The Benefits of Vertical Integration in Supply Chain Selection

The Benefits of Vertical Integration in Supply Chain Selection

Outsourcing single use medical device manufacturing with the right supplier can add expertise, cut development time and lower total costs while maintaining superior quality. The question becomes: “what capabilities should that supplier have in-house vs. manage through third parties?” Many suppliers have one or two key manufacturing competencies and advertise their ability to manage the entire process to develop a full service solution. However, selecting a supplier with limited in-house capabilities can result in tradeoffs. Forefront Medical Technology, a specialty contract manufacturer with a focus in disposable diagnostic, drug delivery systems and medical device systems offers a vertically-integrated, one stop solution. This whitepaper looks at the benefits of choosing a vertically-integrated supplier.

These advantages include:
• Broader options for designing in competitive advantage
• Reduction in product development and manufacturing lead-time
• Greater opportunities for cost reduction
• Improved quality
• Better service

Broader Options for Designing Competitive Advantage
Competition continues to increase in the single-use medical device market. Product cost, feel, functional capabilities, ease-of-use, biocompatibility, patient comfort, industrial design, compatibility with other devices and quality are sources of competitive advantage. Often these aspects of competitive advantage require work with specialized materials. While a “full-service” contract manufacturer that specializes in one manufacturing technology such as molding or extrusion can manage subcontracted suppliers, the range of choices in terms of technology and materials may be far more limited than found with a full service contract manufacturer. Forefront Medical’s vertically integrated business model includes mold design, Stereolitography (SLA) system for rapid prototyping, injection and blow molding, extrusion, metal fabrication, and clean room assembly capabilities.

For example, one of Forefront Medical Technology’s clients wanted them to design and mold a plastic valve set which was functionally equivalent to the metal valve set currently used in endoscopes. The challenges included:
• Identifying materials with correct level of rigidity and strength to be functionally equivalent to the metal valve set
• Ensuring that the plastic components performed identically and felt similar to their metal counterparts to a doctor performing an endoscopy
• Designing a complex mold that could produce parts with conformance to extremely fine tolerances

The valve assembly to be replaced had five separate components: a stem, end cap, snap cap, gasket and spring. Multiple materials were required. The design team began the project with a brainstorming process to determine the likely best materials options. Thermoplastic elastomer (TPE), polypropylene, polycarbonate and acrylonitrile butadiene styrene (ABS) were tested as replacements for the stainless steel parts. ABS offered the lowest cost and the best level of rigidity. This was important because the ABS part was sliding against a metal component during procedures and the plastic part needed to be able to withstand the friction of the sliding motion. Another benefit was the compatibility of ABS with TPE. Components which would come in contact with the doctor’s glove needed to be soft with no sharp edges that could tear the glove. TPE met that criteria and it also provided the best bonding properties with the ABS components.

To better understand the functional requirements, the design team closely studied a working unit in their lab. The plastic valve set not only needed to perform functions identical to those performed by the metal part set, it also needed to feel the same to the doctors using the endoscope. One area of concern was friction. As mentioned earlier, there is an ABS part sliding against a metal part and that operation needed to be as frictionless as possible. The team found that a lubricated ABS would eliminate the friction and was able to work with ABS supplier to specify a material with an anti-friction property that met the requirement.

Design of Experiments (DoE)s were used to fine tune the design of the spring used for a cushioning effect, in order to develop a spring that provided the same “feel” to doctors as the metal spring. The most significant challenge involved mold design. The design of plastic components is fundamentally different from that of metal components because the manufacturing process is different. Fabricated metal parts are formed through machining, which supports very tight tolerances, precisely formed grooves and sharp corners with 90 degree edges to achieve a tight seal. Conversely, plastic parts are formed via an injection molding process which traditionally has wider tolerances and delivers a less precise cylindrical form.

The tolerance for the components used in one of the valve assemblies was 5 microns, which gave a window of +/-2 microns. When a part is injection molded, there is a possibility of non-centering. Additionally, cylindrical molded parts are typically not a perfectly shaped cylinder. The initial parts did not have the required tolerance and as a result, there was leakage in the valve.

The team decided to change the mold and the molding concept. The two-cavity mold was redesigned to include a slide-core mechanism for forming the cylindrical portion of the part. The critical dimensions of the part were machined inside of the slide-core mechanism during the injection molding process. A high speed computer numerically-controlled (CNC) electronic discharge machine was used for final machining, since it can control tolerance to less than 3 microns.

