Contract manufacturing Contract manufacturing
Market observers also highlight that, in the wake of Covid-19, the rationale for moving towards a full-service CMO continues to be driven by external forces, including trade and geopolitical challenges, alongside rising device complexity. Yet while it may be tempting for OEMs to enlist a full-service CMO to manage the life cycle of their products or devices, it is important to evaluate whether the shift is being made for the right reasons and suits an OEM’s aims.
The full-service CMO shift
According to Alex Diamond, managing director at Ernst & Young’s consulting arm, EY-Parthenon, an OEM’s decision to consolidate its manufacturing provisions is often driven by a desire to reduce factors that make their manufacturing protocols more onerous, such as vendor handoffs. Strengthening accountability and traceability, costing and enabling closer collaboration from design through production are further potential benefits of a full-service provider shift, Diamond adds. Regarding CMO consolidation, however, Keith
Washington, chief product officer at medical cart specialist Simplifi Medical, notes that just because an OEM’s manufacturing provisions have fewer moving parts, this will “not automatically create a better product, solution or system”. Rather, Washington says OEMs should focus on what will create successful customer outcomes, with consolidation as a potential part of that equation. “Fundamentally, OEMs have to start with their first principles as to what problem they’re trying to solve for the benefit of their customers,” Washington says.
“My experience is that it starts with a strong product specification that goes into great detail as to what an OEM is asking their contract manufacturer to do, along with sound testing methodologies surrounding their product before the CMO ships it out.”
Consolidation may provide value-add around these key considerations, Washington says, because it could be the case that an OEM is “giving the contract manufacturer a little more control” to create a desirable outcome around these aspects.
Choosing an effective CMO Diamond highlights that consolidation with a full- service CMO may result in “increased exposure to capacity and supply chain shocks” – factors that can occur if a CMO lacks adequate supply chain redundancies or, more generally, if it cannot provide as consistent and responsive a service as an OEM can reasonably expect.
In selecting a full-service CMO, Diamond emphasises that OEMs should perform their due diligence around a CMO’s quality programme maturity, and other factors including capacity
www.medicaldevice-developments.com
headroom, supply chain redundancy, financial health and their ability to “scale from prototype through commercial production”.
According to Diamond, for consolidation to prove effective, the CMO must “truly span the value chain from design, manufacturing, electronics integration, through assembly”. However, complex devices may still require specialist suppliers for sub-assemblies, Diamond adds, so the question becomes whether the lead partner can “manage those interfaces and take end-to-end accountability, rather than owning every step under one roof.”
CMO consolidation for OEMs is not always as black and white as choosing a single-source provider versus multiple partners for different aspects of their product life cycle.
“Using multiple vendors is still the norm for many components across medical devices in order to help ensure stability and resilience for customers,” Diamond says. The common model is that an OEM enlists a “lead strategic partner for integration” yet retains specialist suppliers for “critical but capacity constrained components”. When a medtech OEM shifts to a single CMO or related provider, it does not always mean it will pin all its manufacturing dependencies on a single provider. Jennifer Huebschman, VP of strategic accounts, medical sector, at electronic manufacturing services (EMS) provider Creation Technologies, shares that when a medtech OEM comes to them needing expertise outside their portfolio, they won’t necessarily turn them away.
She says: “In some cases, a customer could come to us and want us to do something broader, such as
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