Rejection Hurts. You’ve finally got your groundbreaking technology working in a product. You decide you are going to use a contract manufacturer (CM) rather than build-up a manufacturing plant yourself for commercial production. So, you start sending out your design to be quoted by medical device CMs. To your surprise, you receive one or more no-quote/no-bid responses. 1) It’s not you, it’s me It is possible, especially in the current economy, that the no-quote has more to do with the CM vendor than you. They may be at full capacity, they may not have the expertise or specialization they believe you need. They may be struggling internally to meet their existing commitments and not have bandwidth to take on something new. They may be refocusing on specific technology, treatment types or device classifications.
The point is, have the conversation. Talk to the manufacturer and find out what they can tell you about the no-quote. They may not be willing to share details, but they may surprise you.
2) Mismatched When I was a child, cleaning the bathroom or the windows each week for $1 in chore money seemed like a good offer. How else would I get enough money to
expand my sticker collection? By the time I was a young teen and able to earn a lot more babysitting, it wasn’t so exciting. Now, of course, I wouldn’t even entertain the offer.
Similarly, a partner that is too big is not going to see the pay-off. It is going to be too much work for too little reward. A partner/site that is too small is not going to be able to support the product volume you aim to manufacture; everything from their SOPs to capital equipment to supply chain is going to be overloaded. So, they no-quote rather than tank their existing business by taking on something they can’t handle yet. Finding the right manufacturing partner includes:
annual volume, especially ramp in years 1 through 5
existing supply chain and confidence in CM ability to meet COGS targets
ability to scale and gain economies of scale
existing infrastructural capacity and required capital investment
profitability targets for both the product and the CM overall
It may be difficult to get the CM to admit this mismatch, but asking questions like “what is your typical annual volume per product at this manufacturing site?” or “how do you define low volume and high volume?” or “does this site have a minimum annual revenue per product?” can be a good start.
3) It’s not me. IT’S YOU Once you’ve eliminated CM internal challenges and a mismatch on volume or profitability, it is time to face the hard truth: your product might be the problem. I work with clients who have created impressive new technology that patients are clamoring for. They have developed a working prototype. Formative Studies, engineering evaluation, pre-DV testing are all looking good and getting to market seems so close. Unfortunately, great technology in a functioning product isn’t enough. Take a hard look at your design. You may consider bringing in a fresh pair of eyes.
Here are a few examples of commercialization considerations:
Nominal values and Tolerances – are they included on the drawing? Are they reasonable for industry standards by commodity? How tight a manufacturer has to hold the tolerances is going to impact which suppliers they can use and additional cost for secondary processes or additional scrap cost. Likewise, assemblies that rely heavily on humans to get them exactly right are going to drive up cost with in-process inspections.
Source controlled – contract manufacturers are going to have their preferred suppliers in terms of cost, quality and existing relationships. If they don’t have the ability to incorporate most of your bill of materials (BOM) into their supply chain, the opportunity is going to be less appealing.
Scalability – A contract manufacturer is not going to use engineers to build your product. Can your existing design be built with simple processes, clear instructions and limited training? How manual is the assembly of your existing design? Does your assembly align with the quantities in your ramp plan? For example, how hard would it be to semi-automate your manufacturing process? Do you have any single sourced components with limited availability? These are just a few of the concerns that come up when evaluating design vs ramp plan.
Cost – Is your COGS target reasonable given your BOM costs and assembly labor involved? Is your customer pricing appropriate for your target market? How much opportunity does the CM see in your existing pricing and COGS goals? Can the upfront cost of setting up your line, including assembly equipment, be covered with a typical 2-5 year ROI?
Funding – Is your company financially secure? Can the manufacturer trust they will get paid? Likewise, consider whether or not the CM is solvent enough to be a reliable partner.
Lack of information – if you are asking CMs to quote production unit pricing from a picture on your website, you are doing yourself a disservice. Talk to your CM and find out what information they need to give you a reliable quote. Most will want to review component and assembly drawings. If you have a secret sauce that you really cannot share even under NDA, at least give them what you can. The more information you provide, the more of their expertise you can benefit from.
At the end of the day, getting 1 no-quote response may not be a big deal. Two no-quote responses should be a red flag to evaluate the quote input package for some of the considerations above. And if all of your CM options are no-quoting, give us a call. I’d hate to see commercialization challenges get in the way of patients benefitting from your innovation.