Minimizing Cost in Offshore Product Development Efforts
Fri, 12/05/2008 - 7:04am
One of the major factors in deciding to outsource work is to save on costs. This could be achieved at any step in the process, from design to packaging. This article looks at the key elements in a strong product development teaming relationship, and provides examples of how Singapore suppliers have reduced cost in product development while improving overall quality and schedule performance.
Audrey Soon is an account manager in the Electronics and Precision Engineering Division in International Enterprise (IE) Singapore. IE Singapore is an agency under Singapore's Ministry of Trade and Industry, which simplifies the process of global OEM and Singapore supplier introductions. Soon can be reached at firstname.lastname@example.org.
Reduced cost is often the initial reason for outsourcing some portion of product development offshore. However, this process is not without tradeoffs, particularly with medical products. Labor and material cost savings can be quickly eroded if suppliers do not have a robust process that links seamlessly with the customer's internal product development effort.
Key areas that contribute to reduced cost in long-distance product development relationships include:
•Supplier synergy with existing design resources
•Supplier services which are aligned with market trends
•Supplier expertise in tooling design, development, and sourcing
•Strong project team focus and good fit between teams
Supplier Synergy With Existing Design Resources
John While Springs (JWS) frequently sees issues with variances in custom part specifications. Materials available in the U.S. may not be as readily available in Asia, and the redesign effort may have to involve supplier teaming efforts. According to Simon Payne, JWS senior VP of sales & marketing, the company recently set up a Singapore medical device consortium to address this particular customer support need. In a recent project, a customer had a requirement for a specialized component comprised of a plastic part wrapped around a spring. The original part was sole-sourced in North America and was not readily available in Asia. The client wanted an alternate part that didn't infringe patents both to reduce cost and provide a secondary source for a critical component. The consortium provided a strong network for developing the alternate component as a one-stop solution.
Another issue can be integration of the supplier into the overall design process. Univac, a design to turnkey company for consumable plastics and devices with focus in the medical and pharmaceutical industries, applies a flexible set of resources depending on customer need. They use a strategic alliance with a U.S.-based conceptual design firm when customers want to outsource the complete design project. When the customer has an internal design team, Univac's engineering team will focus on filling the gaps in design resources, such as mechanical product design, tooling design, material selection recommendations, or design for manufacturability (DFM) and design for assembly (DFA) recommendations.
Supplier Services Aligned With Market TrendsSensitivity to market trends is also a key issue. According to Fritz Maier, Dip.-Ing., Univac's marketing and sales manager, two trends his company has noted are a growing demand for portable, complex in-house diagnostic devices, and a migration to single-use disposable devices for pharmaceutical applications.
"Technology is allowing an aging population to have more freedom in their medical monitoring and support needs and this is driving device design," Maier said.
He listed five significant trends in medical device design:
"An aging population also wants to medicate at home and single-use devices are easier-to-use and more sterile than devices designed for multiple use," Maier added.
These trends drive volumes similar to that found in consumer electronics.
"Product design involves more input from the manufacturer than in the days of lower volume products. With those products, product design and DFM were often very distinct and linear design phases. In high volume production, that segregation of effort can be costly. In high quality, high volume applications, product design and manufacturing considerations are closely woven together in the design process. Additionally, with medical products moving out of the hands of trained physicians and into the hands of individual patients, greater care must be given to human factors engineering. Form, fit, interaction with the human body, user interface, instructions for proper use, and consistency of product performance are far more critical in the home environment," said Maier.
Higher volume medical devices and disposables require repeatability and consistency in the design process and similar repeatability and consistency in production. DFM and DFA activities typically occur during design finalization and prior to tooling development because large scale production drives a need for high cavitation molds with short cycle times that feed into highly automated assembly lines. Product quality is driven by tool quality and the consistency of the automated molding and assembly processes. For this type of application, Univac designs all molds in-house and typically fabricates the molds in its mold shop in Singapore. The company also maintains a joint venture with a Swiss technology company which specializes in the design of hot runners. Univac fabricates molds which include hot runners in Singapore. Hot runner technology is especially important for molded consumables.
