Outsourcing Guide

Wired for Success: Tips for Building an Effective Medical Electronics Outsourcing Strategy

Posted in Contract Manufacturing Services by emdtadmin on September 1, 2009

Partnering with an EMS provider can help medical device firms bring innovative new products to market faster while reducing costs



It’s not just your cell phone that has gone to 3G and beyond. The rapid pace of electronics innovation spurs the evolution of medical devices, as well. But because of regulatory pressures, device firms encounter higher hurdles implementing new electronics technology than do manufacturers of consumer electronics. In many cases, it might make sense to share that burden with an electronics manufacturing services (EMS) provider.


“Outsourcing manufacturing frees up the customer’s own internal resources, allowing him or her to concentrate on the design and marketing of the company’s equipment,” says Nick Jones, Sales Director at Wilson Process Systems (East Sussex, UK; www.wps.co.uk).


“By using a good EMS provider, a company making medical devices will almost certainly be able to get products to market faster and with less investment than it could if it were acting alone,” he adds.


An outsourcing relationship enables a device manufacturer to benefit from an EMS firm’s continual investment in capital equipment and employee training programmes in advanced manufacturing techniques, Jones says. A medical equipment manufacturer may not be able to justify such investments. “For example, miniaturisation is very important to makers of products such as hearing aids, medical sensors and catheters. Latest designs require miniature electronic components—for example, passive devices with a package size of 0201 or smaller,” says Jones. Such tiny parts require specialised equipment for automated assembly that would be unusual for an OEM to have, but would be standard at a well-equipped electronics outsourcer, he adds.


Though an outsourcing relationship can offer a number of benefits, the main draw for most firms is its financial rewards. “Many medical device firms can get the biggest bang for the buck by putting their best people into design and letting the EMS players take care of the electronics,” explains David Atkinson of Jabil (www.jabil.com), Senior Director of Medical Business Units at Jabil’s facilities in Auburn Hills, MI, USA. Because medical device OEMs typically have low-volume demands for electronics, partnering with an outsourcer often can result in significant savings—in the range of 10–15%, according to The Electronics Outsourcing Report published by the Venture Outsource Group (San Jose, CA, USA; www.ventureoutsource.com). Outsourcing also gives OEMs the advantage of converting fixed costs such as manufacturing overhead into variable expenses, which can be especially attractive when relatively low quantities of parts are needed.


EMS companies rely on a variety of cost-cutting strategies to offer OEMs competitive prices. EMS firms’ commitment to manufacturing efficiency is one approach they use to minimise cost. In addition, the diversity and size of their client base enables them to buy electronic components in substantially greater quantities than OEMs can, Atkinson says. “Many EMS providers have a very large budget for components, so they can leverage that cost for their customers,” he notes.


The right business partner


To get the most mileage out of electronics outsourcing, OEMs should cultivate a long-term relationship with a skilled, future-oriented firm. “You want your EMS provider to do more than manufacture stuff for you,” Atkinson says. “An EMS firm can invest in your company’s future while taking care of your current product,” he says. “They should be coming to the table ready to invest in the next generation of your product. They should have a design team that is looking at the latest technology and finding ways to apply it to your product.”


When setting out to look for an EMS partner, start with a list of prospects and eliminate those without a sufficient background working with medical device firms. “You don’t want a company that just moved into medical,” Atkinson says. The company you choose to work with should have a thorough understanding of the regulatory climate for medical devices. Of course, it also should possess the necessary regulatory certification. “Certification to ISO 13485 is really just a minimum,” he advises. Device firms also should consider the EMS providers’ plans to obtain new certifications in the next three to five years, says Jackson Tan, Business Development Manager, OSI Electronics (Singapore; www.osielectronics.com).


Tan also recommends looking for a firm that can meet your short-term as well as your future manufacturing needs. To help in this regard, it can be useful to make sure the company’s business model is a good fit, he says. “Does your firm need high-mix, low-volume or low-mix, high-volume manufacturing?” he asks. A device firm also should consider the likelihood that it will need to scale the volume up or down in the future, he says.


Tee Soon Ann, Vice President, Business Development, Nestronics Ltd (Singapore, www.nestronics.com.sg) advises OEMs to look for an electronics outsourcer with a comparable business size to their own company. Similarly sized firms are more likely to understand each other’s needs and have a meaningful long-term relationship, he explains. Of course, you want to make sure that your EMS partner has the competence to offer the variety of services you need. But, says Tan, small- to medium-sized EMS firms often offer more accountability than larger firms. “There’s usually more corporate hierarchy at larger electronics outsourcing companies,” he says. “When working with a large electronics outsourcer, you often have to go through some kind of a department that’s not directly monitored by upper management,” he says. “Working with a small- to medium-sized EMS provider can translate into more accountability and a closer working relationship,” explains Stan Lee, Senior Business Development Manager of OSI Electronics.


