Ask almost any contract manufacturer what its biggest issue is, and the answer is almost always the same: cost of materials.
Adding to those pressures is the ever-increasing demand to be a full-service supplier to original equipment manufacturers. The situation is changing how manufacturers operate and think. It also is making it harder for smaller companies to succeed without forming partnerships or alliances to meet OEMs' needs.
``The cost of material is the No. 1 driver,'' said Greg Brown, health-care market development manager for GW Plastics Inc. in Bethel, Vt. ``You have to look at ways to contain those costs whether it is through the use of less labor, faster cycle times or a new material,'' he said in an interview at Medical Design & Manufacturing East in New York.
``But you also have to be able to do everything because OEMs want you to come in, design the part, build a prototype, mold it, put it together and ship it somewhere. If you can't do that, you won't succeed. One weak link and you won't get the job.''
Consequently, small molders nearly have disappeared, he said. Either they have lacked the capabilities or a larger molder has purchased them.
``All the companies are trying to determine whether they are going to get more vertically integrated,'' said Paul Orlando, business development manager for Atek Medical Manufacturing in Grand Rapids, Mich. ``Design companies are thinking about going into manufacturing and vice versa. The burden is on the supplier to be vertically integrated or to partner with the best-in-breed to become a full-service solution, either as a group of companies or as one company.''
OEMs are asking for more, said Paul LaFond, sales director at Nypro America Healthcare, a unit of Nypro Inc. in Clinton, Mass.
``They want us to provide more of an integrated solution. They want us to mold, assemble, package and ship,'' LaFond said.
They also are asking suppliers to provide more services, such as upfront design, that lead to manufacturing efficiency, according to Steve Glorioso, vice president of health care for Nypro.
``We can look at their design and make sure the designs lend themselves to the highest level of manufacturing efficiency, help them reduce cycle time, eliminate materials that are expensive and reduce parts through simple design,'' Glorioso said.
It is a challenge that is creating both competition and opportunities.
``The bottom line is that OEMs are outsourcing more and sometimes all service providers in the medical device industry are competing for the same business,'' Orlando said. ``But there are more opportunities as well.''
The market is going to continue to grow at 8-10 percent, if not a higher rate, Brown said.
``As long as you have what the customer is asking for, the business is clearly there,'' he said. ``Being able to help current customers get to the next level - with new products that will help the markets grow - will help you grow.''
If companies want to keep growing, they must make sure their operations have the experience, talent and skills to serve the needs of their OEM customers, according to George Blank, president and chief executive officer of MedTech Inc. in South Plainfield, N.J.
Some companies are using alliances to have the capabilities OEMs demand.
Atek, for example, is one of five companies that make up the Solectron Medical Alliance Program. Milpitas, Calif.-based contract manufacturer Solectron Corp. started the alliance in February to be a single point of contact for a best-in-class medical device global team.
On a smaller scale, Microtest Laboratories Inc. of Agawam, Mass., and Texcel Medical Systems LLC of East Longmeadow, Mass., announced a similar alliance to provide pharmaceutical manufacturers and biotechnology firms with a complete solution when developing the latest breed of combination products.
Such combination products marry a drug and a medical device, a drug and a biological-based product, a biologic and a device, or all three.
Contract manufacturers also said developing designs and using new materials that reduce the number of parts or the amount of material and offer better performance are critical to maintaining a marketplace edge.
Pharmaceutical companies need a different way to deliver their products and molders have to be able to produce them, Brown said.
``There are a lot more device/drug delivery systems out there,'' Orlando said. ``It is forcing companies to gain these competencies to stay ahead.''
Blank agreed: ``You have to stay on top of the innovations that are designed to improve the quality of life and to prolong life. Populations are aging, and that creates a need for more of these services.''
It is a trend that also impacts resin suppliers such as GE Plastics in Pittsfield, Mass.
``One of the key things we are focusing on in health-care packaging is protecting tissue and blood from changing its structure,'' said Clare Frissora, marketing director for the health-care segment at GE Plastics.
There is a desire for terminal sterilization, unit-dose packaging and continued improvement in patient and provider safety that is accelerating research into materials and designs for new packaging and products, Frissora said.
``We are continuing to evolve packaging and product design to meet those trends. The industry is going this way.
``Now is the time to capitalize on it,'' she said.