Medical Device Startup Thrives with Contract Manufacturer Functioning as its "Virtual" Workforce
A contract manufacturer's custom-designed work cell engages a manufacturing team that functions as the client's "virtual workforce"--an extension of the OEM's business that takes on the responsibility of maintaining the client's reputation in the marketplace.
Any startup company faces many challenges. But perhaps one of the most compelling is the issue of how to get a product to the end user while preserving as much capital as possible for critical, core investments in research and development and sales and marketing. It's not enough to simply "sell" the product; the company must develop a manufacturing capability, a complete supply chain, and a post-sales service and support center. In many cases, an outsourcing strategy is developed because of the capital outlay, complex logistics, and headcount that are required to meet these critical needs.
InaVein, LLC (www.InaVein.com), a startup medical device manufacturer in Lexington, Massachusetts, came face-to-face with the complexity of this challenge when it acquired complete ownership of an innovative vascular medical device from its original developer. InaVein specializes in developing vascular products to assist clinicians in treating the full spectrum of conditions caused by peripheral venous disease. Its product, the InaVein TRIVEXTM System, enables surgeons to perform transilluminated powered phlebectomy (TIPP), a minimally invasive technique to remove varicose veins safely and efficiently under direct vision. The first generation system was introduced in 2000, and the current system was launched in 2004. It consists of a control unit, a cart/stand, and two handheld devices: one wand equipped with a light source, and the other configured with a cutting tool. Surgeons can operate the system to remove varicose veins in a way that is not only more complete and faster, but involves fewer incisions than traditional removal techniques.
Because InaVein was buying the whole product line, the company had an "instant product," a luxury that many startups might envy. But it also inherited the warehousing, manufacturing, and service issues that went with it. InaVein could market and sell the device, but it had no means of manufacturing it. Although the legacy supplier could offer support for a limited period, it was imperative that a partner be found that could handle these issues with the utmost reliability and expediency.
Selecting a manufacturing "partner"--a company that could source the material, build the device, and handle all of the post-sales logistics--required InaVein to find a facility that was qualified to build medical electronic devices, among other criteria. It wouldn't suffice to choose just "any" contract manufacturer.
"When we acquired the technology, we understood that different components in the system--from electronics to molded parts--were manufactured in different locations, including the U.S. and Mexico," said InaVein Vice President of Operations, Joe Burke. "What we wanted to do was bring the manufacturing and assembly closer to home for greater control of quality, cost, delivery, and other factors. In making our decision with regard to whom to work with, we considered a number of factors, including their ISO 13485 Certification, which is a key standard for companies seeking to manufacture medical electronic devices. This was critical. Also, we asked, "Are they FDA registered?" This is extremely useful as we engage in a complete order fulfillment relationship [because] we can be confident that our quality system will easily integrate into the dedicated work cell, drastically reducing audit exposure risk and expense."
ISO 13485, published in 2003, is an important quality management standard that represents the requirements for a comprehensive management system for the design and manufacture of medical devices. "Other factors we needed to consider were their range of capabilities, such as circuit board assembly, mechanical assembly, and cable assembly," Burke added. "The ability to build the entire unit and handle distribution and after-market logistics, as well as a track record of providing similar turn-key manufacturing services for other clients, were all important considerations."
After a thorough review of several local contract manufacturers, the decision was made to partner with West Bridgewater, Massachusetts-based Sunburst EMS (www.sunburstems.com) to obtain the critical manufacturing and logistics services required. Sunburst EMS began operations over twenty years ago as a contract manufacturer of electronic assemblies, and has since evolved into a versatile provider of contract electronics manufacturing services (EMS). The company has expanded its capabilities beyond circuit board assembly to include other services, such as design, prototyping, conformal coating, box build, cable and harness assembly, distribution, and depot repair, and has become a "complete order fulfillment" partner.
Once the decision was made, Ed Monte, director of quality and manufacturing engineering at Sunburst EMS, outlined the challenges and engaged the Sunburst EMS manufacturing team to engineer a solution. The concept had to begin with a dedicated manufacturing cell. The footprint of the dedicated cell would require limited access and have the space to accommodate receiving, verification, and storage of customer-owned material; the stocking and shipping of customer disposable product; and the manufacture of the product's sub-assembly and system hardware. It would also accommodate all inspection activities; order picking; packaging, and shipping; and a dedicated service area.
Philosophically, it is important that the cell be designed from the start to be isolated from the ever-changing dynamics of the traditional contract manufacturing floor. The culture and protocol involved requires a different mindset. "We take on the entire personality of the client company," says Ed Monte. "In a sense, we become them: We take on their identity, absorb their philosophy; we have to think of ourselves as the client. We are directly between them and their customer. Therefore, we have the responsibility of maintaining their reputation in the marketplace, and that is kept front and center with everyone involved in the project at all times.
