By Jim Kasic, Boulder iQ
Mention “smart manufacturing” and terms like robots, cobots, and Big Data likely spring to mind. Automation and computer-driven processes are indeed integral to today’s medical device industry. But for startup companies, smart manufacturing strategies require a nuanced approach.
That approach stems from a startup reality in the medical device world: You must be able to afford to make a device inexpensively. Getting costs down is every developer’s goal, but here’s the rub: It takes money — often, a lot of money — to drive the cost out of a device. Large corporations with deep pockets can afford to employ technology and automation to do just that. They can also afford to move more slowly and deliberately in market introduction of a device.
Startups have to think differently. “Smart manufacturing strategies” have more to do with true strategic thinking and careful decisions than quickly implementing automated solutions. Here, we outline five smart manufacturing strategies that will benefit medical device startups.
1. Let Startup Reality Rule When Considering Automation
One of the main challenges for startups is evaluating the differences in return on investment (ROI) between nonrecurring engineering costs, such as automation, and manufacturing by hand. The latter is not always an antiquated choice.
To illustrate, let’s look at two different types of medical devices. An adhesive bandage is a very low-cost device — one that requires a tremendous amount of machinery to make it at low cost. On the other hand, a catheter or an endoscope is a relatively high-priced device but one that can be made by hand profitably with very little automation involved.
In fact, the manufacturing for a catheter from a startup developer might actually involve gluing it together. It’s possible to assemble the parts with a thermal weld (bond) – at a cost of about $50,000 for the welding machine. If you could amortize that cost over, say, 50,000 units, it probably would be a good investment. But a company in startup mode, focused on getting its device to market as quickly as possible, is only going to manufacture a few hundred units. Until it knows the extent of market adoption, investing in automation to manufacture the device won’t make good business sense. Manufacturing by hand, even when margins are lower, is the right decision in many cases like this.
In general, startups are smart to take lower margins in early stages of manufacture to gain maximum flexibility. Concurrently, they can develop a plan to automate later based on demand, sales, and the margins needed for positive ROI.
2. Second Source Critical Items
Startup developers often cringe at the suggestion of second sourcing. In truth, it is very hard to have two vendors on hand that can do the same thing; in effect, you’re paying twice for something. For critical items, though, it can mean short-term savings of tens or hundreds of thousands of dollars — and much more in the long term if it substantially speeds your device to market.
As an example, one developer we work with said that it was working to bring on an overseas manufacturer to fill the void after its domestic manufacturer pulled out. That sounded reasonable until they explained that it would be close to a year before the new manufacturer was up and running, resulting in a one-year gap where they would have no one to manufacture their device. A one-year delay in getting a new medical device to market can mean catastrophic failure of the business.
Similarly, with the supply chain issues in sterilization, it’s not uncommon to see a developer lose hundreds of thousands of dollars in revenue every month because they can’t get their device sterilized. Getting another sterilization contractor on board can be the linchpin in your go-to-market plan.
These cases confirm the importance of second sourcing of critical items in manufacturing. Often, startup and small developers will start out building devices in-house and retain minimum capabilities in-house even after moving to a contract manufacturer. However you do it, think beyond short-term dollars and act strategically with sourcing decisions.
3. Avoid Death By Scale-Up
Scale-up often kills startups. Quality may go down, inventory costs could go up (significantly), and lead times can go haywire. Smart developers will work diligently to understand all scale-up costs and cost of goods when the time comes to scale.
Consider an actual scenario in which a startup was making its device by hand, incurring high per-device costs and low margins. An overseas manufacturer could reduce the cost to make each device by 70%, just what they were hoping for. The caveat: They had to buy in quantities of 10,000 units at a time. They were caught in a Catch-22 situation: They ran out of cash before they could sell enough product to pay for the product they were going to manufacture.
Most startups have a plan for how and where they will achieve their margin, but the reality is that margin comes only with volume and sales. To move forward, most companies are smart to plan on taking a hit on margin for the first few years.
4. Design For Manufacturing Flexibility
Startup device companies often look for clever ways to reduce costs and speed up manufacturing, especially when it comes to plastic parts. Many favor the use of snap kits, for instance, or ultrasonic welding.
Both methods are fast and efficient, no doubt. But use either method and it becomes difficult, if not impossible, to disassemble without cutting them apart in the event something doesn’t work perfectly and you need to tweak the design. And when in startup mode, one constant is that things don’t work perfectly.
The smart manufacturing strategy: Design in alternative features that allow troubleshooting or low-volume production, with plenty of flexibility. When the device design is set and headed to market, it’s not a big jump to replace those features with the more automated options. In the example above, a design that incorporates a simple screw to hold the parts together can do the trick and is easily swapped out when the time comes.
5. Automate When It Makes Sense
Smart manufacturing strategies for startups do include automation — when a thorough analysis indicates a benefit. Rapid prototyping (3D printing) is one good example. Because few 3D resins hold up to the mechanical and sterilization needs of a product, it usually is not a good idea to try and go to market with 3D parts. However, 3D-printed jigs and fixtures can be made quickly and inexpensively and can greatly improve the manufacturing process.
Relatively inexpensive, simple robots are available to complete basic manual tasks. Go/no-go gauges, mechanical measuring tools that assure machining has been performed correctly, are often solid additions for a startup. Smart scopes can make part inspection substantially faster and more accurate.
As in many areas of life, medical device manufacturers are wise to avoid reinventing the wheel. Employing best practices and economics of manufacturing is sound business. Tempering those with the market launch goals of a startup will help device developers make the smartest manufacturing decisions for their companies.
About The Author:
Jim Kasic is the founder and chairman of Boulder iQ. With more than 30 years of experience in the Class I, II, and III medical device industry, he holds more than 40 U.S. and international patents. His career includes experience with companies ranging from large multinational corporations to startups with a national and international scope. Kasic has served as president and CEO of Sophono, Inc., a multinational manufacturer and distributor of implantable hearing devices, which was acquired by Medtronic. He also was the president of OrthoWin, acquired by Zimmer-BioMed. He received a B.S. in physics and an M.S. in chemical/biological engineering from the University of Colorado, and an MBA from the University of Phoenix. He can be reached at email@example.com or on LinkedIn.