5 Key Questions to Determine if That Contract Manufacturer is a Good Fit for You

Five Key Questions to Determine if that Contract Manufacturer is a Good Fit for You
presented April 5, 2018 by Mark Rutkiewicz, VP, Quality at Innovize


Mark Rutkiewicz: We’ll start with the five questions here.

The basic starting point that everybody typically has is the baseline – what’s the cost? And if you make the selection just on cost, you may, in about a year, be very sorry about what decision you made.

There are a lot of other things also. You might be looking at the quality system and the technical expertise associated with that contract manufacturer. There are many types of contract manufacturers doing:

  • Box builds
  • Part assembly
  • Catheter assembly


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At Innovize, we do:

  • Converting. high-volume film roll converting;
  • Printed circuit board assembly; and,
  • Sterile packaging and prep.

But those are just the baseline that you should be looking at. We’re going to go through five questions on:

  1. The right information being shared;
  2. What kind of product development services they provide?
  3. What contract manufacturing services they provide?
  4. Is it convenient for you? And,
  5. Is it a good business fit?

I’ve been in the industry 30 years. As part of that, I’ve been in the large medical devices. I was at Guidant for about 3 years, and that was my first intro into contract manufacturing. We had an in-house circuit board assembly, and we needed to outsource. And so it was given to me to look for a new house.

We ended up choosing a facility down in Southern Minnesota called EMD. They were not the fit. They never did medical before, but they had the expertise in the technical side. They were close, and cost-wise I think they worked out. And they became a long-term partner with Guidant and now Boston Sci. They’re now called Benchmark.

We didn’t use a formal process at that time. Since that time, I’ve been in multiple other medical device companies selecting contract manufacturers, and now I’m on the other side as a contract manufacturer. We have a lot of our customers come to us, and we’re trying to provide the right kind of service and support and fit, and culturally match each other.

1 – The right information to be shared?

The contract manufacturers should:

  • be asking you for your Device Master Record. You have to bid this project out, and they’re going to go quote it. They’re going to need to know your bill of materials, who your suppliers are. Do you have manufacturing work instructions? So, if you’re moving it or doing it yourself already and then moving it, then they’re going to want everything that you have in your Device Master Record. If you’re a brand new Medical device company, you haven’t built it yet, that has to be the expectation as the process to do the manufacturing;
  • They’re also going to want to look at previous process validations. If you’ve done work there already, that’s a good starting point;
  • They also might ask you for your design requirements. As part of the contract manufacturing, you’re going to want to look at if you’re going to need to change some of the manufacturing process for manufacturability, to make it easier, to get higher yields. You may have to change things that might affect the design requirements, so they might want to ask you to see those;
  • allow you to see your manufacturing space. Will they allow you on your manufacturing floor? I was looking at a couple of different contract manufacturers, and they wouldn’t allow me into the manufacturing space. So, a little bit of a pain and they didn’t actually get selected. And,
  • as part of looking at pricing and volume expectations, the contract manufacturer needs to know a set point and determine expectations for you.

2 – Provide product development support services?

The second question about product development services –

  • Is there expertise match? Are they building the right kind of activities? Are they doing packaging? Do they help with sterilization? Have they ever done assembly? Have they ever done catheter assembly?
  • They’re going to also ask about how you change management. So, they should be asking, “If you send me your Device Master Record, how am I going to manage and maintain it? And then if change is happening, either we’re requesting the change from the contract manufacturer or you’re requesting change, how is that being implemented? And how does that help me know that people are building everything to the right specification?”
  • Do they have project management support services? So, budget and schedule and your communication strategy, what is that going to look like on a regular basis? And,
  • can they meet your schedule? Do they have the people available at the time that you need them?

So, those are some questions you’re going to ask during the product development support services.

3 – Provide manufacturing process services?

The third question, can they provide manufacturing process services?

  • Do they know how to do an IQ, OQ, PQ? Do they have the procedures already on process validation?
  • If you have high volume, are you going to look at the statistical process monitoring?
  • Are you going to provide any special equipment or tooling through the contract manufacturers, or are the contract manufacturers going to make it all?
  • And if there is going to be special equipment, trend of maintenance, calibration activities, software controls, do they have all those features in place? In the ISO 13485, a lot of these processes will be there. But it’s your product, and these are unique requirements they’re going to have to meet;
  • If your product’s going to become a high-volume, do you want to implement automation? You might want to start out, for your clinical trial, you’re only going to build a couple of hundred parts, and then a year later you’re going to build a million parts. The process is going to change significantly in order to reduce costs, so you need automation. And,
  • can they provide testing services? Do you need electrical testing; mechanical, functional?

One of the companies that I was at when I was in Medical device, we were actually making up a device that had a laser associated with it. So, we needed optical testing and the security and safety around laser testing.

