12 Key Questions for the Supplier Selection Process

Answering these questions will help you zero in on the right supplier.

Few decisions are as important to medical device companies as the choice of an outsourcing supplier. These
suppliers, which take on critical jobs once handled by OEMs themselves, have a large and immediate impact on the
fortunes of their customers.

What’s more, it’s likely that the impact will be a lasting one. OEM-supplier relationships “tend to go on for a long time.
So when you choose a supplier, you’re probably making a three- to five-year decision,” notes Jeff Somple, president
of northern operations for Mack Molding Co. (Arlington, VT), which provides plastic molding and other contract
manufacturing services to medical device firms.

So how does a company choose the right outsourcing supplier? Keys to making a sound decision include
understanding your needs for a specific project, the work to be outsourced, and the suppliers vying for the job. Also
crucial is the selection process you develop and how well you implement it.

To help you become a better shopper for outsourcing services, here are a dozen questions to answer before signing
on with a supplier:

1: What are you looking for?

To begin with, try to define and put on paper what want from a supplier, advises Dirk Smith, vice president of
business development for Minnetronix Inc. (St. Paul, MN), which designs and manufactures software and electronics
products for medical device companies. The document you produce could be as detailed as a request for proposal,
Smith says. Or it could simply be a general statement of what you expect from your outsourcing partner.

With some kind of document stating your requirements, you’re ready to begin your search for a supplier. “Many
companies say they do medical device design and manufacturing,” Smith notes. “But that can mean a lot of different
things. So you have to do some work upfront to narrow down your list of prospective outsourcing providers to those
that do what you’re actually looking for.”

After you’ve identified a number of vendors that do the type of work you need done—molding, machining, assembly,
etc.—you have to find out which of them have the specific competencies required by the project, according to Bill
Ellerkamp, CEO of ExtruMed (Placentia, CA), which provides custom thermoplastic extrusions to the medical industry.
For example, Ellerkamp says, your product may need a degree of tolerance control that can only be provided by
certain suppliers.

2: What phase is the project in?

Generally speaking, Ellerkamp says, there are four major factors to be considered when evaluating a supplier: cost,
quality, speed to market, and volume or capacity. The importance of each of these factors depends on the phase in
the product lifecycle in which the supplier will be getting involved. Ellerkamp breaks up the product lifecycle into the
following phases:
• Design: At this stage, he says, you needn’t focus on a supplier’s capacity or production cost. Instead, you should be
concerned about speed to market (how quickly the supplier can provide what you need) and how well the supplier
can comply with your quality requirements.
• Development: Speed to market remains a primary concern at this stage, as does quality. Cost is beginning to
matter, but volume is not.
• Manufacturing: Quality will probably jump to the top of the list, Ellerkamp says. Cost and volume also become more
important, but speed to market becomes less so.
• Maturity: The product’s sales growth has now probably peaked. At this point, cost becomes the OEM’s top concern.
“When you’ve got two or three competing products on the market, it’s all about who can sell the product at a lower
price and still get a good margin out of it,” Ellerkamp says. Quality and volume are also important in the maturity
phase.
• End of life: At this point, there’s still enough of a market for the product to make it worthwhile to produce. But the
OEM is no longer putting any focus on it. While quality remains important, “it’s really all about cost at this point,”
Ellerkamp says. Therefore, he notes, the OEM may be thinking about moving manufacturing offshore to cut costs
even further. “Today, there are products on the market that may have reached the end-of-life stage 10 years ago but
were moved to Mexico and found new life because they’re manufactured at a cost-competitive level.”

According to Ellerkamp, some “integrated” suppliers can handle all five phases of the product lifecycle. But there are
also many suppliers like his firm, which only assist OEMs in one phase. Therefore, he says, products will sometimes
shift from one supplier to another as they move through their lifecycles.

3: Who will size up suppliers?

Potential outsourcing partners should be evaluated by people from a number of different departments of the OEM’s
firm, advises Robert Scott, vice president of manufacturing operations and information technology for Possis Medical
Inc. (Minneapolis), which develops and sells devices used to remove intravascular blood clots. In addition to
manufacturing, Scott says, departments that should be represented during the selection of a manufacturing supplier
include:
• Engineering: the group that knows the product best.
•Quality: this department knows the quality standards that must be achieved.
•Documentation: to make sure the document systems used by the OEM and the supplier are compatible.
•Finance: to ensure that any deal with the supplier is a sound financial move.

