Early Communication is Key to Cost Reductions in Medtech

As purchasing decisions shift from physicians to group purchasing operations, and uncertainty continues in the face of healthcare reform and device taxes, Medtech companies are under increasing pressure to reduce costs without compromising quality. Manufacturers must continue to ensure products are safe, effective and fully compliant at every phase of development and production.  One of the best ways to reduce costs in any phase is to work with an experienced, broad-based supplier as early in the project as possible.

By the time a product has been designed, only 8% of the total production budget has been spent, yet the design has determined 80% of the cost of the product![i]  Bringing suppliers in at the end of the process leaves few options for cost containment. And, in this regulated industry, it is simply too expensive and risky to jump from supplier to supplier to save a few cents on components.

Preparing the statement of work, performing risk assessment, designing for manufacturability, creating “what if” cost estimates, outlining regulatory requirements, etc., are all vital steps in a cost reduction initiative. So too is the early and active involvement of cross-functional representatives from product management, marketing, finance, quality, service and support, regulatory compliance, purchasing, key customers and key suppliers.

Bringing a supplier partner in earlier also allows companies to take advantage of existing products and services that may be commercial-off-the-shelf in other industry sectors. For example, mHealth products — the use of mobile, wireless, digital and/or wearable patient monitoring systems — are based essentially on smart phone technology.

Miniaturized connectors, displays and battery housings are examples of parts or sub-assemblies that, if purchased off-the-shelf, could save time and costs in design, prototyping, testing and preparing documentation.  A supplier partner that has experience in different industries can bring this broader perspective to the table. Such vendors, like Molex, can offer a range of choices and assist in the risk/benefit analysis of using commercial products in Medtech applications to reduce costs.

Another way to identify and enact long-term, sustainable cost reductions is by making cooperative decisions with a supplier partner and providing incentives for all parties involved.  These performance incentives should be tied to specific, agreed-upon metrics such as tolerances, quality targets, sales volume, delivery dates or other measurable requirements.  A typical example might be an agreed-upon cost reduction for components based on hitting a target increase in order volume.

Communicating with vendors when the design is more flexible enables companies to build savings and cost efficiencies into their products from the start. To reduce your overall production costs, start the conversation earlier. Contact Molex today.

[i] David M. Anderson, “Design for Manufacturability; How to Use Concurrent Engineering to Rapidly Develop Low-Cost, High-Quality Products for Lean Production” (2014, 486 pages; Productivity Press) www.design4manufacturability.com/books.htm).