So, more manufacturing questions, as part of the quoting process, you need to ask is:

  • Can they do sterile release management if your product’s sterile, can they do the sterile prep, sterile release?
  • Do they have an inventory management program? Can they manage your inventory and send it to the different distributors or can they even send it to final customers?
  • And that ties in with the stocking program; and if you’re doing a capital-type piece of equipment, your [end of the contract manufacturer 00:06:28], they’re going to be your repair depot, so
  • What do they have for capability for managing, doing servicing and repair? And lastly on the manufacturing side,
  • as a medical device company, your customers are going to ask you, basically the large buying groups, “What’s your REACH, RoHs compliance?” So, you’re going to have to go back to your manufacturer and they’re going to have to answer that question. Then they’re going to have to go back to their suppliers. It’s a chain to be able to get their compliance activities right, so when you get just a price from a quote, what’s all included in that?

4 – Convenient for me?

The fourth question – is it convenient for me?

  • How far is the contract manufacturer from you? Are there time zone differences? Based on that, when can you have meetings? When can you solve issues? There’s always going to be issues on the production floor if you have weekly project meetings;
  • If you were going to be at multiple time zones, are you building travel costs into this budget for contract manufacturing?
  • Time and effort needed to train the manufacturer – So, I was at a company up in Canada, and we were transferring the capital build to a company in the United States. So in order to do that manufacturing, we needed to train them. We had very few manufacturing work instructions. It was a lot of design; it was a very complicated assembly; it was really more of an R&D shop trying to become a manufacturer. We brought the contract manufacturers up; the three people were supposed to come up and learn over a week-or-two period. As they were coming up, they had to cross the border. One of the technicians that was coming up was not allowed to cross the border. So, all of a sudden, the people that were available to do this training weren’t there. So that’s something worth looking at as part of convenience for you;
  • If you’re going offshore or to a different country, are there language translations? I’ve been in situations where they needed documents translated into another country. When I was at Guidant, we had purchased a company based in Switzerland. All their documentation was in German, so we had to translate everything just to get the build in-house working;
  • They may ask for a retainer up front too because of the amount of time and effort;
  • If they need to have people in-house come up and visit you, then if it’s not convenient, there are going to be costs of shipping the products, and that all has to be built into the cost of the product. You may be owning that, but that’s all part of the manufacturing cost; And,
  • And then also with shipping, if it’s international there may be tariffs and agent fees for getting the parts through customs, and there’s FDA import controls that have to be implemented as part of moving products across the border.

Contract manufacturer finishes it. So when I was working at a company in Canada, we were manufacturing it in Canada but we were selling the units into the U.S. And so, we always had to go through customs on both bringing the components in and then bringing the finished product back to the United States.

5 – Good business fit

The fifth question – is it a good business fit?

This is more of a cultural question based on the company’s size. While I was at one medical device company, we needed to do a contract manufacturing for a disposable. And so, we needed about 200 units made the first year, and then we were looking at maybe 600 units the next year, and then maybe go to 10,000 the year after that.

So we started going out; we picked six different contract manufacturers; we tried to stay more local. Based on the six, they all quoted it and they bid it, and so we went and started visiting them.

Well, the large manufacturers didn’t tell us at the time, it wasn’t until the visit that they said, “Oh no, we’re not going to do your business.” So, they were too large; we were too small. Company size did matter. We ended up selecting a contract manufacturer that was a similar size, small, that could do this and could grow to a certain point.

Now, if we ended up creating 20,000 parts a year, they could probably handle that, but they probably couldn’t do a hundred thousand parts a year.

So, that’s dealing with a manufacturing capacity.

And also, with a good business fit, and you’re looking at –

  • Can you interview the team member and the contract manufacturer that’s going to be your person, your point of contact, or your project manager, to make sure that they culturally will fit with what your organization’s trying to do?
  • How are you going to do communication? There are lots of ways. Small manufacturers don’t always have the technical capability for information sharing. You might just be using Dropbox. But I’ve had large contract manufacturers, they have a website; you upload files there; it’s all tracked electronically. So, that really makes the communication process easier.
  • Are you going to set up weekly calls for task assessments?
  • If you have a printed circuit board, can they accept pdx-files? That’s the international standard for how you manage all the components that are on a circuit board because there are typically hundreds of thousands of components.
  • The next part of this is client references – will they give you client references? How many sites do they have? So, some of the large contract manufacturers may start at one site, but then they want to talk to you about offshoring it or moving it to a lower-cost facility. So, there might be one to transfer it for initial development; and then one for long-term production.

So, based on those five questions, I’m going to show an example here on sending out an RFQ. If you’re a Medical device manufacturer, you want to send an RFQ package out.

Now as you develop an RFQ package, like I said, you’re going to have a lot of the same things that I mentioned here. You want to make sure you’re bill of material, basically, your Device Master Record is part of the quote and specifically define a target range, target quantities you want quoted.

