5 Areas of Importance for Selecting a Contract Manufacturing Company for Your IVD Instrument
Startups and small/medium-sized enterprises (SMEs) in the IVD and medical device industry often do not have the appropriate resources and skills to produce and scale their IVD instruments in-house. As a result, companies look for a contract manufacturing partner (CM) who takes over the production of the diagnostic devices. Thus, internal resources can be used more efficiently, and the companies can focus on their core competencies such as research and development of new technology or analytical chemistry.
The industry is booming. According to a 2019 survey by Accenture, 91 percent of biopharmaceutical and medical technology company executives plan to expand their use of CMOs over the next three years. On the other hand, CMO respondents said they are expanding their operations and capacity overall in response to industry growth. (Accenture Life Sciences (2019). DARE TO BE DIFFERENT: It’s time to revamp collaboration in life sciences contract manufacturing)
But there is much to consider for these MedTech companies when they are searching for an IVD instrument manufacturing outsourcing partner. To break it down, what can be identified as the five most important factors?
1. Geo-Location for Collaboration and Market Access
The location of a CM can significantly affect the costs (e.g., material, labor, handling, etc.) of the final IVD instrument. While labor and material costs may be lower at certain offshore locations, handling and shipping costs can be higher depending on the country in which the product is planned to be sold. The use of a domestic or even regional CM can have a positive effect on collaboration and information exchange (e.g., same time zone, more frequent f2f meetings, etc.). Conversely, a globally present CM can ease and facilitate market access if the production site is close to the intended sales market.
2. Flexibility and Scalability in Production
Young companies in the industry usually plan with a conservative sales forecast for the market launch which is based on internal projections and distributor feedback. Although conservative planning is important due to limited financial resources, the scenario can materialize that product demand will peak after launch in a short period. To be able to further gain early market share, the sales potential must be filled. Therefore, it is important to find a reliable partner who both has the size to support future growth and the flexibility to adapt to changing production forecasts.
3. IVD and Medical Device Market Expertise
Companies searching for an IVD instrument outsourcing partner find that CMs have one of two different approaches: CMs who specialize in one market (e.g., IVD and medical devices) and CMs who serve a large number of markets (e.g., automotive, aerospace, defense). Both approaches have advantages and disadvantages for customers of various sizes. However, a medical device startup should make sure to select a partner with a specialized facility in which all processes are FDA QSR and ISO 13485 compliant. This ensures that the industry know-how, technical capabilities, and correct level of services are available in all operational levels associated with the product.
4. In-House Product Design and Development Capabilities
In addition to manufacturing capabilities, CMs often provide ongoing support throughout the product lifecycle including product development activities and sustaining engineering tasks. Choosing a partner with capabilities in R&D and manufacturing has the advantage that any engineering changes or product upgrades can be carried out and implemented internally which saves time and costs. In addition, managing “only” one external partner (as opposed to separate partners for R&D and manufacturing activities) creates working synergies over time and shortens decision-making paths which leads to a faster time-to-market.
5. Global Supply Chain Management
Choosing a CM with a global footprint has the advantage that customers benefit from its global partner network of suppliers. By producing several products at different locations (e.g., Europe, Asia, North America), the CM can rely on a network of long-standing and well-established relationships with preferred suppliers. This has the benefit that the lowest material costs and the shortest throughput times can be guaranteed. The biggest advantage, however, is that the transfer of supply chain management frees up internal resources that can be used more efficiently elsewhere.
Due to the enormous competitive pressure with growing innovations in the IVD and medical device market, it is now more important than ever for companies to find a reliable partner who successfully delivers. Both parties enter a symbiosis in which their success is mutually dependent. In other words, the CM is only successful if the company’s business case and execution (e.g., sales and marketing) are successful. Concurrently, the company can only be successful if the quality of the devices is right and the agreed conditions (e.g., costs, on-time delivery) are met. Costs and price will always be decisive factors but should not be the only characteristic when choosing a CM. To form a long-term and mutually profitable partnership, the geographical location, flexibility and scalability in production, and industry experience of the project team should be used as the main decision-making criteria.