Supplier Expertise in Tooling Design, Development, and Sourcing
Comparatively, medical devices have high regulatory oversight, minimal flexibility in design variation, and varying lifecycles. While cost reduction remains a focus in the development of medical products, quality must remain high. This may limit design choices in tooling, materials, and components. Suppliers whose businesses focus primarily on consumer products may choose inferior materials, make build site recommendations incompatible with the technological expertise required to deliver required quality levels, or fail to understand tooling incompatibility issues that can be driven by the presence of older or regionally-manufactured equipment often found in lowest cost regions. Having a supplier who understands the complexity associated with medical product development and who can make relevant recommendations in these areas can be invaluable because total costs and tradeoffs can be better understood.
For example, Team Metal provides turned, milled, die cast, and plated mechanical components. In making recommendations, its staff looks at both part application and lead-times, and may make alternate recommendations in the design phase.
"Normally, U.S. companies are looking for AISI standards or JIS standards in pre-cut steel. If the print specifies stainless 304, we may suggest stainless 303 if we understand its applications, though it has different mechanical properties. This is because the availability for stainless 304 is uncommon in the local markets as compared to SUS303. In some applications, substitution is not advisable, but in others, stainless 303 has its advantage over cost and lead time," said Chan Khai Seng, Team Metal's managing director.
Samuel Tan, senior manager at Sei Woo Polymer Technologies Pte Ltd., sees similar advisory opportunities.
"We go to great lengths to understand our customers' requirements and develop solutions that meet both their cost and quality requirements. For instance, part of the cost reduction associated with production in China is the fact that the labor involved in the design, operation, and management of the tooling is significantly lower than that of the U.S. and Europe, and the equipment investment is also lower because China is able to produce comparable equipment that meets customers' needs at a lower cost. We work to make sure our customers understand the range of choices and cost impact associated with those choices. While the Chinese technology may not be as advanced as those in Europe and in the U.S., we are always open to working with our customers to transfer technology to China, or to invest in new technologies to keep up with our customers' changing requirements. Tooling selection is a function of how close the relationship is between customer and supplier, and the willingness of the supplier to invest in new technologies," Tan said.
Strong Project Team Focus and Good Fit Between TeamsTime can be another element of cost. Payne says that JWS sees value in investing in engineering resources, supply chain management, and optimized logistics support because customers like the efficiencies associated with using a one-stop shop.
"We see ourselves as an engineering company rather than just a spring manufacturer. Having strong engineering resources cuts cycle time throughout product development. For instance, a drawing that used to take a day, now takes four hours. Improved supply chain management helps with R&D and first articles. Using U.S.-friendly carriers and applying trade agreement knowledge can help shrink inventory pipelines and cut logistics costs," Payne added.
Maier adds that Univac's focused design process also supports faster product development by creating a framework which makes it easy to determine division of labor and milestone status. Their framework encompasses eight distinct phases:
•Phase 1: User research and product definition
•Phase 2: Initial concept development
•Phase 3: Concept evaluation, refinement and documentation
•Phase 4: Preliminary development
•Phase 5: Design finalization
•Phase 6: Tooling database layout
•Phase 7: Tooling process
•Phase 8: Manufacturing ramp-up and quality assurance
In some cases, this framework teams Univac with its strategic design firm partner, but in other cases, it may team Univac with its customer's design team. Typically, design finalization phase is the point at which design and manufacturing resources must be equally engaged in balancing product concept and best manufacturing practice decisions.
ConclusionThe examples above illustrate the potential complexity and benefits of outsourcing medical product design within Asia. Often, application expertise and a good understanding of regional capability differences can deliver an overall lower cost design solution than simply going to the lowest cost supplier or labor market.
OnlineFor additional information on the technologies and products discussed in this article, see MDT online at www.mdtmag.com and the following websites: