Offshore Manufacturing: Risky Business or the Right Choice for Your Project?

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Offshore Manufacturing: Risky Business or the Right Choice for Your Project?

Overview
The unfortunate truth about manufacturing offshore is that unit cost is rarely reflective of total cost. Nor is every low cost country (LCC) contract manufacturer equally equipped to provide the support required by highly regulated medical product design and manufacturing. A strategy based on having your team train or continually audit a low cost contract manufacturer into compliance with your systems, typically doesn’t result in real cost
savings if your internal costs as well as the supplier’s charges are measured. In short, for offshore contract manufacturing to consistently save money, the contract manufacturer needs to not only have a competitive unit cost. It must offer the same level of systems and processes found in domestic suppliers. The challenge for a supply chain management team becomes finding a contract manufacturer capable of delivering more than unit price
reduction. Forefront Medical Technology, a specialty contract manufacturer with a focus in disposable diagnostic, drug delivery and medical device systems, built its business model around examining that equation. This paper looks at the key support elements that are integral to achieving lowest total cost.

Finding the Value
So what are the elements a sourcing team should look for in terms of determining whether or not the chosen contract manufacturer mitigate the cost surprises that can otherwise come with working in a LCC? Seven areas stand out.

  • Design expertise
  • Focused transfer of work process
  • Localized support
  • A robust quality management system and a team experienced with working with the regulatory agencies in your product’s end market
  • A strong commitment to IP protection
  • Capabilities and expertise in line with project requirements
  • The ability to identify opportunities for cost reduction over the life of the product.

Design Expertise
The old adage, “what costs a dollar to correct in product development, costs ten dollars in production and one hundred dollars in the field,” is correct. For medical products the quantum cost leap may be much larger given the agency approval and validation processes associated with commercialization. Of equal importance, the design process should be focused on shortening the product development cycle as much as possible. A lengthy product development process not only adds costs, it can impact competitive advantage if the product is timed poorly against the market window.

Questions to ask in determining the level of a value a contract manufacturer’s design capability can deliver include:

  • Is there a clearly defined process for developing a product specification?
  • What tools, databases or processes are used to help shorten the product development process?
  • Does the design team have tooling design expertise or does it depend on tooling vendors for that element?
  • Can the contract manufacturer’s team communicate in your team’s preferred language?
  • Does the company have a U.S.-based technical support operation that can help minimize the challenges caused by incompatible time zones?
  • Is there a track record of designing products of similar complexity and materials?
  • Are the examples of areas where the design team has suggested improvements which reduce cost or solve a challenge faced by a customer design team?
  • How closely do the contract manufacturer’s design engineering and manufacturing teams work together?

Forefront Medical’s team uses a standardized process in which customer requirements are assessed and a Design Development Plan (DDP) is created. A customer specification is then developed and market inputs are collected. Once the customer specification is approved, 3D CAD models are developed and analyzed. Design reviews which include functional analysis and risk evaluation are completed. After a customer’s team approves the design, prototyping and verification began.

To help shorten product development cycles, Forefront Medical also 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.

A Focused Transfer of Work Process
In many cases, a “lift and shift” strategy may help add life to older product lines by reducing cost or opening the door to new markets. However, achieving cost reduction goals requires a focused transfer process that minimizes customer team time and considers all angles of potential cost reduction from product redesign to logistics.

Questions to determine what level of value a contract manufacturer can bring to this process include:

  • Is there a well-defined process for transfer of work?
  • How does the contract manufacturer address tooling compatibility issues?
  • Is cost savings based on entirely on the cost structure of an LCC or is the contract manufacturer evaluating the cost benefits of improvements such as changes in automation strategy?
  • Can the contract manufacturer’s engineering team support product redesign for cost reduction or added functionality?
  • Does the contract manufacturer have the support staff and processes in place to support product qualification and production validation processes?
  • Does the contract manufacturer’s team look at business issues such optimum logistics strategy?
  • Will the contract manufacturer be able to help support identification of a “local” group of comparable suppliers in the region in the product will be manufactured?

Forefront Medical Technology routinely adds value in its transfer process. For example, when a manufacturer of enteral feeding tubes wished to transfer their production line from New Jersey to one of Forefront Medical’s facilities in Asia, a dedicated project team was assigned to manage the transfer. Forefront’s team completed the transfer in four months. Their process included developing/executing a plan for supply chain continuity; risk management; machine, tools and process validation; product bio-compatibility and stability validation; sterilization validation including sealing integrity; and packaging ship testing. Kaizen events were used to improve the process over time. Additionally, its engineering team made recommendations for enhanced product design and quality.

Localized Support
Frequent after hours communication requirements and long trips overseas take a toll on supply chain management and product engineering teams. This extra work and travel expense adds to overall project cost, plus may incur “opportunity cost” as time-challenged teams become unavailable for other critical assignments. The ability of a contract manufacturer to minimize this added workload through a local support team should be carefully analyzed. Questions to ask to determine the level of value a contract manufacturer can deliver in this area include:

  • What personnel and systems resources are located in time zones either in or easily compatible with your project team’s normal business hours?
  • Are design tools standardized among the contract manufacturer’s locations?
  • Is there program management support resident in a time zone compatible with your team’s working hours?
  • Does the contract manufacturer have the ability to hold online video conferences when needed to minimize the necessity for travel?