"The client has input into the resource planning, which includes a number of elements," Monte continues. "These resources are broken down into facilities, work environment, and human resources. It's fair to ask, 'How do you train your people who will function as the 'virtual' client company?' In this case, the client conducted the training and documented it in accordance with our internal procedures. So, in the end, we know that the cell personnel have been trained to the customer's requirements, both documented and implied, and that the effectiveness of the training has been verified. During the training process, the customer verified the effectiveness of the training by monitoring the employee's performance based on the scope of the assignments. Not only were the accuracy of each distribution shipment monitored, but also additional factors, such as communication skills, ability to adapt to changing requirements, interpersonal skills, and efficiency and timeliness in posting important web-based inventory transactions. This gives the client instantaneous visibility that can be used to monitor the accuracy of the work performance of the cell at any time. The customer then provides feedback, indicating their satisfaction that we had selected the right candidate."
Sunburst Director of Operations, Steve Haley, says that the company has to be comfortable with its assignments. "We are selecting our direct employees and placing them, based on known skill sets, in certain positions. For example, one position might require a computer-literate person to track orders and use certain programs related to order fulfillment, inventory transactions, distribution, inventory control, or receiving the customer's material. Others may have to be familiar with mechanical assembly and be able to interpret several types of drawings, visual aids, and bills of material formats. It's understood that even though we select the employees for positions within the 'virtual' company or cell, the customer may intervene if they feel that we have not made the right choice. It's not a pass or fail grade for the employee, but in this situation, with a small versatile group, the chemistry has to be right. The goal is to provide our client with a team of multi-skilled operators who have complete responsibility and accountability for quality and delivery within the cell.
"The custom cell is designed to function as an extension of the OEM's business," Haley adds. "The communication protocol is established straight from the client company to the personnel in the manufacturing cell with limited involvement from all levels within the organization. This makes the manufacturing team a virtual workforce for the client."
In parallel with Ed Monte's manufacturing engineering effort, Sunburst EMS's Julie Caulfield, director of program management, and Patrick Thompson, purchasing manager, worked on the transitioning of parts procurement from the original OEM to Sunburst on behalf of the client. "We had bills of material to work from, but in many cases, the parts had not been quoted for several years," said Thompson. "Many of the parts were also used in other products for the former OEM, so they needed to be quoted in different quantities than were originally priced."
To further complicate matters, according to Caulfield, little or no vendor information or engineering documentation was readily available to provide for quoting. "There were only 172 different parts, but many were unique to the client's system, and there were over 40 different vendors to contact," she added. "Account information for all new vendors was required to be initiated by us in addition to obtaining letters of authorization from the former OEM to get quotes on certain parts. And each item needed to be negotiated separately to ensure cost-competitiveness and retain margin for the client. Another challenge was to obtain proper engineering drawings and documentation for many of the parts."
On-time delivery, product availability, and cost reduction are all prime considerations for the transition team. Accomplishing effective execution requires a great deal of teamwork and experience. Another step in the transition plan is validating what inventory can be transitioned directly from the original OEM to Sunburst to minimize the risk of duplicate buying. The Sunburst quality team took a trip to the original OEM's facility in Oklahoma City, Okla., to verify the assembly process and familiarize itself as much as possible with the manufacturing team, as well as inventory procurement and control. The current inventory was then factored into the MRP system so that the team could conduct a gap analysis, to determine exactly what it needed to buy, and a lead time analysis to determine when it needed to be bought to meet the forecasted demand.
Ed Monte created the initial cell concept, flow charting each process step. This would be the foundation for the sequence agreed upon to validate the manufacturing process from subsystems assembly to final systems integration, test, and packaging. All activities are accomplished in a cell footprint that is just over 1,000 square feet, with an additional 450 square feet of vertical storage for disposable and hardware finished goods and point-of-use materials. The manufacturing portion of the cell consists of three subsystem-specific workstations, which contain all the unique items identified and organized by part number. This includes dedicated hand tools and custom modified tooling to accommodate the manufacturing process. The subcomponents that configure to the final system include a stand, electronic console, and motor drive unit. All have very different individual assembly techniques and tooling requirements.
Currently, finished goods and disposables are received and accounted for at the Sunburst facility. Upon receipt of an order, dedicated work cell personnel assemble, package, and ship completed units directly from the dedicated manufacturing cell to the client's customers worldwide. Returns, depot repair, and reverse logistics are also handled through the cell. Inventory changes, tracking numbers, and shipment data are all electronically transmitted back to the client, so their customer service and accounts receivable systems are always up to date. There is also a virtual office space with a dedicated phone line, desk, and computer/printer available for client personnel in the cell when they visit.
"When properly executed, this custom-designed micro-facility, based on a stand-alone, vertically-integrated work cell dedicated to our client's system, eliminates the need for the OEM to invest in any logistics, supply chain, or operational infrastructure," says Dave Fahey, vice president of sales and marketing at Sunburst EMS. "This is extremely attractive and important to leading-edge medical device, clean energy tech, and other high-tech companies who need to invest their scarce capital in R&D and sales/marketing."
--Edited by Design-2-Part Magazine
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