When we were doing that disposable I mentioned, we sent it out to the six manufacturers. We put the package together; we had a formal form, and they all came back differently, even with that. So part of that is understanding contract manufacturers have their own process for quoting, and it’s going to look slightly different every time. You need to understand that and make sure that it ties out, so you can do a one-for-one comparison between the different manufacturers.

And you want to rank your responses from zero to four. I’m using a simpler scale – one to four is a very strong match, and zero is no match at all.

Example analysis – matrix

Here’s what the matrix is going to look like. So we’re going to take the five questions, but they’re going to be weighted as the same level of quality system and part and cost.

I had done this previously. At one company, we had gone to a disposal manufacturer and we just went totally on cost. And we started on that process, after one month we abandoned it. The cost-quote didn’t match; there were all these extra service fees thrown on, all these extra costs thrown in, and I couldn’t actually say if we were going to save money or not with that manufacturer.

So, these five additional questions really are going to help you make the decision, make sure that, culturally, it fits.

Example – 4 contract manufacturers

So, we’re going to use an example of a small electrocautery device – it has a circuit board in it – and we’re going to look at four manufacturers.

  1. One’s a medical device electronics assembler; they’re in the same state, so they’re close by;
  2. A medical device packaging assembler, it’s in the same city even, so they’re really close. I can go over there after lunch and just talk to them;
  3. A third would be a medical device catheter manufacturer, so it’s a different kind of product, but they know medical device. They have 13485. They’re in a different state, but they’re going to low bid because they want to get into the business; and,
  4. the fourth is a commercial circuit board house. They want to get in the business too – long to get into medical – so they’re going to probably be the cheapest, but they’re not going to have the quality system that you want.

So, based off of this, the rankings we’d end up with, as you see here, the quality systems for the first two of medical device are going to be all fours. The third one was not quite there as a catheter; but the fourth one, it was a zero for their quality system.

But their price on C and D were the best. So if you just went strictly on price, C and D would be your choice. You’d visit them and make the decision. But if you look at the specialty information section, you’d end up that A would probably be the highest and C and D wouldn’t be.

Development services – the one that has a lot more experience would be ranking a lot higher, that’s B. Manufacturing services, same thing; convenience, the closer, the better. The farther, and the communication and the tools they have would be lower; and business fit.

So, in the example criteria here, A and B are the companies you want to look at instead of C and D because your overall lifecycle cost of that product would be cheaper, taking all these things that are required as part of a medical device manufacturer.

Summary

So, in summary, picking it, you want to make sure you align the needs of the manufacturer with your needs in these five questions, so cost is not the only factor. Just because they’re ISO 13485 – that’s good; they’ve got a baseline they can build off of – that doesn’t mean they know how to make your product.

You have to be working with them and understand the product itself to build it out and align your needs with the contract manufacturer’s needs. That’s going to give you the best solution.

So, this is just one aspect – supplier selection. Supplier–relationship management is this whole big thing where you’re looking at, beginning from, supplier selection, qualification, all the validation work, ongoing controls and then ongoing inspection and collecting the data; and the material acquisition process is part of that aspect.

I’m at Innovize. We also have a sister company, Consiliso. So at consiliso.com, we have a template procedure for these documents. I also have a book out on Consiliso which defines how to design integrated business processes across your entire company. [It tells how 00:16:27] 13485 would fit into that architecture.

And there’s a new book coming out, The Blueprint, which is a textbook on Consiliso.

This is just one tiny aspect of Consiliso on how you try and integrate the structure and make sure you include all the requirements when you’re designing products, when you’re designing your supply chain, when you’re designing your design controls.

So the question is, “Once you’ve selected your supplier, how do you integrate that into your ongoing controls for that supplier?” So, as part of your supplier selection, the manufacturing aspect is really key. When you’re doing the process validation at the contract manufacturer, what are the things they’re looking for and finding during the validation work? And so, you determine what your key controls are.

The specifications might have 50 or 100 things that are required, but during your validation, as you look at your PPKs during your validation, which ones are more on the edge? Which ones have the most variability?

Which ones have the most variability due to input material too? So, you’re going to be looking at the key things during your process validations and using those as your inputs. Now, depending on the kind of product, if you’re making a really simple product and you can prove that your PPKs are above 1.33, any of those parameters won’t have to be part of your incoming inspection.

But if you know you’re tighter on certain parameters, you’re going to want to maybe ask the supplier to give you data with every load. When I was back at Guidant, we were serialized, and so we actually had to have data on every single device. On high–volume disposable, you’re not going to do that; you use statistical process controls. And as part of those statistical process controls, you want to make sure that your limits are set, and you have more action limits, and so you’re telling on a regular basis.

Another way of doing that, if you don’t want to collect data on every load because you know your quality is good, you might, depending on your volume, have quarterly meetings or annual meetings with your contract manufacturer, keeping the relationship going.

Okay, Innovize is in Booth 311. I have copies of my first book available there. If you want to pick up a copy, you can stop by the booth after this, I’ll give you a signed copy.

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