Focus: Contract Manufacturing: Trends in medical contract manufacturing

Contract manufacturers increasingly handle virtually every aspect of manufacturing parts—from design through distribution—for their medical customers.

When Jay Policastro, president of Classic Industries, is asked where medical contract manufacturers (CMs) are heading, he responds with a seemingly simple four-letter word: more. The underlying explanation isn’t nearly as simple, but promises continued growth in this category.

Policastro sees great opportunity on the horizon when it comes to serving medical OEMs. “We see a trend, already evident in the electronics industry, in which the OEM wants to shed all functions except sales, marketing, and research. CMs who participate in this market are aligning their production and resources to fill this need. Adding value by doing more for the customer makes us more valuable as a supplier,” he explains.

Classic Industries, a privately held CM, focuses on providing tight-tolerance, high-quality components and finished assemblies for the medical/dental device industry, which makes up 95% of its business. It currently operates five highly automated, environmentally controlled manufacturing facilities containing more than 75 horizontal presses and 10 vertical insert machines with clamping forces ranging from 22 to 400 tons. Its customers tend to be midsize OEMs whose needs vary along a spectrum.

“A few customers still want us to produce components only, although this segment of our business is decreasing. At the other end of the scale, we have taken over and vertically integrated entire manufacturing businesses for our customers,” he adds. “In this case, we design, mold components, purchase and machine metal and electronic parts, assemble, package, send to a sterilizer, and then ship to a distributor. Once we have final approvals, the customer’s involvement in the manufacturing process is minimized.”

Defining the Role of CM

This raises the question of how CMs are defined, at least in the medical industry. Policastro believes that a range of services can be involved, but that contract manufacturing always involves production of a finished, packaged device. “Our definition is value added, bringing together molded components, assembling them with other parts, and packaging it, totally bypassing the customer.”

Design. Offering design services is more than just owning a CAD system. Molders who are CMs typically design the plastic components and associated tooling, providing expertise in areas unfamiliar to the medical OEM. Working out details up front can also optimize designs for manufacturability, saving money in the process. “We design products for functionality, ease of assembly, and moldability,” he says. “This is our best opportunity for cost savings up front.” Designing for manufacturability can involve material selection, tooling, multicomponent molding, special assembly processes, and device handling.

Supply chain management. In addition to molding plastic components, CMs must source and purchase the additional parts necessary to produce a device, including metal stampings, electronics, and fasteners. Alternatively, some CMs produce metal parts in-house.

Packaging. Like other medical CMs, Classic purchases roll stock for packaging, and then performs form, fill, and seal operations. This is an area that is fast becoming a given in medical CM.

Sterilization. Packaged devices are typically sent to a sterilizer prior to shipping to the customer or its distribution channel.

On the whole, Policastro believes medical CM is the smallest portion of the growing trend toward contract manufacturing. “But it is growing, as are all of the markets CMs serve, because manufacturers are all striving to return to core competencies. In general, medical OEMs have been more conservative, owing to FDA requirements. As the level of supplier sophistication has increased to the point where we have become registered device manufacturers with quality systems in place, OEMs are now more comfortable with contract manufacturing.”

Process in Action

Classic’s typical CM project offers an example of the complexity involved. At the start, the OEM furnishes concepts and market feedback from which designers produce several iterations of prototypes and models. Some eventually become solid candidates, and these instruments are again prototyped for use in laboratories or among surgeons selected to test the devices. If all goes well, Classic receives approval for production tooling, and begins the molding-assembly-package-sterilize-ship sequence.

During the prototype-testing phase, Classic may also become involved in discussion with the ultimate end user, who might be surgeons or lab technicians.

An added emphasis on upfront engineering made it necessary for Classic to beef up these capabilities. “We’ve increased our engineering competencies over the last five years significantly, from both the design and project management sides. These projects require multiple activities, including regulatory filings and a good deal of behind-the-scenes work. Project management has become pivotal to CMs in this industry.”

Quality standards, another given in medical CM, must also be secured. ISO 9000-2000, EN46001, and Class 7 or 8

ISO standards for cleanrooms are essential. “We’re doing all of our manufacturing in cleanrooms,” Policastro says, “which most customers view as a requirement today.”

Growth Opportunities

In response to medical customers with operations in Mexico and Puerto Rico (PR), Classic recently opened a plant in Ponce, PR (see sidebar, “Profile of a Growing CM’s New Plant”). “There appears to be a trend among medical CMs of expanding operations in and outside the U.S.,” Policastro says. “In our case, we have customers in Mexico and PR for whom we do development and prototyping work. Once the work comes to maturity, we will need to supply the components to the plants located there. In addition, we have CM opportunities in this region.”

Classic, like other medical CMs, is looking at expanding into other markets, such as Mexico and Asia. “The idea is to continue to support customers in those regions and to grow the CM business at the same time.” At the end of the year, the new plant in PR will contain 15 machines and investment will total $4 million.