Forefront Medical operates a U.S. Technical Center to make it easier for U.S. customers to communicate with personnel in a time zone convenient to their normal work schedule. Additionally, Forefront is headquartered in Singapore, where English is considered the language of business. Its management team, program management team and engineering team are fluent in English and multiple Chinese dialects, ensuring that project discussions are fully understood at all levels of the manufacturing process.

Robust Quality
Lives depend on the quality of most medical products. A delay in process validation or a recall driven by poor manufacturing quality often eliminates the cost savings of moving offshore. Additionally, changes in manufacturing strategy are often triggered by new products or the desire to enter new markets. Having a contract manufacturing partner knowledgeable in the associated regulatory requirements can reduce time and internal support team cost. Questions to ask in determining the value a contract manufacturer can deliver in this area include:

  • What regulatory bodies does the contract manufacturer work with most frequently?
  • What quality management system certifications and/or registrations does the contract manufacturer hold?
  • Are there examples where the contract manufacturer has smoothly completed validation processes on projects of similar complexity and end markets?
  • What resources does the contract manufacturer have dedicated to quality management and compliance activities?

Forefront Medical has a dedicated Regulatory Affairs team whose responsibilities include product registration and CE marking; maintenance of the Device History Record (DHR) and technical file; biocompatibility testing; validation and support sterilization; updates on regulations and communication of new/revised regulations; and intellectual property protection. 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).

Commitment to IP Protection
Intellectual property protection (IP) is a key concern when manufacturing offshore. A contract manufacturer’s commitment to limiting access to proprietary information is a key part of risk mitigation in this area. Questions to ask related to the value a contract manufacturer can provide in this area include:

  • What practices are in place to limit access to proprietary information to only those who require it for design or production activities?
  • What protections are in place to protect IP in supply chain transactions?
  • Has the contract manufacturer ever been sued or prosecuted for IP theft?
  • Will agreements related to IP protection be enforceable with the contract manufacturer?
  • Will your company or the contract manufacturer own design files, tooling and other key documentation related to your product?

Forefront Medical Technology is headquartered in Singapore, which consistently ranks high in IP rights protection in the IMD World Competitiveness Report and the World Economic Forum’s Global Competitiveness Report. Headquartering in Singapore has enabled Forefront to tap the knowledge base of one of the strongest medical regional hubs in Asia and work in an ethical business and legal environment that is transparent and compatible with customer preferences. Forefront also clearly identifies ownership of documentation and tooling as part of initial project scope definitions.

Capabilities and Expertise in Line with Project Requirements
The broader a contract manufacturer’s base of manufacturing capabilities and engineering capabilities, the more options there are to provide innovative solutions market competitiveness challenges. Vertical integration eliminates one set of markups and often cuts lead-time. Prior to selecting a contract manufacturer, current and longer product requirements should be evaluated carefully. The ideal contract manufacturer isn’t simply a company capable of manufacturing the product. Instead, it should be a company capable of evaluating both current and future requirements and making recommendations that help your team maintain cost competitiveness. Questions to ask include:

  • What process does the contract manufacturer have for evaluating either initial product design or older product and recommending improvements?
  • What similar products has the contract manufacturer helped improve?
  • Will the contract manufacturer’s injection molding capability support the product’s requirements?
  • If micro-molding is involved, does the contract manufacturer have sufficient mold design expertise and specialized equipment to handle the product’s requirements?
  • If high cavitation molds are involved, has the contract manufacturer designed molds of similar complexity?
  • What tools does the contract manufacturer use to optimize production efficiency?
  • Are molds designed to minimize manual processing?
  • Has the contract manufacturer suggested alternate processes or materials to solve manufacturing or cost challenges?
  • Does the contract manufacturer have experience with any specialty materials the product is likely to require?
  • Does the contractor have the necessary assembly automation experience for the product’s requirements?

Forefront Medical focuses its business completely on the medical single-use market in the areas of specialty medical disposables, diagnostics and drug delivery systems. Its facilities include Class 10K and 100K cleanrooms for molding, extrusion and assembly. Forefront’s integrated manufacturing capabilities include product development, mold design and fabrication, injection molding, extrusion, assembly, packaging, and sterilization. It has proven experience with complex design and fabrication of large cavitation molds. Its capabilities also include micro molding. The Forefront team is experienced with a variety mold specialty plastics including silicone, TPE, PEEK, ABS, as well as commodity material with precision tolerances. It also has a proven process for replacement of high cost metal precision machined parts with cost effective precision molded plastic components.

The Ability to Proactively Identify Cost Reduction Over the Life of the Product

Since single use products often require specialized tooling, and custom assembly and packaging equipment, sourcing with multiple contractors is often not cost effective. The danger with a single sourced contract manufacturer is there is little competitive pressure to drive cost reduction. Consequently, it is important to evaluate a contract manufacturer’s record in supporting cost reduction over the life of other projects. Questions to
ask include:

  • What examples of cost reduction can the contract manufacturer share?
  • Is there an internal process in place that helps drive cost reduction?

To address this challenge, 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 includes feedback from operators and technicians. Externally, the focus is on 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.

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.

Visit www.forefrontmedical.com to learn more about our capabilities. For a confidential review of your project, please complete our enquiry form here, or email us at: info@forefrontmedical.com.



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