Before embarking on a partnership, it’s important to make sure that the manufacturing supplier understands all standards and expectations.

Choosing the right contract manufacturer is of paramount importance to achieving business success for orthopaedic device companies. The effect of selecting an appropriate contract manufacturer goes far beyond the quality of the requested component part. It affects time-to-market delivery and liability issues, and can directly alter a company’s competitive advantage against other similarly positioned devices. 

A traditional supplier audit involves three key metrics of evaluation—on-time delivery, quality, and customer service. Ultimately, a manufacturer should achieve high marks in each of these areas. However, the problem with this evaluation is that it does not assess many of the areas defining the supplier’s business value. As a result, even after an audit, many orthopaedic device companies find that they cannot rely on machine shops and must monitor their quality and delivery.

This model is broken. Although device companies should spend the majority of their resources on selling products and generating profitable revenue, too many resources are siphoned away to

• Double check the quality of a part that should have been correct upon first delivery.
• Manage a plethora of vendors to achieve a final product.
• Slowly plow through the trial-and-error process of prototyping without proactive input from manufacturing partners.

Many orthopaedic device companies have lowered the bar for machine shops and aren’t sufficiently challenging their suppliers to have a more positive and compelling effect on their bottom-line business. The traditional standards for choosing a manufacturing supplier must change. This article gives manufacturers a refined template for choosing a contract manufacturer or replacing its current base of suppliers. It also provides a checklist to help companies consolidate their manufacturing and supplier base in a systematic fashion. It centers around three core values that are often ignored during the traditional supplier audit.

Choosing a Partner: No More Machine Shops

A change is occurring in the marketplace of machine shops. It is quickly dividing contract manufacturers that will positively contribute to an OEM’s growth from those that will go out of business. At the center of this change is the culture of an OEM’s supplier.

This cultural standard, if truly embedded in a supplier, will be reflected in multiple aspects of the company. But ultimately, all aspects will point to one focal value—being a business partner. The first test is to assess whether this culture exists within the supplier’s organization by asking the following business-related questions. Be sure to assess the supplier’s answers from a business perspective and gauge them according to this new partnership standard.

What is Its Core Value to the Company? What is the supplier’s primary value to the OEM as its customer?  A traditional machine shop might give an answer such as, “We make parts.” However, a manufacturing partner will discuss how it is an extension of the OEM’s business.

As a simple comparative backdrop and analogy, consider Mercedes Benz. If you were to ask Mercedes if it makes a car, the answer would be a rebellious “no.” To the contrary, the company’s Web site reflects the core values that consistently differentiate it from the competition. Its culture is built around rejecting compromise, staying true to a  vision, taking responsibility, and outperforming expectations.

However, most machine shops see their task solely as making a part to print. A company’s initial queries should uncover whether it has kept its expectations high or whether it has lowered them to accommodate the machine shop mentality, which is hurting the competitiveness of the United States in the global market.

The initial partnership test is critical due to the high level of competitiveness in the orthopaedics market. The chosen suppliers are ultimately part of an OEM’s extended team and will have a direct effect on the company’s success. An OEM’s ability to choose a supplier with a business-oriented partnership mentality will be a key factor in whether it can compete more aggressively in the orthopaedics market.

What Makes Them a True Professional? Ask yourself, does giving someone a driver’s license make them an excellent driver? Many people would say no. Why? Because being an excellent driver has more to do with the person, than a license. Characteristics of an excellent driver include respect for others on the road and the constant improvement of driving skills, which includes learning from daily mistakes made by themselves or others around them.

Aligning with this mindset, an OEM must define its manufacturing partner beyond its certifications and capabilities. The supplier should have a distinct set of values that are evident in all aspects of its business. To achieve maximum effectiveness from a supplier base, an OEM should only be aligned with manufacturing partners that operate by a code of professionalism. Therefore, ask the tough questions that will answer this concern more definitively, including

• Why did the supplier get its certifications (or not)? If it has none, run away—immediately. If it has certain certifications, ask why it received them. It seems like an obvious question, but the answer can be very revealing. Many machine shops received certifications as part of a requirement (so they don’t lose an account), not because they recognize the value in repeatable processes or traceability. Is that the definition of a professional partner—one that changes only when forced? A partner should be driven to be a better company as part of its corporate value system.
• When did the supplier get its certifications? Again, this is a tell-tale sign, because some machine shops wait until the very last moment to get certified. A professional partner is driven to excellence and doesn’t wait until the 11th hour to make important changes.
• Did the supplier achieve the minimum certifications or is it already working on others? Some machine shops are achieving the minimum standards to sneak by in their current audits. Any future manufacturing partner should be prepared with certifications that exceed an OEM’s expectations.

As manufacturers demand more for their partners, the role of the traditional machine shop could change.

The formal value of certifications is that they provide assurance of the repeatability of quality through consistent processes. The professional mindset and culture of a supplier be that its role is to help the OEM stay ahead of the competition.

Is Its Corporate Structure Built Around Serving You as a True Business Partner? When entering a traditional machine shop, are you are greeted with a greasy and unorganized floor that is overflowing with random machines and strewn with tools? Challenge the supplier to be more focused and invested  in managing a business infrastructure that is built around you as a partner.

How much of its business infrastructure (including square footage) is dedicated to supporting your business? This space includes operations such as customer service, dedicated account management, material and tooling management, and accounting. Are these services an afterthought for the supplier, if they exist at all? Does the supplier discuss its business infrastructure as one of its main values? Finally, find out how many resources the supplier invests in maintaining business stability, profitability, and keeping its market position as a long-term supplier. Does it have a business plan, or does it operate on a month-to-month basis?

