CONSIDERATIONS FOR SELECTING A SUPPLY PARTNER THAT SUPPORTS YOUR REQUIREMENTS
We hear this too often – Customers and prospective customers face the challenge of how to weigh the effectiveness of their supply chain and partners. Selecting a new one can be overwhelming; balancing price, location, quality systems, general manufacturing know-how and more items are enough to leave your supplier evaluation teams dizzy. To top it all off, design and manufacturing of medical cable assemblies, connectors, and interfaces is done worldwide creating even more supply options to select from. It might seem obvious to select a partner that’s overseas as labor costs are typically less in Mexico and even more so in Asia. However, manufacturing of medical device products in the U.S. is increasing. The perceived cost advantages of offshore manufacturing of only a few years ago is disappearing.
“In-sourcing” or “re-shoring” has gained a great deal of attention in the media lately. Both terms refer to the trend of bringing manufacturing that was outsourced to offshore locations back to the United States.
1) PRICE VS. TOTAL COST
One reason for the return of manufacturing to the U.S. may be that the expected cost savings were not achieved. Pricing from offshore manufacturers may have been compared to pricing from U.S. manufacturers, without taking into account additional costs, some of which are not readily apparent. Import tariffs, shipping costs and the intangible launch and maintenance costs such as travel to and from overseas suppliers are usually not accounted for when selecting an overseas supplier. The price of the product may have been lower, but the total cost of the product usually ends up equal to or higher.
2) SUPPLY CHAIN COSTS & ISSUES
Anything that decreases the efficiency of the supply chain will add to the true cost of a product. Added costs due to supply chain inefficiency are often unknown or overlooked when initial pricing is negotiated.
To reduce costs, many medical device OEMs have implemented programs to minimize the cash held in inventory. For such programs to be successful, short lead times and reliable dock dates are required. With the “built-in” delay for goods to clear U.S. Customs, shipments from offshore manufacturers take longer than from a domestic producer. And, when sourcing from an overseas manufacturer, OEM’s are faced with either high air freight shipping costs or very long transit times.
As lead time to receive product increases, so does the need to maintain safety stock or buffer inventory. Additionally, if there is any uncertainty over an offshore supplier’s ability to meet delivery commitments, an even higher inventory level may be required. The cost to hold excess inventory can quickly reduce, or even eliminate, price advantages of manufacturing offshore.
3) THE VALUE OF FLEXIBILITY
It is reasonable to assume that shorter overall lead times offer the advantage of greater supply chain flexibility. Flexibility can be a benefit when:
- Orders need to be increased
- Orders need to be decreased or cancelled
- A product change needs to be implemented
- A “pull system” is desired or advantageous
It may be difficult to assign a dollar amount to the value of flexibility in a supply chain, but it should be obvious that increased flexibility may offer a reduction in total cost.
4) QUALITY SYSTEMS & ON-SITE AUDITS
An important consideration when choosing a manufacturing partner is their quality system and certifications. A supplier with ISO certification from a recognized body will be expected to meet minimum common standards. However, without conducting an on-site audit, the effectiveness of the quality system cannot be fully quantified.
The ability to conveniently conduct initial and follow-up audits may be an important consideration in supplier selection. An on-site audit is typically easier and more efficient if the supplier to be audited is located in the same country. Auditing an offshore supplier imay be more costly and take more time. The effectiveness of an audit may be reduced due to language differences in both verbal communication and documentation.
5) STANDARDS & REGULATORY EXPERIENCE/KNOWLEDGE
A prospective supplier may offer additional value if they have experience with, and knowledge of recognized standards such as ANSI AAMI and IEC. Similarly, experience with regulatory issues associated with the U.S. Food and Drug Administration may be of benefit especially in the design and development stage of a project. Suppliers should offer OEM medical device companies the comfort of being an FDA registered medical device manufacturer, to show that they understand the challenges and operate on the same plane as OEM companies in meeting regulatory requirements.
6) DESIGN FOR MANUFACTURING – REDUCING LABOR CONTENT
Planning for how and where the product will be manufactured should be part of the design process. As hourly labor rates in the U.S. increase, successful domestic manufacturers often “design the labor out” of the product or implement lean processes and automation to reduce the labor content. Not only does reducing the labor content help reduce cost, but it also increases throughput and can lead to higher quality.
7) DESIGN VERIFICATION & VALIDATION TESTING
When choosing between a domestic or international manufacturer, the value of the supplier’s additional capabilities can also be important. A supplier that can author and execute qualification protocols may save a device manufacturer time and money.
8) UNDERSTANDING PRODUCT USAGE
Understanding how medical cables are actually used allows a manufacturer to provide additional value. By understanding and anticipating potential user risks can be reduced which often results in lower product cost. When that knowledge is applied in the design process, the result is often a cable assembly or device that achieves or exceeds quality and performance expectations while maintaining cost effectiveness and value.
9) THE “TIME ZONE ISSUE”
Collaborating on the design and specifications for a medical cable assembly or custom connector requires regular two-way communication. Communicating with overseas technical resources may be problematic due to time differences. While overseas manufacturers may to minimize the impact of the time difference, communication is often more difficult to schedule at convenient times. Several overseas manufacturers maintain U.S. based sales offices that do well to eliminate language and time zone barriers but when issues arise, there is no substitute for speaking directly to the front line. With a customer oriented domestic contract manufacturer, response times shrink from days/weeks to minutes/hours.
10) SUPPLY PARTNER – NOT A COMPETITOR
Another important consideration for device manufacturers is whether a prospective supplier competes for their accessory business. Some manufacturers produce cable assemblies for OEMs, but also sell the same or similar products to end-users or distributors. Companies, like ClearPath Medical, do not compete with OEM medical device companies and do not sell the product to end users or distributors. Trade secrets, intellectual property and proprietary design and manufacturing methods should be guarded and not disclosed to other OEM customers.
THE BALANCING ACT – BALANCING QUALITY, LEAD TIMES & PRICE
There is no proven path to choosing the right contract manufacturer for medical cables and devices. Medical Device OEM’s should research a contract manufacturer’s reputation, relevant product experience, and scalability along with analyzing availability of their own internal resources needed to successfully launch new products and sustain demand. We too often hear that Medical Device OEMs have to choose between price, quality or fast delivery. Usually the response is pick two but you can’t have them all.
When selecting a manufacturing partner, glitzy catchphrases and empty assurances are worthless. ClearPath Medical prides itself in being a trustworthy provider of the highest quality medical assemblies in a flexible, transparent and turnkey environment. We do our best to offer value starting from concept development through to sustained delivery.
Leverage ClearPath Medical’s expertise in medical cable assemblies when developing your next cable project. Get in touch!
If you’re curious about the markets we serve, download ClearPath Medical’s latest Solution Brief.
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