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Published: September 1, 2008
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Outsourcing: Requirements, options, and planning

Identifying some of the items that may be easily overlooked when choosing to outsource may help lead to a positive partnership when outsourcing is chosen.

By: Ford Garratt and Danny Levenson







A chemist at Millenia Diagnostics Inc. (San Diego) developing a gold particle conjugate.

With ever increasing competition, IVD manufacturers are constantly facing the need to bring new and innovative products to market. In many instances, the use of outsourcing is required to accomplish the task within the time allotted. Another consideration for choosing to outsource is financial benefit. In many cases, it may be more cost-effective to outsource select activities than to perform them in-house.

This article will provide topics and suggestions that are relevant to choosing an outsourcing partner. Although every project may not require all of the topics that are mentioned, it is best to consider and exclude each item rather than to have overlooked a key element. The purpose of this discussion is to prompt thoughts and considerations that will enhance the probability of a successful project.


A critical component of each project is the timeframe that is available to accomplish the completion of the task. As each project and the associated time line are different, this article will only discuss some key elements to consider during the development of the time line.

The use of a timeline should be a tool to aid in monitoring the success of the project, not control it. Each team member (internal or external) must accept ownership of the milestones that are assigned to him or her. Part of this process is to gain upfront buy-in for the dates that are being established, which will allow all parties to feel confident that each task has a high probability of success.

Along with tracking the status of the project, managing and predicting areas of risk is a key role of the timeline. While it is the intent of every project to succeed, it is important to identify any points in the project that might dictate a decision to alter the scope or cancel the effort. These points may be associated with product performance, cost of manufacturing, market timing, or other factors. When there is financial exposure due to vendor contracts, these milestones may be used as a tool in establishing cancellation clauses.

Instead of trying to define every task within the master schedule, whenever possible, IVD manufacturers should try to leave the details of supporting schedules to the owner of the milestone. For vendors, the process of creating a detailed schedule can be an opportunity to identify and highlight any areas that might present technical or lead time-related risks to the project.

A properly designed and managed timeline should provide visibility of the impact that can be caused by the dynamic aspects of any project. If the scheduling tool is properly used, it will help the project team fully understand and mitigate the impact of missed milestones. The goal of this tool is not to eliminate missed milestones, but to aid in minimizing the negative impact to the overall schedule when these events occur.

The timeline is also an excellent tool to establish clear communication channels for the project. Each milestone owner should be identified with contact information distributed to all team members. Creating a project- related distribution group for e-mails can be a solid tool for maintaining timely and accurate status information. If all members are aware of unexpected events, the opportunity to respond effectively can be increased.

Technical Challenges

Figure 1. (click to enlarge) The use of flowcharts can be an important tool to aid in defining and tracking process steps.

Outsourcing of medical devices inherently has technical challenges. Design specifications must be clear, from component size and placement to the end device performance. Tolerances should be established for each component, and their effect on product performance should be investigated. The capabilities of the outsourcing company must match the processes and tolerance requirements of the product. Reasonable tolerances should be established and validated in order to maintain manufacturability. In many cases, the contractor is willing to develop the specifications in conjunction with the customer. Quality control procedures should be implemented both in process and on the end product. Flow charts are a great tool to guide the manufacturing process (see Figure 1).

There is a diverse set of technical skills required to make medical devices, including chemistry, biochemistry, mathematics, engineering, and packaging, to name a few. It is important to choose a company that meets the demands of the product or components being outsourced.

Education, equipment, experience, and training of the personnel must be appropriate for the level of complexity of the procedures. Environmental and equipment considerations should be addressed early in the project. IVD manufacturers should choose an outsourcing company with expertise in the technology related to their product.

Outsourcing between domestic and international companies presents an additional set of technical challenges. Having a domestic-based contact with a strong technical background can provide significant benefit in regards to communication with international contractors.

Intellectual Property Protection

For every project that includes outsourced activities, the need to maintain protection of intellectual property (IP) presents challenges. It must be remembered that IP is a two-way street, as many times the vendor may also be developing methodologies or designs they wish to protect. For this reason, simple nondisclosure agreements may not be satisfactory for all situations. While not attempting to provide legal advice, this article will mention some topics to consider when planning a strategy or discussing this matter with legal professionals.