Reducing Risk and Sharing Liability

The second test in eliminating unsuitable machine shops focuses on choosing manufacturing partners that are committed to reducing risk and invested in sharing liability. There are several key areas that a supplier audit should investigate.
Certifications. How much value do certifications offer? Many machine shops are lucky if they recently received their first ISO certifications.

Does the supplier offer part-level traceability? Part-level device traceability is critical to an orthopaedic device company because of the number of implantable devices it produces and the subsequently increased risk. With recalls and lawsuits making recent headlines, orthopaedic device companies have a heightened need for suppliers that can pinpoint part lots and from which machine a specific part was made. There are still machine shops today that don’t offer part traceability. By choosing the supplier with both ISO and FDA-related certifications, this risk is addressed and reduces the likelihood of a potential class-action lawsuit.

Materials. Do the machine shop’s materials protect a company or render it vulnerable to lawsuits? Some machine shops purchase cheap materials, even if such materials are prone to defective characteristics. These shops purchase materials that are technically within specification on paper, despite their corrosive properties. Ask the supplier if it uses material compliant with the Defense Department’s Defense Federal Acquisition Regulation (DFAR). If it does not, the OEM must ask the supplier from where it receives its material. DFAR-certified materials are guaranteed to have been melted in the United States, its outlying areas, or in another qualifying country. More information about DFAR-certified materials is available on the Defense Department’s Defense Procurement and Acquisition Policy Web site.

Due to the high volume of implantable devices developed by orthopaedic device companies, potential issues such as rusting cannot be ignored. Within the next 10 years, the industry could experience an increase in lawsuits due to the use of low-quality materials by manufacturers. 

Investment. What level of investment in metrology equipment has the supplier made? Many machine shops purchase the minimum amount of metrology equipment needed to confirm a part’s quality. As a result, medical device companies are burdened with the cost of having the proper equipment in-house. A manufacturing partner should take on the responsibility to out-inspect its medical device customers whenever possible. 

Resources. How many resources are allocated specifically for quality? Carefully examine the supplier’s organizational structure. Even if a machine shop has recently been certified, it may not have the infrastructure to truly support and maintain quality systems. A professional manufacturing partner will have invested the necessary resources (such as having a chief quality officer), in ensuring that it has a reliable quality system to protect the OEM.

Protecting Data. Does the supplier have back-up, redundant IT systems that protects an OEM’s data? A suitable manufacturing partner will understand that an OEM’s information is vital and that in the event of, for example, a natural disaster, business is expected to continue. Furthermore, investigate whether the supplier stores the majority of your information in hard copy or an electronic format. These factors could dramatically affect an OEM in an emergency.

Delivering More than a Part

Manufacturing partners should also offer inspection, passivation, and cleanroom services.

Many traditional machine shops measure their value primarily as delivering a part. To maximize the value received from a manufacturing partner, an OEM should assess several areas.

Services. Does the supplier offer a full range of capabilities or only a specialized service? When assessing suppliers to manufacture close-tolerance parts, keep expectations high. Partner with a manufacturer that offers a full suite of capabilities. Today’s market demands that a manufacturing partner function as a one-stop-shop. Look for partners that offer the full range of Swiss-screw, electrical discharge machining, milling (horizontal and vertical), and lathing capabilities.

It is also fair to have the manufacturing partner make plans to offer passivation and cleanroom capabilities. These are fundamental needs of medical devices companies, and ones that an OEM should expect from a supplier.

Design for Manufacturability (DFM). Does the supplier lower costs and reduce risks with a DFM consultation? DFM should not be an extra service from a manufacturing partner. However, some machine shops will simply take a print and make the part without questioning it. This method leaves medical device customers with the burden of learning through trial and error what works in the manufacturing world. A true manufacturing partner should be contributing its wealth of knowledge to the OEM in the spirit of lowering costs, reducing risks, and improving lead times. This standard is at the core of an effective partnership.

Does the supplier help you manage outside processes? A quality manufacturing partner should offer an OEM the ability to significantly consolidate its supplier base by managing processes such as laser welding or marking, passivation, heat treatment, and plating. An OEM’s time should not be consumed with managing multiple suppliers. Pick one or two suppliers that offer what is required—the finished product.

Growth from Partnership

The ultimate question that should be answered from these questions is simple. Is your orthopaedic device company better, more competitive, less risk averse, faster-to-market, and more profitable because of your manufacturing partners? Are your core resources being invested in sales, marketing, and revolutionary designs? These questions should be answered with a resolute yes.

The challenge suppliers have in becoming irreplaceable business partners begins within their cultures and is reinforced by OEMs raising the standard even further. Manufacturers have value and longevity, as long as they produces more than component parts. OEMs should stop building their businesses around the ineptness and the lower standards of out-of-date manufacturing methods. If U.S. machine shops want to remain competitive, they need to produce more than a part. Orthopaedic device companies should demand additional value from manufacturing partners.

Raise the bar to where it should have been set initially. Set expectations for machine shops to evolve into refined, business-oriented companies that will help you achieve your business goals and beyond. This method will not only help machine shops, but also help the United States become competitive in the global market once again—one machine shop at a time.

Tony Loaiza is vice president of sales at Precision Swiss Products Inc. (Milpitas, CA).

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