Is Your Contract Manufacturing Strategy Up to Date?
Today’s manufacturers strive to balance product quality and innovation with cost and process efficiency, and medtech companies are no different. Contract manufacturers have been helping medical device companies with such endeavors for years, but technology advancements, globalization, new regulations and standards, and market and competitive pressures are raising new challenges.
David Montecalvo has been addressing such challenges for years. He previously worked at Medtronic in a number of leadership roles including vice president, contract manufacturing, of the company’s Restorative Therapies Group of businesses; vice president of business operations integration, where he led the successful global operations integration of Covidien Plc; and vice president of the product development and global operations of the company’s Cardiovascular Structural Heart division. Now serving as senior vice president, chief operations and supply chain officer, for West, Montecalvo leads the company’s operations and supply chain strategy across 27 global manufacturing sites. He has extensive international experience with global business partner collaboration in Asia, Europe, Latin America, and the Middle East. He is also a certified Six Sigma Black Belt and an advisory board member of the Boeing Center of Supply Innovation at the Olin Business School of Washington University, St. Louis, Missouri.
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What do medical device manufacturers need to keep in mind when developing a manufacturing strategy? Is it simply based on technological capabilities and volume, or is there more? What factors point toward the need for working with a contract manufacturer?
Montecalvo: When considering the development of a global operations strategy, manufacturers should assess how to best leverage their organization and align to executing on strategies in five key areas: Manufacturing Strategy, Global Supply Chain, Process Excellence, Global Procurement, and Advanced Manufacturing Engineering.
A company’s Manufacturing Strategy should address optimization of its global footprint and network of facilities in strategic locations. The strategy should include initiatives to drive maturity by the development of capabilities and competencies to ensure that manufacturing processes are creating value in the marketplace and delivering the highest quality products on time, with efficient lead times, and in a safe environment. Establishing an effective, integrated global supply chain strategy will facilitate a sustainable efficient supply of products and create solution-driven opportunities for customers.
An important foundational element throughout global operations and overall business operations effectiveness is Process Excellence. At West, we have implemented a West Business System (WBS) that provides a framework to ensure a customer-centered focus and efficient continuous improvement process to meet and exceed the needs of our customers and business. A key element of the WBS is the implementation of Lean and Six Sigma methodologies and tools like DMAIC, Value Stream Mapping, Cellular Manufacturing, Kaizen, and Gemba walks to engage our team members and help continuously improve our processes through a lean framework. The true value of our WBS is not only realized in Operations, but is an enterprise initiative driving improvements in business support functions as well.
Medical device manufacturers should also look to actively leverage their scale to develop and implement material (both direct and indirect) strategies to deliver a more focused approach to key suppliers in driving quality, lead time, and cost and actively managing supplier risk. Lastly, as medical device products are becoming more complex in design and function, a critical capability for medical device manufacturers is in Advanced Manufacturing Engineering. This core competency provides early-stage design considerations for manufacturability and ensuring lean principles, automation, and digital manufacturing environments are established to drive toward zero defects, optimized lead times, and reducing manufacturing cost.
Please explain how ISO 13485 has transformed the manufacturer-to-contract-manufacturer relationship. Are there any other changes in standards or regulations that have changed the manufacturer-to-contract-manufacturer relationship?
Montecalvo: An impact of ISO 13485 requires manufacturers to demonstrate a mature and robust risk management system, including product design and manufacturing (from conception to intended use), and ensuring that appropriate risk assessments and methodologies are actively implemented. Manufacturers also need to take this approach with their critical suppliers to ensure that their quality systems are compliant with this standard and appropriate risk-based quality systems exist and are effective. Successful contract manufacturers partner with medical device companies starting early in the R&D process, when components are selected to complete finished device to sterilization and packaging, to facilitate quality and regulatory compliance all the way through commercialization, when safe and effective products are delivered to patients in the global markets.
Are there heightened product quality and process excellence expectations today? Why? How has this impacted the manufacturer-to-contract-manufacturer relationship?