In large part, the decision to select a specific outsourcing partner may be based on very specialized capabilities or technologies that that company can provide. The initial contract should clearly define what IP may be retained by the outsourcing partner. By clearly stating these boundaries at the start of the project, each party may then operate in a controlled environment. If gray areas are encountered, it should be fairly easy to resolve ownership before a relationship-threatening situation occurs.

If the project is being run within a large company, there is a good chance that personnel who are solely tasked with maintaining IP will be assigned to the team. This may be true for the outsourcing partner, the contracting company, or both. If this is not the case, a prudent step is to designate a team member to ensure that all IP is captured.

Because anything that is said, written, or even scribbled on a notepad may be considered IP, it is best to record all such information. If audio recording is not practical, then a designated scribe should be assigned to take notes during each meeting. This person should also collect and copy all other documents or comments that have been recorded by others in the meeting. This level of record keeping may also be of value in support of certain validation requirements for the project.

Regulatory Requirements

Regulations to consider include the relevant ISO standards and good manufacturing practices (GMPs). The appropriate regulations to follow depend on the product being produced, its intended use, and where it will be sold. The product regulatory requirements should match the outsourcing company's regulatory status or willingness to adopt a new set of regulations. Every company should have a quality policy and quality manual that describes in detail the commitment to quality and the systems in place to ensure quality.

Figure 2. A good contract
manufacturer will have well established record keeping protocols and procedures.

Documentation must be created to transfer the product knowledge to the contractor. Standard operating procedures will describe in detail each procedure used in manufacturing the product. Either party can create the procedures, which should be clear and sound to lead to a high-quality, reproducible product (see Figure 2). Forms are used in conjunction with procedures to document each process. Training should be conducted for each technician performing procedures, and the training should be documented. Compliance with regulations is mandatory and should be audited a minimum of once a year. The contractor should not be opposed to customer audits, as long as the audit does not expose sensitive proprietary information of the contractor's products, or that of their customers.

One extremely useful tool to guide the audit process is the Quality System Inspection Technique published by FDA. This tool provides guidance for the inspection of the quality systems. Another useful tool is The FDA and Worldwide Quality System Requirements Guidebook for Medical Devices. The book provides a great overview of the quality system regulations, as well as a comparison chart to the GMP and international standards.

A master device record provides an overall list of the components, procedures, labels, and specifications for manufacturing the product. The device history file contains the history of the product development process, design controls, and product specifications. This file is maintained by the owner of the product and is not required to be maintained at the contract manufacturer. The batch record is a lot-specific file that contains copies of the manufacturing records, quality inspections, and quality assurance documentation. These records are required for each batch produced and should be available for review during any audits.

Project Specifications

When creating a specification, often the tendency is to avoid over-specifying. However, the best-performing projects are those that start life with very clear and explicit expectations. A vague or ambiguous set of requirements can easily create an environment of misunderstanding and unrealized goals.

Having an accurate specification up front can be a significant aid in selecting an outsourcing partner. Knowing exactly what is required for the project will help to create a vendor profile that may be used as an initial screening tool. If various vendors are active in a project, the master specification document can provide clear definitions of responsibility to ensure smooth process flow even if the vendors are not in direct contact during the project.

A bill of materials must be created and provided to the outsourcing company. The list should contain the material name, source, secondary source if available, and raw- material acceptance criteria. The material control system should be implemented. Raw-material inspection documents should be created by the manufacturer and used to inspect incoming raw materials, which are either approved for use or quarantined.

The purchase control system should be implemented and vendor criteria established. Materials should only be purchased from the approved vendors, and their approval status should be reviewed periodically and documented. Traceability is essential to maintaining quality, and material records must be maintained.

Design controls are an essential part of the design process of IVD products. Regulatory agencies have recognized a lack of design controls as one of the major causes of device failures and recalls. This system helps to simplify the complex process of IVD development by calling for the identification and assessment of design requirements. Such requirements are necessary to develop a medical device that is safe and effective for the intended use of the device, and meets the needs of the end-user.