4: How’s the fit?

Is a supplier a good fit for a particular job? To answer this question, the OEM must make judgments about several
areas, including:

• Experience: Has the supplier handled jobs like yours before? It’s not necessary for a potential outsourcing partner
to have experience with exactly the same type of product as yours, Smith maintains. More important, he says, is
experience making devices with the same level of complexity and produced in the same types of volumes. So, for
example, a company with a relatively large and complex clinical device that will be manufactured in low volumes
should look for a supplier accustomed to handling complex, low-volume devices.

“If you’ve got a design that’s done and you’re looking for someone who can build the device, I think it’s more
important to look for expertise in executing on manufacturing—and not necessarily expertise in the technology of an
IV pump or whatever the product might be,” Smith says.

• Volume: Does the supplier have the volume capabilities to handle your product when it goes into full production? If
not—and if this is discovered after the supplier has been given the job, forcing the OEM to switch suppliers—the
OEM will have re-qualify the new supplier to meet FDA requirements, says Lonny Wolgemuth, medical market
specialist for Specialty Coating Systems (Indianapolis, IN), a provider of coating services and equipment.

In addition, the supplier must be able to handle any increases in your volume requirements, when necessary. John
Grecco, senior designer for knee engineering for Stryker Orthopaedics, says his company expects its suppliers to be
able to keep up with Stryker’s growth.

• Scope of services: According to Smith, Minnetronix specializes in providing a complete package of services for
medical device manufacturing, including regulatory-compliant documentation. In some cases, however, “people come
to us who want a module or component of a system, and they don’t need our quality system and our complete
documentation package. So we point out that we may not be the best fit for that type of project because they don’t
need all the services we provide.”

• Cultural: Make sure your corporate culture is in sync with that of a potential supplier, advises Somple. For example,
OEM and supplier should have similar views on key matters like corporate values and treatment of employees.

In one case, Somple says, “four of our customer’s engineers were basically living at Mack for the better part of six
months. In that kind of situation, they almost become a part of your team, and you become part of their team. So if
your team directives are different—for example, if one group comes from a quality culture and the other comes from
a profit culture—there are going to be some clashes.”

Good cultural fit is particularly important during a product launch, when “there are all sorts of decisions you have to
make as a team,” Somple adds. “When you and your supplier are culturally the same or close to it, you’re making
decisions based on the same kind of criteria. But if you’re always arguing about what’s most important, you find you’
re spending most of your time wrestling with each other rather than trying to solve problems.”

5: What else does the supplier bring to the table?

Many attributes and abilities have an impact on the performance of suppliers and the satisfaction of their customers.
Among the most important of these are:

• Medical expertise: According to Somple, medical device firms must make sure that potential suppliers understand
process validation. Also crucial is the supplier’s quality system. “You’ll probably want your suppliers to adhere to ISO
13485,” he says. “That puts a lot of emphasis on recordkeeping and things that suppliers don’t necessarily have to
do in normal day-to-day operation, but are required in the medical field.”

When a supplier focuses on the medical industry, “it engenders a culture,” explains Gil Reich, vice president of sales
and marketing for The MedTech Group (South Plainfield, NJ), a full-service contract manufacturer of medical devices
and components. According to Reich, medical device companies should look for suppliers with a medical-
manufacturing culture. “When you’re talking about things like bioburden and pyrogenicity, you should be talking to a
supplier who doesn’t have to look those terms up in a dictionary,” he says.

Why is this important? When a supplier is focused on the medical industry, the OEM doesn’t have to spend lots of
time bringing that supplier up to the standards of medical manufacturing, Reich says. For example, a medically
focused manufacturing supplier will know that raw materials must have the proper certification and that devices must
be made in a controlled environment with low bioburden.

• Corporate systems: What systems does the supplier use to govern how it conducts business? Examples include
quality systems such as ISO 9001 and 13485, Ellerkamp notes.

• Design and development capabilities: These include design for manufacturability and prototype production. “Since
most [medical device firms] are instrument designers and marketing companies rather than manufacturers, they look
for a company that can do upfront development work,” says Frank Jankoski, director of technical services for Micro
Medical Technologies (Somerset, NJ), a contract manufacturer of medical devices and components.