As this example illustrates, analysis of the best options required not only a broad knowledge of molding and materials options, it also required the ability to design a mold that could support far narrower tolerances than commonly found in injection molding. The ability to assign a co-located multi-disciplinary team to analyze the design goals, perform DoEs and recommend a solution was possible due to Forefront’s vertical integration. Additionally, with a vertically integrated contract manufacturer, there is often more willingness to invest in expanding hybrid capabilities that bridge multiple in-house technologies for projects that will provide a return on that investment. When third-party suppliers are utilized for specialized customer requirements, a vertically-integrated contract manufacturer’s team often is able to monitor and evaluate those suppliers more thoroughly than a team from a company with a narrower focus of design and manufacturing expertise.

Reduction in Product Development and Manufacturing Lead-time
Vertical integration streamlines lines of communication and priorities. A group of suppliers often has varying priorities, capacity constraints and different recommendations on design modifications. All of these issues can impact the targeted timeline for product development or start of production. Conversely, a vertically integrated contract manufacturer has one set of priorities and a multi-disciplinary team. There is also more institutional knowledge resident within the team.

For example, to help shorten product development cycles, Forefront Medical maintains a database of approved materials which includes a full range of medical-grade polymers. While the best material will vary depending on application, cost considerations and desired functionality, the product development team is often able to recommend pre-approved materials choices to reduce product development time. Using materials that have previously been tested and approved within the regulatory environments associated with the product can cut 4-5 months from a product development cycle. It’s also important to note that the 4-5 months represents a single testing cycle. If the material has failed testing, a new material must be selected which then restarts the 4-5 month testing cycle.

When tooling design and fabrication are integrated into the product development process, tooling options, costs and constraints can be evaluated concurrently with product design decisions. Communication is streamlined, which minimizes time and cost. Not surprisingly, in-house tooling development can shorten the product development process by several months. This is driven by several factors. First, in Forefront Medical’s model, a gated design process enables tooling development to begin as early in the design process as possible. The Company has taken a vertically integrated approach to tooling fabrication and use of its in-house resources often cuts another 2-3 months off of product development time. The tooling design process includes a design for manufacturability (DFM) phase, followed by development of the mold specification. As mentioned earlier, mold-flow analysis tools are used to ensure efficient molding with minimal scrap and minimization of secondary finishing processes. This computer analysis minimizes design iterations on tooling. Tooling iterations are a key performance indicator (KPI) for Forefront Medical’s engineering team. The KPI target is no more than 2-3 iterations per product development process.

Forefront also maintains a detailed library of injection parameters related to the best mix of injection pressure, speed and other variables based on materials used. With standard molds and resins, developing optimal injection parameters utilizing this library typically takes two hours. Tooling fabrication time is also reduced. Forefront Medical’s vertically integrated tooling fabrication capabilities typically reduce tool fabrication lead time by 1-2 months when compared to third- party tooling companies. The company also maintains in-house resources for the scale up of molds and tools. pilot runs and validations.

Product development cycle time is further reduced through use of in-house rapid prototyping in support of the product validation process while hard tooling is in development. This prototyping capability is the SLA system for rapid prototyping. Forefront Medical also enhances communication speed and continuity in product development activities by having standardized software tools in its US Technical Center, Singapore Design Center and China full scale commercial tool room. Cimation software is used for tool, hot runner and cooling system designs. Mold- flow software is for mold-flow analysis and to support Design of Experiments (DoEs)to optimize the design and molding parameters when those parameters are not resident in their existing library. Moldex 3D software is utilized for molding process simulations to test assumptions prior to tool fabrication. This standardized approach enables tool designers to easily demonstrate the likely performance of the tool under review to the customer’s team during the product development process.

Greater Opportunities for Cost Reduction
One of the challenges with single-use medical devices is that tooling and assembly automation strategy often typically locks the project into a single contract manufacturer. The larger the supply chain associated with that contract manufacturer, the more markups are rolling up into cost. Additionally, separate suppliers for multiple production processes add additional costs, increase logistics complexity and cost, add to lead-time and often limit the opportunities for focused cost reduction over the life of the product. Comparatively, vertical integration eliminates these inefficiencies and concomitant non-value added costs. Forefront’s business model offers the best of both worlds. Its vertical integration strategy supports the bulk of its customers and its capacity is “right-sized” for its projected business. The company is also willing to work with its customers’ suppliers or its own strategic partners for special requirements, providing customers a broad range of options that can be tailored to fit each project.