The company you ultimately do business with should have a proven track record of consistent high-quality manufacturing, recommends Soon Ann. Get in touch with existing customers of the EMS providers and find out if they are happy with the companies’ level of service and product quality, Tan recommends.


And, of course, a device company must check whether the EMS provider has the right capabilities for the job, advises Jones. Things to keep in mind, he says, include whether they can handle miniature components; are capable of providing the right coatings to protect both sensitive electronics and the patient; and offer value-added services such as cable assembly and box build.


Your EMS provider should have broad commodity knowledge and a solid supply network, advises Atkinson. A well-rounded firm versed in multiple industry sectors can bring value to medical device firms by applying technology from other sectors to the medical OEM’s product portfolio, he says. A company with a solid supply network can offer cost and logistical benefits, and safeguard against counterfeiting. “Ask how the EMS firm qualifies its suppliers. It should have robust and documented processes catering to medical requirements,” recommends Atkinson. “It should have a range of suppliers that meet medical requirements,” he says. “A lot of the OEM’s products will live for many years on the field, so it’s important that the EMS firm can source replacement parts for years to come.” Atkinson also stresses the importance of looking for an outsourcer with a strong RoHS background. “You don’t want to find yourself stuck with leaded parts that are supposed to be unleaded,” he says.


Location, location, location...


Also consider the implications of the location where the EMS firm operates its manufacturing facilities, recommends Tan, whose home base of Singapore counts a large number of EMS firms. “The basic rule OEMs should keep in mind is to look for an outsourcer whose manufacturing facilities are based in a politically stable country with a solid economy,” he says. “It would be a disaster if your product was ready for shipment but couldn’t be sent out of the country because of political instability.” He advises that OEMs look for a company based in a region with a strong logistics network and an educated workforce with sufficient engineering support. Other things to keep in mind include the country’s tax environment and whether there is good intellectual property (IP) rights protection, he says. “IP is very important—especially for medical device firms.”


Working with a firm that operates multiple facilities across the globe also may be advantageous because of the flexibility that provides, Tan explains. On the other hand, Jones advises device manufacturers to seek out a local firm to keep the lines of communication as short as possible, which can be useful when complex medical device components are concerned.


After you have narrowed down your list of potential EMS partners, go visit them in person, Tan recommends. By visiting the company’s manufacturing facility, you should be able to get a sense of the firm’s knowledge base, its grasp of quality control and so forth, he says. “Also look for a company culture match,” Atkinson recommends. The relationship between an EMS provider and OEM is really kind of like a marriage, Atkinson says. “You likely will be in it for the long haul, so you want to make sure you see things eye to eye.”


Be prepared


Before work begins, your company should ensure that proper, complete documentation is in place, Jones says. “If a product has previously been made in-house, the medical device company will have an inherent knowledge of procedures that may not be obvious to the EMS company,” he says. “However, once all the processes and procedures have been documented, quality and efficient production can be assured.”


Because there is often a learning curve at the outset of an outsourcing relationship, an OEM would do well to communicate frequently with the outsourcer to make sure both companies are on the same page, Tan recommends. “We suggest daily conference calls—at least in the beginning.” A lot of problems can be avoided through clear communication, Tan stresses.


The potential learning curve at the start of the relationship also can be helped by making a PCBA-level project the outsourcer’s first assignment. “Though we don’t rule out starting at the box-build level, we suggest starting at the PCBA level, which is actually the heart of the whole product itself,” Tan says. “If we start there, we can really understand what the requirements are for the product and often can introduce cost savings,” he adds.


Before the production begins, most EMS firms provide design for manufacturability and design for testability reports to their customers. The information gleaned from such reports can help medical device OEMs optimise the manufacturability of their existing products. The EMS provider should be able to help medical device firms introduce cost savings and improve manufacturability by tweaking the product’s design, Atkinson says. The outsourcer can often suggest a slight design modification that can dramatically lower manufacturing costs or result in a big improvement in terms of user experience or product quality.


Involving an EMS firm in a project’s design phase is generally more effective at improving the manufacturability of a new product than modifying an existing product. “I can think of so many examples of medical OEMs that have problems with their products that could have been avoided through careful preparation while the product was still in the concept phase,” Atkinson says.


Copyright ©2009 European Medical Device Manufacturer

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