• A wide range of manufacturing capabilities: The more manufacturing technologies and operations a single supplier
can handle in-house, the less risk is run by the supplier’s customers, according to Chuck Edwards, executive vice
president of Micro Medical Technologies: “If [a contract manufacturer] is buying five different components from five
different suppliers and then putting them together to make an instrument, the chances of variability in those
processes are much greater than if the manufacturer has the five different operations running in-house, where he
has control over them.”

By using a single supplier with many manufacturing capabilities, OEMs also make it easier for themselves when
problems arise. Consider a situation where a medical device company is getting components from 10 different
vendors and then putting them into a complex medical device. If a quality issue arises that can’t easily be traced to its
source, “imagine the finger pointing that goes on between the 10 vendors,” says Al Carolonza, Micro Medical’s
director of marketing. But if his company has all the component manufacturing under one roof, any quality issue “is
our problem, and the customer goes to one place to get it resolved.”

• A special wrinkle: Does the supplier have some unique capability that will give customers a competitive advantage?
For example, Carolonza points to a patented technology developed by his company that halved the cost of a
component in a customer’s instrument, thereby helping the instrument gain market share.

• Long-term engineering resources: According to Jankoski, OEMs pay plenty of attention to the engineering staff a
supplier will assign to the development and launch of a product. “But who’s going to be managing your project two
years down the road? Does the supplier have a staff that’s going to be working on continuous improvement? Often, I
don’t think medical device companies look at what the supplier’s engineering staff will provide over the long term.”

• Engineering service capability: Medical device companies may want a manufacturing supplier with the technical
expertise to service their products during the warranty period, Scott says.

• Financial stability: Unlike products in other industries with launch times measured in months, it takes years to roll out
medical products, Somple says. So medical device companies need to know that the suppliers they choose won’t be
going bankrupt in the middle of the long process of getting their products to market. What’s more, during that time,
he says, suppliers must have “the financial resources to invest in the people and everything else needed to make
sure your product is successful.”

6: How was the visit?

Suppliers can say anything over the phone or in a written questionnaire. So it’s important for medical device firms to
actually visit the facilities of the suppliers they’re considering, Jankoski says. During such visits, he notes, OEMs will
be able to see whether the supplier’s facility is clean and well organized. They’ll also be able to see if the supplier is
working on other medical devices.

Other things to look for during supplier visits include:
• A prototype lab: If you need development work done, Jankoski says, you want to see an actual prototype lab, not
just a few scattered employees identified as people who work on prototypes.
• A validation package: Such a package, which includes device and design history records, shows that the supplier
understands validation methods, Jankoski says.
• Your team: Somple suggests that you ask the supplier to identify the people who are going to work on your project.
Even get their resumes, if you can. “The team that’s assigned to you can be just as important as the company you
pick,” he says. “If the supplier assigns you the B or C team, you could be in a lot of trouble.”
• Questions from the supplier: During a supplier visit, try to determine how well that supplier will listen to you while you’
re working together on a project. Though this can be hard to assess, Smith thinks your meeting with the supplier’s
personnel could provide some clues. For example, are the people you’re talking to quick to reach conclusions about
the project? “I think technical people have a tendency to jump in and provide solutions, so it’s important that they
take a step back and ask questions,” he says.

7: What did the references say?

A chat with references can be a big help in assessing a supplier. “You want to go into this relationship knowing you’re
not a guinea pig—that the supplier has worked on similar products and has been successful in helping get them to
market,” Somple says.

Of course, suppliers will always provide their best references, Scott notes. “But surprisingly, we get good, frank
information from some of them,” he reports. He and his colleagues at Possis ask references a number of questions
about their suppliers, including:
• Did they provide on-time delivery?
• Did they try to solve quality-related problems themselves, or did they bring the customer in on the solution? The
latter is preferable, Scott says, “so if there are any quality issues that may be looming out there, you’re not blindsided
by them later on.”
• How did they handle pricing? Did the customer get a lowball estimate but end up paying more?
• Do you know anyone else who used the supplier—and in particular, anyone who may have had a bad experience
with the firm?
• Where do you think the supplier can improve? This question can elicit “some very honest feedback,” Scott says.
“Everybody can improve somewhere. So if [the reference] doesn’t come up with any place where the supplier can
improve, you have to question the integrity of the person responding.”

