Sourced for Success

13 July 2008 (Last Updated July 13th, 2008 18:30)

Quality management should be an essential consideration when choosing a contract manufacturing partner. Amanda S Spencer and Neil R Armstrong of the Chartered Quality Institute explain why.

Sourced for Success

As global sourcing and global markets are driving device manufacturers to develop strong supply bases worldwide, contract manufacturers should be increasingly viewed as partners rather than as mere vendors.

Time to market is being compressed and pressure to reduce costs mounts, yet the highest level of quality has to be maintained. Medical device and diagnostics companies are developing their relations with contract manufacturers not to merely ease costs but also to gain access to new technologies. The increased capacity and complication of outsourcing activities means developing and sustaining partnerships is imperative, as is critically monitoring the activities of contractors.

It is a failure to provide this type of integrated management including critical assessment of lower-level activities that frequently result in such issues as poor product quality and non-adherence to timescale and cost targets. Too frequently, companies choose to outsource a project for the wrong reason: maybe the project is behind schedule or way above budget. Someone then decides that shipping the project out will solve the problems. Not so, it just passes the problem onto your supplier.

PARTNERSHIP SELECTION

One of the most important things to remember is that the vendor-selection process will take time, as will negotiating a contract. OEMs should select their partners early to include their input in the product design. They also need to make sure that such things as language barriers, terminology, cultural appreciation, time zone synchronisation and travel distance or restrictions are considered in the selection process.

To guarantee product integrity an OEM should select a team of individuals representing manufacturing, R&D, quality assurance, regulatory affairs, finance, marketing, sales and other key areas, who will manage the myriad tasks of preparing for outsourcing and deciding on the suitable contractor. Management should recognise that team members cannot handle all of their regular responsibilities during this period. The team should agree on the essential criteria against which it will evaluate the potential supplier.

Check their weaknesses and look at their core competences. If the supplier will manufacture your product in low-cost labour areas such as India or China, determine how they monitor quality in these facilities and how manufacturing in these areas will benefit you.

"The increased capacity and complication of outsourcing activities means developing and sustaining partnerships is imperative."

It is also important to realise that the existing economic and political situation may develop over the lifetime of a project. For example, one country may appear a good choice now, but if the government is not stable, skilled personnel are becoming scarce and the currency is undervalued this may change rapidly. Stability is nearly always preferable to getting the very best deal. Use tools such as commercial risk management and sensitivity analysis to be sure you make the best possible choice of partner for the duration of the project.

It is vital to have a strong relationship with mutual trust. Do not ignore soft issues such as the potential for a culture clash: some companies' personalities and processes simply are not a good fit. When assessing how easy it will be to work with the supplier, it is important not to place too much weight on the perception gained from the sales team.

Beware that a pragmatic problem-solving approach from an order-hungry salesman can hide intransigence and a blame culture deep within the organisation.

This is particularly important when selecting a Certification or Notified Body as this is a long-term critical relationship and the impression gained from the sales team can be dramatically reversed at the first encounter with an auditor or product specialist.

Most regulatory systems for medical devices incorporate some elements of standards compliance in both the design and manufacture requirements for medical devices. If a potential supplier can not offer the necessary certifications to particular standards for all the desired markets, then the manufacturer may be faced with additional testing or control requirements which significantly impact cost and time to market.

A RECIPE FOR SUCCESS?

Take two doctors based in Belgium, who have an idea for a device and a small budget to get it to market. They source a designer on the internet and end up with one in Taiwan, from whom they had a good response, but could only design the circuit boards for the device. So now add a German design company (met at Medica) who take on the next stage of the design, then add a plastic manufacturer from Taiwan with their manufacturing plant in China into the equation.

Don't forget the UK-based regulatory affairs consultants and Notified Body that were also collected along the way from ComPaMED. Then finally bring in a display manufacturer from Germany and what have you got? Kingfisher Healthcare and its microcurrent TENS-like device. Sally Sennitt of Kingfisher, one of those very doctors, admits: "It was far from easy, in fact at times it was chaos, but in the end we got there."

Kingfisher's main problems seemed to come down to the communication, cultural and language barriers.

"We could not get the Chinese engineers to understand the German ones and having our designs and components scattered all over the globe became a major coordination task when we needed to physically test prototype devices," adds Sennitt.

