Donna Bibber
INTRODUCTION
Wow! In over 20 years in the medical device design and manufacturing industry (10 of these specifically in micro), I’ve been saying: “this is the year, this is the year of the micro boom,” and each year comes and goes with growth, but not the boom that was anticipated.
Well, this year finally boomed, and micro — specifically micro medical manufacturing — really took off, and is now reaching the potential it has been expected to reach for all these years. With all of the talk about economics and worldwide recession, a bright and shining star called medical device manufacturing glows, keeping hopes alive for any country or any company that has invested in the “how-tos” and “where-tos” to get micro components manufactured in a scaled-up fashion.
It seems that from material manufacturers, machine shops and fabricators, to equipment suppliers that supply to the medical device community, everyone is smiling, and they are not just busy but “swamped” as they describe it. With that said, they are all holding their breath too, and they are not oblivious to the fact that they need to be smart about investing and re-investing their profits in the right places. They are also aware of the fact that when the economy picks up, they should be even busier than they are now. Or will they?
Here’s a random, non-financially educated, but often voiced thought. What happens in a down economy is that people get stressed, and when people get stressed they get sick, and when they get sick, hospitals get busier and use more medical devices. Because of this, medical device manufacturers have an influx of cash that they can use to develop new products and the new product engine is what keeps us all busy with new and innovative products to supply to the medical device community.
Now, everybody knows that medical devices take 2-3 years to develop and get onto the market, so what happened to the economy in 2000-2001 is just beginning to reverberate around the world and is now turning into new medical device production orders. (I told you it was non-educated, but it is a theory that I’m sticking to because all others aren’t logical enough to explain why medical device subcontractors are so very busy in a bad economy).
GLOBAL MARKETS
The materials used in micro medical devices are influenced by regulatory requirements, compliance (less pain, easy to use), and global price competition. The medical device industry is extremely competitive, and as with any market, it is critical to be the first on the scene with new products. Some of these new products can be seen in Figures 1 and 2.
According to BCC Research (a global market analysis firm), the global market for minimally invasive surgical devices and instruments is expected to reach
$19 billion U.S. by 2011. Many of these devices are enabled by micro components and assemblies to fire their tiny mechanisms internally in the body. Approximately 60% of medical devices are designed in the United States and some OEMs continue to shift production and assembly operations to other countries. With Intellectual Property now aligning with scale-up, more and more medical device companies are keeping technology advances “close to their chests” by manufacturing internally or strategically partnering with a full-service contract manufacturer to produce both their challenging micro assemblies and their straightforward conventionally-sized assemblies.
MICRO MANUFACTURING SUPPLY CHAIN OPPORTUNITIES
So, where is this boom happening and what are the applications in micro medical devices that are fueling this growth? In spite of mounting operating expenses, the medical device industry has experienced substantial growth during the past decade. Medical device OEMs have managed to maintain profitability by supporting an extraordinarily high level of commitment to product innovation, and by adopting a variety of creative cost-cutting measures— including the increasingly popular strategy of outsourced manufacturing. This is most evident in micro manufacturing, as re-inventing this wheel is not the best use of their multi-billion dollar research and development budgets. Additional reasons for outsourcing medical devices are:
• Quicker, more-efficient product launches. Engaging full-service contract manufacturers in the design and development phase of a product’s life cycle condenses launch timelines. Manufacturing experts working in conjunction with product designers are able to achieve higher productivity by developing DFM (Design For Manufacturability) solutions that drive out production inefficiencies over the long haul.
• Ability to focus on core competencies. Medical device manufacturers obtain greater ROI by investing in product development and marketing rather than in manufacturing. Developing methods for micro manufacturing capacity are both capital intensive and slow for medical OEMs, resulting in lower capital returns over time.
• Access to specialised capabilities. Contract micro manufacturers have become experts in their niches in the market, allowing manufacturers the option to use these specialised production capabilities without spending valuable R&D dollars on projects that distract from their core competencies.
Although the argument for outsourced manufacturing is compelling, there are instances in which manufacturers choose to handle projects for which they would otherwise rely on contract manufacturers or micro manufacturing consultants. Such reasons include:
• Surplus capacity. Due to the fixed-cost nature of manufacturing, manufacturers may look to leverage underutilised resources before outsourcing work.
• Manufacturing control. Device manufacturers may keep projects in-house to interact with existing assembly equipment or to protect their Intellectual Property. IP in micro manufacturing is historically linked with scale-up processes versus making the first several thousand parts, and therefore the IP becomes tightly integrated into the supply chain and may include co-development of products.
• Liability issues. OEM Device manufacturers are ultimately liable for products they market. There may be instances, such as pharmaceutically-induced materials, that would necessitate ownership of the manufacturing process.
CONCLUSION
The medical device market is never stagnant, it is recession-proof, and it is full of challenges and innovation. Many medical OEMs are using a combination of outsourcing, internally sourcing, and niche supplier strategic sourcing. As the outsourcing continues, medical OEMs will either move toward a full-service manufacturing provider or start to develop their own outsourcing network to provide the additional services. To the extent that their existing suppliers have micro manufacturing capabilities, they will be the likeliest candidates for the new business.
Donna Bibber is President/CEO of Micro Engineering Solutions, a solutions-based company serving small to Fortune 50 companies. She is also technical partner for microPEP, a full service micro manufacturing company. She has written and lectured hundreds of technical papers on micro manufacturing associated topics worldwide and was recently voted onto the List of 100 Notable People in Medical Devices for 2008.
