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Medical device manufacturing can be a lucrative market but there are challenges

by Mary Scianna

One of the lessons of the recent economic down for contract manufacturers and job shops was the value of not keeping all your eggs in one basket.

When one market hits a downturn, the other markets you service will help keep you afloat - so the theory goes.

One sector that many businesses turned their attention on was medical device manufacturing. The $7 billion industry is one of the largest in the world according to data from Industry Canada.  The market in Canada is comprised of more than 1000 firms employing close to 26,000 people. The sector consists of small and medium sized enterprises that generated a combined total of $2.6 billion in export revenues.

The main “medical manufacturing hubs” in Canada are British Columbia (with more than 60 medical device manufacturers and distribution companies), Alberta (more than 80 companies), Manitoba (home to a cluster of companies specializing in development of magnetic resonance imaging equipment), Ontario (strong in research and development), Nova Scotia (which invests more than $100 million annually in research), and Quebec, by far the province with the largest medical device sector with more than 350 companies.

This industry didn’t experience the dramatic downturn in 2009 that many other sectors, such as automotive and aerospace witnessed. In part, the nature of this sector provided some immunity to the economic recession because many of the products categorized under “medical device” include essentials - when people get sick and need surgeries a recession doesn’t typically slow this activity down. Medical device products include pacemakers, prosthetic joint products such as knee and hip replacements and surgical tools.

Machining medical devices: challenges

Steve Charlton and his wife Heather formed Free Force Machining Technology Inc.  in St. Catherines, ON, five years ago with an exclusive focus on medical device manufacturing.

Charlton says he’s happy he formed his company when he did because “breaking into the medical industry now is very difficult. A significant barrier is getting the ISO medical device manufacturing registration IS0 13485, which we have. It’s a chicken and egg thing because you can’t apply for registration unless you’re doing work in the medical device industry but all the manufacturers today expect their suppliers to have ISO 13485 before they’ll take them on a contract manufacturer.”

When Charlton and his wife formed the company five years ago, customers were satisfied with ISO 9001 so Free Force was able to build its customer base in the medical device industry, customer that range from Canada and the US to overseas.

For APN, a job shop based in Quebec City, QC, the lack of a the ISO medical device registration hasn’t posed a problem with customers, says Yves Proteau, vice president and co-owner. That company machines moulds for implants (dental, knee and hip) and tooling for needle manufacturer Becton, Dickinson and Co. (BD), which opened a manufacturing plant in Quebec in 2008.

“Only five per cent of our business is specifically in medical device manufacturing, we are also involved with the ammunition [military contracts], aerospace and high tech industries. Since we’re registered to AS900 for aerospace and have to meet very high specifications for other industries we work with, it as acceptable for our customers.

He adds that the company could not justify the cost and time involved in achieving the medical device certification.

“Getting that medical certification can cost upwards of $100,000 a year and we cannot justify that money with the small amount of business.”

Registration isn’t the only challenge. Free Force has had trouble sourcing tooling and materials. Inventories at suppliers’ facilities have dried up “and with the recent economic troubles companies were holding less inventory and now that demand is up, there is no inventory. I’ve had lead times of three months for stainless steel bars and I’ve asked my suppliers for shorter lead times, but they saw demand is outweighing production and I’m not seeing any buildup of inventory yet,” says Charlton.

Machining medical devices means an investment in technology

One thing is certain, if you’re looking to get your foot in the door of the medical device manufacturing industry, you have to invest in the right technology, which is significantly more expensive than standard machine tools.

For Free Force, that technology is Swiss turn machines. Production runs range from 10 to 10,000 parts with the average being 1000 pieces, which for many shops, running Swiss turn machines would be considered low volume because Swiss turn machines are more cumbersome in terms of set up being more time consuming. Free Force operates five Star Swiss Turn CNC lathes purchased through distributor AMT Machine Tools.

Swiss turn machines are typically more expansive than a standard turning machine. Charlton says a Swiss turn machine starts at $150,000 “and for that amount of money you can get four turning machines. Many shops wouldn’t even consider Swiss turn because set-ups do take longer, but once we’re up and running no shop can catch us because our cycle times are much faster. We see having only Swiss turning as an advantage; from the start our focus was on production work of small pars and the Swiss turn machines are ideally suited to this type of work.”

For APN, it was purchasing top-of-the-line machines - $2.5 million - from Elliott Matsuura Canada Inc. APN has four Nakamura-Tome turning centres, one EDM and a Carl Zeiss CMM, among other equipment.

“Our philosophy is, to produce high quality parts, you have to have high quality machines and high quality employees who understand how to run them,” says Proteau. “It would not be possible for us to make high quality parts and have customers in medical, aerospace and other high precision industries with low-end machines and that’s why we purchased what we think is the top equipment from Nakamura-Tome and Zeiss, for example.”

APN’s philosophy has helped the company grow. Last year, it purchased a California manufacturer servicing the medical and military industry. The company had just completed a $5 million investment at its Quebec City plant, when the opportunity to purchase the US company emerged.

“We didn’t really have the time or the money to invest in this company, but when we went to visit the operation and met the people, we recognized it was a good opportunity.”

 Photo credit: CEA Technologies

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