One of the worst problems was that the company could not find out the details about the quality management system for the Taiwanese manufacturing plant based in China, to tie this in with its own system. Sennitt even travelled to China to try to resolve this, but it was to no avail. "It was down to all of the cultural and language differences, they seemed to have a totally different outlook towards time, it was as if they did not understand the urgency that was involved," she adds. Sennitt goes on to mention problems concerning the "cutting of corners". Kingfisher ended up moving the manufacturing to a Germany-based firm.

She finished off by saying that if they had to do it all again, they would keep all the design process local so they would be able to meet up and make sure they had design control. Only then would they outsource further afield for manufacturing.

However, Kingfisher's experience was far from all negative: the company brought its device to market in less than two years with a budget of only €1m and a headcount of just two. It now has ISO 13485, ISO 9001, a 510(k) and CE Marking for two products. One device is on the market in the US and two are in Europe, which just shows what can be done with a virtual company and no infrastructure, but with the right mindset and the aid of outsourcing.

QUALITY CONTROL

Finding suppliers with the right quality management systems is crucial. It is important to examine the system and not just the certificate that is presented to you. The system may have been accredited by an organisation that itself is not recognised or notified and does not have the international reputation you require. Moreover, the system may be designed in such a way that it is difficult to interface with your own system to ensure the smooth transfer of information.

Never forget that a quality management system accreditation says absolutely nothing about the product quality. A supplier may have a great system and comply with it perfectly (as demonstrated by audit reports) but still accept a high rate of rejects and deviations from specification.

Several contract manufacturers have developed out of their own finished device business. As a result, they have insight into the regulatory, sales, marketing and distribution. Although there are advantages to using their services, be aware of possible pitfalls; for example, priority may be assigned to their own products in times of materials or processing capacity shortage.

PARTNERSHIP MANAGEMENT

Clearly identify your expectations, define and document the procedures you want followed and the expected performance. In addition, specify a process for assessing a contractor's work. This will help ensure that the outsourced products are assembled well and delivered on time. Do not forget that changes to the scope or requirements as the project progresses may have a dramatic effect on the suppliers' ability to meet the objectives.

"Not communicating, or not communicating clearly enough, is the problem and sometimes technology hinders rather than helps."

OEMs should try to specify particular parts, even naming specific brands, such as noting "must use AD8015 Series". An excellent technique is to use exploded drawings to name all the parts (in all languages) and identify critical ones, and then both parties have a defined terminology and priority for each component. Making sure that everybody knows that, for example: the power switch and the start button are different and that the power switch is "safety critical" whereas the start button is not. Not communicating, or not communicating clearly enough, is the key problem and sometimes technology hinders rather than helps.

The use of different software can create its own problems, for example: a supplier may have agreed to send you batch records electronically, but if you do not have the right software to open (or translate) them, they are useless and may even lead the supplier to assume you are condoning their actions. Some companies will specify particular software and in some cases this appears to help.

The key to building a strong relationship with a supplier is to make sure communications are clear and misunderstandings avoided. Agreeing terminology, quality system interfaces and responsibilities is best done in a formal quality or technical agreement separate from a commercial contract. Since quality is the top priority, ensure that it will stay high; establish if the supplier's quality system is sufficient for the device they are producing for you.

If feasible, analyse gaps between your and their quality systems and standards/regulations. A sound track record of regulatory compliance is one significant quality indicator. The supplier should provide documentation that it complies with regulations and ISO certification.

FUTURE FORECASTS

Apart from offering design and other front-end services, contract manufacturers say a multitude of other demands are transforming their function in the medical device industry. Evidently outsourcing is evolving to include a broader collection of services. As the medical device industry takes its cues from other manufacturing sectors, it is probable it will incorporate yet more procedures from the outside.

However, it should be noted that with more companies outsourcing, the likelihood of the regulators stepping up enforcement actions against non-compliant contract manufacturers will become reality; already the US FDA is making arrangements to base some of its staff permanently in China. This could denote additional pains for OEMs, as despite the fact that they are outsourcing finished products, as holders of the market authorisations, they are ultimately responsible for the safety and efficacy of their products.

In conclusion, regard the selection of your supplier to be a procedure that identifies a trusted, long-term partner. Changing suppliers is costly and painful; therefore it is vital to get it right the first time and remember as with any relationship this will require ongoing work from both parties.

As OEMs entrust more of their products and processes to service providers, they must realise a tighter integration between internal and external operations is needed. If you ever hear the words "I don't understand what went wrong, they were such a good supplier" it is a sure-fire sign that the monitoring and management of the supplier was at fault.