Guest Column | July 20, 2017

How CMs Evaluate Prospective OEM Partners


By Jeffrey Schipper, Proto Labs

You know what you need when considering a manufacturing partner, but what are they looking for in an ideal customer?

What if medtech companies had to resort to personals ads to find a manufacturing supplier? It might look something like this:

Do you enjoy curling up with a new product idea? Into innovation, automation, and the latest tech? Ready to go beyond 3D printing? We’re a medical device maker that loves consistency, on-time delivery, and getting products to market before the competition does. We’re seeking a smart, reliable quick-turn manufacturer. Objective: Possible long-term relationship.

You won’t, of course, have to rely on a personals ad in your search for a compatible manufacturing partner. However, whether you’re a scrappy startup, a Fortune 500 giant, or somewhere in between, making that supplier connection is critical to the success of your project — and maybe your company.

Your firm is a “catch,” of course. But what are contract manufacturers (CMs) really looking for when they size up a medical device OEM or other medtech firm? Finding out could lead to the right match, and even a trip down “the aisle” — to regulatory approval (if necessary), to market, and to revenue.

Ideal Customer

For a CM, the ideal customer — in short — is one that wants to move fast and reduce risk. That customer needs to have prototype parts in-hand quickly, iterate rapidly, and return in short order for more parts, for testing, or to quickly address market demand. That ideal customer places a high value on getting to market as quickly as possible, whether for competitive advantage, to capitalize on fast-moving markets, or to introduce proprietary technology, among other reasons.

In this need-for-speed dynamic, the supplier’s ideal customer also recognizes that the speed it desires may come at a premium — and sees the value of that in the total cost of ownership of the part over its lifetime.

That customer also understands that an approach of “fail fast, learn often,” “fail often, learn fast,” or some other variation of that wisdom, reduces risk and minimizes capital expense, especially when using cost-effective tooling to produce multiple prototype versions simultaneously. This approach boosts confidence in a new design before the company invests in more expensive production tools (with a production house or medically approved vendor).

Medtech OEMs that have difficulty forecasting production volume for a medical device or other product, whether new or updated, also present a red flag to contract manufacturers. An on-demand manufacturer that doesn’t require minimum orders, or a commitment to order a certain quantity of parts over time, will enable a project to move forward with less uncertainty and lower up-front costs while quickly responding with on-time deliveries when production demand spikes.

A fledgling medtech startup can level the playing field with a blue chip OEM by working with a rapid prototyping and on-demand manufacturer through the product development cycle to get to market faster. The little guy might even grab some market share from its larger competitor, perhaps making itself a candidate for acquisition as it grows.

Involving a contract manufacturer early in your product development cycle will get that CM’s attention — and improve your results. Taking the plunge early can typically cut development time by at least half — chopping the time between initial prototyping and market launch from a year or more with a traditional manufacturer to just six months. Prototyping early, often, and cost-effectively to improve the product and learn to design within the manufacturing partner’s capabilities and limitations also positions the customer to go to market with the version of its product that works the best — not just a version that works.

Turning Up the Heat

An on-demand manufacturing partner will be enthusiastic about working with anything custom, and with a “low volume, high mix” customer that needs tens of thousands of parts a year for many different products. Having multiple product lines that need components as they change yearly, or every other year, will further endear a customer to such a production partner.

Interest in — and experience with — 3D printing at some level in the development cycle is another way to appeal to a CM partner. This signals that the supplier’s customer is more innovative and more open to adopting new technology.

Given the buzz around 3D printing these days, most companies by now have used 3D printing in-house. But getting parts from an in-house shop may mean having to use a limited set of materials and getting sub-par, less-than-commercial-grade quality. A CM can respond more quickly and meet a need for parts that may be outside the in-house shop’s capabilities.

CNC machining with a contract manufacturer is ideal for functional prototypes. But because machined components won’t be available in greater quantities, the conversation will often lead to on-demand injection molding and its suitability for low-volume production and bridge tooling. A customer that uses multiple manufacturing services regularly, across multiple product lines, will be popular indeed with a contract manufacturer.

Furthermore, a company on the rebound from a product that is performing poorly in the market can turn to an on-demand manufacturer — after the company has gone back to the drawing board and redesigned things — to get immediate help with production components. While such suppliers would rather be working with the company early in the development cycle to iteratively test parts, ensuring they won’t fail in the first place, it’s good for companies to know that they have an on-demand supplier safety net if needed.

Deal Breakers

Not every potential relationship is going to work out. A company that needs an implantable device will have to find a medically certified manufacturer for large production runs. Commodity parts, where a customer needs millions of the same component over a long period of time, probably won’t be cost-effective to a CM (though the same is true for prototypes or custom parts from high-volume production houses). In some cases, parts may be too big or too small for a CM to produce.

Ultimately, as a medtech company, you’ll want to carefully vet contract manufacturers before deciding which one will work best for you. And that decision can be informed by keeping in mind how those contractors size up their customers.

About The Author

Jeffrey Schipper is the Director of Special Operations at Proto Labs. He has more than 15 years of experience in plastics, which has led to a specialized focus within key manufacturing industries including the medical, automotive, aerospace, and lighting industries. Schipper has undergraduate degrees in design, manufacturing, and business along with an MBA from the University of Minnesota’s Carlson School of Management.