At the two-day Technology Symposium organized by machine maker Engel earlier this week at its Technical Center in Corona, CA, March 8 was devoted to medical manufacturing. During the morning presentations, Robert Schwenker, Business Manager, Medical Components, at Saint-Gobain Performance Plastics, and Perry de Fazio, Vice President at investment banking firm Covington Associates, shared some observations on how a new business paradigm within the medtech industry is reshaping OEMs' expectations of their supply chain. Here are four take-aways that I found compelling.
|Robert Schwenker, Business Manager, Medical Components, at Saint-Gobain Performance Plastics.|
Risk management is spreading through the supply chain. Citing a recent study, Schwenker noted that medical device outsourcing is growing more than 10% per year, more than double the pace of growth of the medical device industry itself. This growth scenario presents tremendous opportunities for contract manufacturers, but it also brings a new set of responsibilities.
“Medical device companies are looking to distribute some of the risk and quality management issues throughout the value chain,” said Schwenker. You see it in the new version of ISO 13485, he added, which acknowledges that “quality systems and regulatory matters go hand in hand. This is a trend throughout industry.” Contract manufacturers that have the capability and willingness to share in risk management will have a leg up on the competition.
Be willing to execute on change. For contract manufacturers in the medtech supply chain, historically the best way to manage change in the medical arena is not to change, Schwenker told attendees. “That is a safe program, and it’s fine until you’re running a 10-year-old press and you have to support it, even though you know that there are improved systems and tooling out there that will better serve your customers. But, you can’t execute, and that is something that needs to be fixed,” said Schwenker. Contract manufacturers need to have a better understanding of how to execute “safe change” rather than taking the path of least resistance, he stressed.
Contract manufacturers serving medical device OEMs need to look more like them. The medical device industry is going through some existential changes. For one thing, it is adapting to a value-based care model. The old fee-for-service model, described by de Fazio as, “if the doctor does five things, he gets reimbursed for five things,” is costly, inefficient and does not produce better outcomes for the patient, which is what it’s all about, after all. As a result, medical device companies are bulking up their presence in specific sectors through mergers and acquisitions—think Zimmer and Biomet or Abbott and St. Jude—and, in some cases, instituting a continuum of care approach for patients, where they are not just providing the medical device to treat a condition but also offering an array of patient services. This can be advantageous for contract manufacturers, said de Fazio.
|Advances in medical design and manufacturing and plastics technology will be showcased in the MD&M and PLASTEC zones at the Advanced Design & Manufacturing (ADM) Cleveland event. The trade show and conference comes to the Huntington Convention Center in Cleveland on March 29 and 30. Go to the ADM Cleveland website to learn more about the event, which will be held on March 29 and 30, and to register to attend.|
“Contract manufacturers used to be seen as a necessary evil,” explained de Fazio. You needed them to source widgets, “so you would go to that guy to get a luer connector and that other guy to get tubing.” Not any more: As medical device companies largely abandon manufacturing, a tremendous opportunity opens up for capable contract manufacturers, according to de Fazio. Large medical companies want fewer supplier relationships, and they want to interact with contract manufacturers that have a “verticality” similar to the one that exists within their own company. OEMs, ideally, would like to “deal with a contract manufacturer that looks and feels like themselves.” We are seeing that play out through M&As at companies like Vention and Phillips-Medisize, noted de Fazio.
A cleanroom is not enough. One of the trends we will be seeing in the contract manufacturing space over the next five years, according to Schwenker, is better particulates management. “Once particulates are found, they are almost impossible to eradicate,” he noted. They need to be controlled at the source, and that source could be you in the eyes of your customer. “Having a cleanroom is not enough: You need one that is actively monitored and controlled,” said Schwenker, if you expect to be taken seriously.
Contract molders that claim to operate in a particulate-free environment need to validate it, said Schwenker. And it needs to be engrained in the organization as a daily practice. “It’s not something you set up once and never think about again,” he said.