Although IVD development is a complicated process, it is simplified by the establishment of design controls.Such controls spell out the starting specifications, labeling requirements, user requirements, performance requirements, validation of designs, transfer to manufacturing, and design history file. The regulatory requirements are there to guide the production of medical devices, from design through release for distribution.

Process validation is a requirement of GMP. Validation includes installation validation, performance qualification, and general validation, and it should also include a validation protocol. Validation of both the process and process controls can establish a high degree of confidence that the product can be consistently produced with high quality.

Figure 3. It is important to ensure the vendor keeps accurate calibration and maintenance records for process equipment used in product creation.

Equipment must be kept in calibration, but just as important, it should be validated for its intended use. Validations should be done on a regular basis and are typically done internally. Although calibration can be performed by outside sources, validations are usually done internally as there must be a good understanding of the process in which the equipment is used (see Figure 3). Worst-case scenarios should be included in validation testing.

Resource Evaluation

Figure 4. Verify that the vendor maintains a clean working environment and provides proper protective gear such as smocks and gloves.

Once a solid specification is created and a preliminary timeline is in place, the process of evaluating resources can begin (see Figure 4). The key decision is to determine quickly and accurately where in the organization resource gaps might exist. Even if internal resources appear to be available for all tasks, it may still be a valuable exercise to review any existing outside capacity.

If existing relationships exist, it is good to explore the available bandwidth that each vendor might be able to provide. If a vendor has adequate capacity to finish a task in a shorter time frame than the internal resource, it may be beneficial to the project to outsource this task to help the overall schedule.

In the event an internal resource is redeployed or lost for another reason, having an immediate outside fallback position can be crucial for the success of the project. By performing the full review of all resources at the start of the project, it will be much easier to accommodate any situations that might require additional or alternate project capacity. If there is a high risk that such an occurrence is likely, it may even be beneficial to establish a retainer with the selected vendors, which would allow the vendor to participate in project update meetings so they could seamlessly step in if needed.

The goal is to build a dynamic team that will ensure success for the project. Leveraging existing relationships is a key element in this process. When new capabilities are required, the first decision is whether to add permanent staff or outsource. The contract decision may be to bring a temporary person in-house for a specific task or outsource the requirement. In any scenario, it is critical to bring this resource into the team environment quickly and seamlessly. This decision will allow the whole team to support the growth of the new resource during the critical early stages of participation. If the entire team is involved in evaluating the contribution of this new resource, any shortcomings or discrepancies may be identified and resolved quickly.

It is also necessary to be honest when evaluating inside and outside resources. If the internal team is very strong in certain areas, it might make more sense to find external resources to fill in the weak spots instead of trying to grow this capability organically. An example would be an internal team that is very capable on all technical aspects of the project but weak in overall project management. While it is possible to limp along with engineers and scientists trying to monitor and record their progress, investing in outside resources that focus on this specific task could pay huge dividends.

An IVD manufacturer must also consider any possible negative impact that outsourcing could have. Unless all team members are fully committed to this direction, there could be unforeseen consequences downstream for the project. Dissension within the team could spell disaster for the project if this impact is ignored.


An IVD manufacturer is faced with many challenges associated with resource selection and management. Not only is it important to find partners that bring key technical capabilities to the project, it is equally important to maintain internal peace and team chemistry while doing so.

In addition to facing the need to bring new products to market, IVD manufacturers are also faced with the need to manufacture devices with high quality and low costs. Efficiencies, material costs, automation, labor costs, and overhead are some of the variables to consider. Outsourcing is one option that could address these issues while also helping to bring new solutions to the special challenges associated with each development project.

The power that an outsourcing partner brings to a project can have a profound impact on its success. Only through effective and disciplined application of this resource can the full benefit of this power be realized.


Ford Garratt is founder and president of Garratech LLC (Sonora, CA). He can be reached at ford@garratech.com.


Danny Levenson is president and chief executive officer at Millenia Diagnostics Inc. (San Diego). He can be reached at danny@


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