Montecalvo: Robust and high-maturity quality systems are imperative for medical device manufacturers. Proactive quality measures and quality insurance initiatives to drive to zero defects are critical to the success of manufacturers that strive for the highest quality products for patients. Contract manufacturers should demonstrate strong CAPA (corrective and preventative action) systems and ensure that the same quality expectations are driven to their suppliers as well.
Design-for-manufacturing initiatives are growing in popularity. Where do they come into play in the manufacturer-to-contract-manufacturer relationship?
Montecalvo: Design for Manufacturing (DFM) capabilities are an important input into ensuring products are designed efficiently. Medical device manufacturers should engage a contract manufacturing partner that shows evidence of this capability early in the design process to provide input to improve design efficiencies. Highly capable contract manufacturing partners will assist in product design simulations to optimize the number of device parts driving optimal design efficiency and reliability as well as optimizing the manufacturing processes through lean processes and automation.
When serving a global marketplace, do manufacturers also need their contract manufacturers to have multiple locations around the world? Would such globalization support procurement and fulfillment, or are there other needs?
Montecalvo: A key element for a global manufacturer to consider is to ensure that the contract manufacturer has global capability in regions ideally where their customers are located. As markets continue to be globalized providing medical device products to patients around the world, one must consider the value created through the ability to co-locate near the customer’s operations. The clear advantages are to better align product fulfillment through efficient distribution, lead time reduction, and optimization of the overall supply chain. Globalizing operations also allows a deeper development of knowledge and partnerships with local suppliers and optimizing procurement of materials.
Manufacturers who offer customers manufacturing redundancy are often highly sought to ensure risk mitigation to supply. West’s global strategy is to establish multiple facilities with common manufacturing processes and operations in order to provide customers with risk mitigation of pharmaceutical drug supply to their global customers and patients. An example is the addition of our recently constructed site in Waterford, Ireland. West’s Waterford site provides a valuable second site in West’s manufacturing network for the production of insulin laminate materials for the global diabetes market. This multiple site capability is key in risk mitigation and helps ensure West is well-positioned to provide our customers, and ultimately our patients, with an uninterrupted supply of the insulin products they depend on. In addition, West has added sterilization capabilities in Waterford to further support risk mitigation, providing sterilization capabilities in two regions—both Europe and North America—helping to further fortify product supply and provide increased capacity and capabilities for West’s high-value product offerings.
Above: West's Waterford, Ireland facility
Are there any recent changes in the medical device supply chain that would impact a manufacturing strategy or the manufacturer-to-contract-manufacturer relationship?
Montecalvo: Medical device companies continue to merge in order to leverage scale and drive higher market share. As these consolidations occur, the acquiring company will continue to focus on their core competencies, often looking to consolidate facilities and outsource products that do not fit with core capability or proper scale to manufacture within the company. This has created opportunities for contract manufacturing companies to provide effective services to meet this need. Contract manufacturers will also seek to consolidate to develop new capabilities and utilize better scale.
Also, medical device technology continues to become further sophisticated requiring miniaturization and also focused more in areas of diagnostic and minimally invasive products. Contract manufacturers need to ensure that they do have solutions, including vertical integration of materials, high capability automation, and strong quality systems, to help address this need. Another trend that has been driven by the move to buying groups for hospital supplies and products is the presence of medical technology distributors, which provide highly effective supply chain solutions. Contract manufacturers must have sophisticated supply-chain systems that could easily integrate with these distributors to ensure highly responsive and optimized product supply. Supply chain management for top contract manufacturers can be a sought-after capability for a large medical OEM.
Should manufacturers look for contract manufacturers that are investing in automation and Industry 4.0? If so, why?
Montecalvo: Medical device manufacturers should evaluate contract manufacturers that are investing in automation and next-generation digital manufacturing environments. In the recent past, medical device manufacturers drove decisions for manufacturing locations based on the availability of low-cost labor to provide a cost competitive advantage. However, today, more medical device manufacturers are seeking contract manufacturers that have high capability in automation and can drive a digital manufacturing environment for high-volume products, which provides a higher level of sophistication and predictability relative to quality, supply and cost. Recent examples are diagnostic disposables for the diabetes market and auto injectors for the pharmaceutical industry, where a high degree of efficiency and output can be obtained with highly engineered manufacturing processes and systems.