To better address the challenge of ensuring cost reduction over the life of the product, Forefront Medical developed a continuous improvement value-added process to identify opportunities for cost reduction and /or improvement in the overall competitiveness of the products it produces by evaluating internal processes and surveying end users. Internally the focus is on identifying production bottlenecks and long lead-time issues, and includers feedback from operators and technicians. Externally, the focus is on the ease-of-use . The team develops a list of potential improvements and then selects the top priorities . A timeline is developed and progress is tracked. The project is closed once 80-90% of the improvements have been achieved. This process varies from a traditional Value Analysis Value Engineering (VAVE) process in that VAVE projects tend to be completely cost driven. In this process, the goal is to eliminate non-value added cost and increase the customer’s market share.

Forefront also looks closely at the logistics cost equation, both in terms of materials supply chain and finished goods shipping options. Both its Singapore headquarters and China factories offer efficient logistics options for finished goods shipments with easy access to sterilization facilities.

Finally, vertical integration also contributes to intellectual property (IP) protection, which reduces the potential costs of loss of market share and the legal costs of defending intellectual property. Often IP theft occurs not at the manufacturer building the outsourced product but at smaller suppliers building a large enough portion of the product to see a large amount of documentation. In short, the larger the network of key suppliers a manufacturer manages, the greater the IP theft risk. In Forefront Medical’s case, there are two lines of defense. First, as a company headquartered in Singapore, Forefront’s commitment to protecting IP and the legal system in which it operates reflect some the highest IP protection standards in the world. Second, because Forefront is vertically integrated and does the majority of manufacturing in its own facilities, the supply chain does not have access to a significant amount of product documentation.

Improved Quality
Vertical integration helps improve quality by ensuring common oversight of majority of production operations. When multiple suppliers are used, quality issue root cause can degenerate into finger pointing among suppliers. Vertical integration also simplifies logistics by minimizing transport and handling by keeping production operations under one roof. Transparency and trust are hallmarks of Forefront Medical’s supply chain management strategy. Critical suppliers are identified at project start, audited and then monitored to ensure that quality requirements are being met. Customers can also audit suppliers, if required.

All Forefront Medical facilities are registered to ISO 9001:2008 and ISO: 13485:2003. All facilities are also compliant to MDD 93/42/EC which is the Medical Devices Directive for European Community, MHLW Japan’s Pharmaceutical Affairs Law (PAL) and Ministerial Ordinance #169, ISO 15378 which is focused on primary packaging materials for medicinal products, ISO 14001 which is focused on environmental management, ISO 18001, which is focused on occupational health and safety management, and ISO 27001, focused on information security management. All facilities are FDA and Japan registered as foreign contract manufacturers. Its JiangSu, China facility currently holds a FDA Establishment Registration and Class 2 Product Registered (510k), as well as China FDA (CFDA).

Improved Service
A vertically integrated contract manufacturer is a one-stop shop. This improves service at several levels. First, it makes it easier to determine if the contract manufacturer’s business model is aligned with the project requirements in terms of capabilities, preferred volumes and responsiveness. When a supplier consortium is used, this “alignment” may vary with each supplier. Second, responsiveness is improved because the resources of production are co-located with shared priorities relative to the project. Finally, the simplified logistics that come with a vertically integrated contractor help eliminate the added lead-time associated with a supplier consortium.

Choosing a vertically integrated contract manufacturer, whose capabilities match the needs of the project reduces time, defect opportunities, cost and logistics complexity. It opens the door to partnering relationships that can be much more aligned with long-term project needs than is possible with a contract manufacturer managing a consortium of suppliers.

About Forefront Medical Technology

Forefront Medical Technology is a global medical device contract manufacturer with five locations. Singapore is Forefront’s headquarters, as well as home to our Design Engineering Center and specialty manufacturing. JiangSu and Xiamen, China, are additional manufacturing locations and are also China FDA Registered. Shanghai, China, Farmington, CT USA are regional Business Development offices which assure our technical sales teams are close to our customers for local, responsive assistance.

We have developed extensive capabilities with laryngeal mask airways, diagnostic devices, drug delivery systems, enteral feeding catheters, infusion sets, wire reinforced tubes, optically clear components, patient monitoring devices and other specialty products. Each of our locations has state of the art manufacturing capabilities that include class 100K clean rooms for extrusion and injection molding, complimented by class 10K clean rooms for assembly and packaging. Forefront Medical’s integrated technical approach provides customers the total manufacturing solution and global supply chain. Our facilities are TUV ISO 13485:2016, ISO 9001 and FDA Registered. Forefront is a wholly owned subsidiary of VicPlas International Ltd, who is listed on the SGX Main Board, Singapore stock exchange.

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