8: Do you want to go offshore?

Many factors go into the decision of whether to seek a supplier with offshore facilities. These include:
• Product volume and complexity: High-volume, low complexity products are the best candidates for low-cost offshore
manufacturing, according to Smith.
• Product size: Big, bulky products are costly to ship, Somple notes.
• Communications: Smith points out that there are natural communications hurdles that must be overcome when
manufacturing is farmed out to foreign facilities.
• Intellectual property: Does production of your device involve valuable intellectual property? IP protection can’t be
counted on in some countries, Scott notes.
• Market location: If all the products you manufacture outside the U.S. are in a certain country, Reich says, it would be
prudent to look for a supplier with a facility in that country.

While offshore suppliers can slash manufacturing costs, local suppliers have advantages of their own. For example,
Scott and his colleagues have enjoyed the convenience of having Minnetronix, their manufacturing supplier, close by.
“We can just hop in the car and be there in a matter of minutes,” Scott says. “It’s hard to oversell that.”

9: Is the low bidder really the best option?

Many times, the process of picking a supplier is guided by price, according to Ellerkamp. Other important factors in
making the selection “are often overlooked when people are under pressure to meet certain economic criteria,” he
says. “It’s easy to say, ‘I’m going with Supplier A rather than B because A is $800,000 cheaper per year.’”

But there are many reasons not to necessarily opt for the low bidder. In some cases, “people who come up with low
cost estimates don’t provide all the services or address all the tasks” required by projects, Smith notes. They may
assume, for example, that the customer will be handling some of these items, or they may simply have missed them.
Another possibility is that low-bidding suppliers will handle certain tasks but not bring them to the necessary level of
completion. For instance, Smith says, they may produce design documentation as agreed, but that documentation
may not be suitable for inclusion in an FDA submission.

10: Is the supplier you’re looking for the one you’ve already got?

Edwards urges OEMs not to undervalue long-term relationships with outsourcing suppliers. “People at some
companies are always looking for the next low-priced or sexy outsourcing supplier to come down the road,” he says.
“But it’s a mistake for them not to develop these partnerships long term and make the outsourcing supplier an
extension of themselves.”

Why? Once design teams are disbanded, Edwards says, the outsourcing supplier is often the only remaining link
back to the early stages of a project. “So if you have that supplier as a continuous part of the team, that ‘tribal
knowledge’ is maintained and grows over the years.”

In addition, he notes, there’s a learning curve for a new supplier, resulting in mistakes that wouldn’t have been made
by a supplier that has worked with you before. “You don’t want to keep changing suppliers for the same reason you
don’t change the jobs of your internal people every couple of years. Instead, you allow them to grow and learn and
bring their accumulated knowledge to every new project.”

11: How do you evaluate all the information?

When all the information about a group of potential suppliers is in, it’s time to make a choice. In their effort to select
the best supplier for a job, Scott and his colleagues try to do some weighting of the different factors that go into the
decision. For example: Is quality more important than experience and/or technical staffing capabilities? Is cultural fit
as important or more important than quality?

But Scott warns that during exercises such as this, “you can get so analytical that you’re unable to make a decision.”
Though analytical tools and techniques are useful, he adds,  “there will always be a certain inherent amount of
intuitiveness that will drive you to your final decision.”

12: Did you take enough time to make the right choice?

In the end, Scott says, you may conclude that you’re not totally comfortable with any of the finalists. Nevertheless,
you may feel obliged to choose one of them because of the time and effort you’ve invested in the selection process.
In a case like this, however, Scott believes companies should resist the natural urge to bring the process to an end,
and instead declare: “We don’t need to go with any of these companies. Let’s look a little longer.”

OEMs may also feel it’s necessary to choose a supplier relatively quickly in order to keep a project on schedule. But
these companies must remember the importance of making a good choice—and the consequences of getting it
wrong. “With all the documentation and validation involved, it’s very hard to change horses in midstream,” Somple
says. “So you have to take the extra time to make sure you pick the right horse at the beginning of the race.”

This article appeared in a supplement to Medical Device & Diagnostic Industry magazine.