March 31, 2020

The Dos and Don'ts of Manufacturing Consolidation

Somewhere between the avalanche of purchase orders, shipment delays and quality assurance checks, you decided to consolidate your medical device manufacturers to just a few, or maybe even just one.

It’s a big change, which is probably why you stuck with a small galaxy of suppliers in the first place. The benefits of switching to a single contract manufacturer are significant, but making that transition isn’t necessarily a walk in the park either. Here’s a list of simple dos and don’ts to keep in mind during the manufacturing consolidation process.

Do: Know when to switch

Medical device manufacturing isn’t a wide-open field; competition is fierce. You may have a premium product and feel comfortable with having higher costs and price tags than your competitors. But odds are, you’re looking to reduce your costs to beat your competition and lead the market or to defend your position as a market leader.

At a certain point, however, the only things left to cut are the things that make your product great. Nobody wants to sacrifice quality for cost if they can help it. If you can’t reduce costs any further and stay competitive without sacrificing quality, then you know that manufacturing consolidation is your next move.

Do: Ask your chosen contract manufacturer how they’ll protect your IP

Trusting a medical device manufacturer with your designs is a big leap of faith. If a particular contract manufacturer strikes you as a good candidate, make sure to ask them about what they’ll do to ensure that your IP stays yours.

Any worthwhile manufacturer will have an answer for you. If they don’t, you’ll want to keep looking. We’ve written before about how contract manufacturers can protect their clients’ IP, which may give you some insight into what you should be looking for.

Do: Consider your product’s maturity

If you anticipate future changes to your product’s design, you’ll want to make sure that your medical device manufacturer has the capability to support you in these changes.

If, for instance, design changes require commensurate changes in tooling or manufacturing process, you’re going to have to work with your contract manufacturer while they change out their tooling and train employees on the new process. Doing so can be cheaper than running an entirely in-house operation, but it’s important that you have faith in your contract manufacturer’s capabilities and have a relationship that fosters open communication to make this process as smooth as possible.

On the other hand, if your product is fully mature, you’ll have more wiggle room when selecting a contract manufacturer. They should, of course, still be efficient and communicative; you just won’t have to worry as much about the challenges associated with design changes.

Don’t: Consolidate to a medical device manufacturer that doesn’t have a contingency plan

The big worry about manufacturing consolidation is that you’re putting all of your eggs in one basket. The upside is that vendor consolidation reduces your costs and saves your employees’ time, but going with the wrong vendor can increase your risk — if they aren’t prepared.

A worthwhile contract manufacturer will keep their clients’ concerns in mind, and will therefore have a contingency plan for emergencies. If you’re considering outsourcing to a medical device contract manufacturer, ask them about what they’ll do if major events disrupt their supply chain, mechanical issues slow down production, or any other common challenge occurs in the manufacturing process.

Don’t: Consolidate to a vendor without considering their skill set

Not all medical device manufacturers possess the same capabilities. If there is a technique, process or special concern particular to your product, verify that your target manufacturer will be able to address it.

One way to ensure that your contract manufacturer is set up for success is to provide them with the right documentation. Make sure to keep and provide your contract manufacturer with comprehensive documentation on your product, noting any unique features that will need to be considered during the manufacturing process.

Don’t: Stick with in-house manufacturing just because you can afford it

Manufacturer consolidation is often a no-brainer for small to mid-size medical device vendors simply because manufacturing is an expensive process, and they don't have the budget to handle R&D, marketing, sales, distribution and manufacturing to boot.

Larger organizations, however, often do have the budget to perform their own in-house manufacturing, and may choose that route typically out of concerns for their IP.

As mentioned earlier, assessing your contract manufacturer’s IP protection plan should be part of your process when consolidating your vendors no matter what. But if you’ve done your due diligence and the medical device manufacturer you’re considering consolidating to meets your criteria, it doesn’t make business sense to keep your manufacturing in-house simply because you can afford it. Doing so merely leaves an opening in the market for competitors to undercut your prices with a product of equal quality.

Change of any sort is inherently stressful — there are a lot of unknowns to fret over, and it can be difficult to know which direction to go. Hopefully, the dos and don’ts in this article can help point the way.


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