Raw Materials Risk Management

Risk Mitigation Medical Device Supplier Quality Presented by: David Mersereau General Manager, Boston Centerless

What we will cover today…

Risk mitigation as it applies to raw material suppliers in the Medical Device industry and how you combat it

• Material Identity, Material Integrity and Process Validation • Supply Chain Management • Catastrophic Event Recovery • Material Quality and Consistency • Quality Systems and Control Processes • Employee training requirements to support these needs

What is supply chain risk?

As defined at various layers of the supply chain • OEMs/Subcontractors • Mid Process Material Converters • Raw Material Distribution • Originating Melt Source

Mitigation • Quality and Reliability • Lead time and availability • Regulatory Compliance • Price/Cost Benefits


• Guaranteed availability • Regulatory compliance • Protection against catastrophic interruptions • Supplier performance and service level • Inventory costs vs. availability • Material cost vs. regulatory pressure

on consumer pricing

How does supply chain risk affect you?


An ever changing balancing act between costs, availability, performance and risk.

Small quantity immediate availability vs. Long term high volume cost benefits

Reduce supply chain, vendor management vs. Supply chain diversity and catastrophic event

Lowers cost providers vs. High vendor performance levels

Best material pricing vs. Elaborate regulatory compliance requirements

Managing/reducing inventory costs vs. Real time material availability

Process and material validation vs. Supply chain qualifications

Traceability and quality systems vs. Diverse material selection

Employee training and certification vs. Ever changing product types & regulatory requirements


1. Consumer Risk

2. Legal Ramifications

3. Healthcare Regulations

4. Consumer Cost Reduction Demands

5. Regulatory Approval Requirements

Supply chain requirements and regulatory concerns driven upstream into the supply chain:

1. Design/Product Liability

2. Validated/Frozen Processes

3. Identification/Serialization

4. Material Validation

5. Traceability

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Supply Chain Requirements/Demands

OEM/Sub-Contract Manufacturers


1. Quality/Reliability i. Product consistency

1. Base material defects/Material Validation 2. Consistent component reliability 3. Device design/liability

ii. Process consistency 1. Process validation 2. Equipment validation 3. Product validation

iii. Traceability throughout the Supply Chain 1. Certifications 2. Document retention 3. Validated supply chain 4. Process and material traceability 5. Documented regulatory requirements



2. Lead Time/Availability i. Lead Time

1. Development material requirements 2. Short term availability vs. production volume lead time 3. Validate the supply chain from design to production ramp

ii. Availability 1. Short term demand vs. long term production demands

a. Sourcing specialty alloys b. Consistent availability from the supply chain

for the life of the product 2. Reduced AVLs vs.:

a. product availability b. supply chain diversity c. sole source d. supplier management e. critical mass of supply chain

i. manage higher volumes ii. national/international manufacturing support



3. Reduced inventory vs. supply chain gaps a. Inventory positions at key steps in the supply chain b. Multiple suppliers c. Risk of catastrophic event

iii. Supplier performance risk 1. Consistent performance (on time delivery and quality) 2. Broad range of capabilities 3. Broad product range

iv. Unforeseen impact on supply chain 1. International Issues

a. Natural disasters b. Political events c. Swings in exchange rates

2. Major interruptions in key supply chain a. Sole source b. Financial stability c. Inadequate capacity to support increased demand



3. Regulatory Compliance i. Accurate document retention/life of the device ii. Revision and liability control iii. Appropriate mineral sourcing

4. Price/Cost Benefits i. Product liability

1. Liability protection 2. Legal defense costs 3. Consumer risk 4. Long term health issues



ii. Healthcare regulations

iii. Regulatory approval requirements

1. Identification/Serialization

2. Validated/Frozen Process

3. Qualification of replacement or added suppliers

iv. Corporate consolidation

1. Supply base consolidation vs. cost benefits

2. Suppliers critical mass to meet capacity

3. Regional support capability

4. Product diversity



Mid-Process Material Converters


1. Quality/Reliability a. Material condition reducing downstream mfg. costs

i. Tighter finished tolerances 1. Final OD 2. Optimized machining process 3. Minimize material removal 4. Optimize process efficiency

ii. Surface finishes 1. Ability to use OD finish on finished parts 2. Part finishing considerations

iii. Material validation (NDT) 1. Internal defects prior to machining 2. Mechanical/material reliability 3. Material defect recall concerns

Mid-Process Material Converters (Raw material preparation/refining)


b. Process Consistency i. Operator training/certification ii. Process validation iii. Equipment validation iv. Consistent supply chain capability



2. Lead Time/Availability a. Draw, Cut and Straighten

i. Custom diameters ii. Mid-range tolerances

b. Mechanical Properties i. Device specific mechanic requirements ii. Specialized material specifications

c. Sub-Contract Services i. Heat treat ii. Cutting iii. NDT

d. Less Than Mill Min. Quantities i. Smaller quantities to meet demand ii. Shorter lead time iii. Inventory reduction VMI services



3. Regulatory Compliance a. Material Sourcing Restrictions

i. Chemical composition 1. REECH, RoHS

ii. Element Sourcing 1. Conflict minerals

iii. DFARs 1. Country of origin

b. Process Controls i. Frozen/mature processes ii. Defined/consistent supply chain iii. Implant NDT requirements (i.e. F136/F138 requirements) iv. FDA compliant v. Appropriate ISO certifications



4. Price, Volume, Benefit a. Cold Draw

i. Typical coil volumes ii. 500-1,000 lbs. iii. Some volume and diameter flexibility iv. Mid-range material tolerances

b. Material Preparation (i.e. grinding/subsequent processing) i. Maximum flexibility ii. Price vs. total cost benefits iii. Few minimum quantity demands iv. Cost benefit:

1. Exact quantity vs. minimums 2. Tighter tolerances for production yields 3. Surface finish vs. material removal



c. Inventory i. VMI (Vendor Manager Inventory)

1. Local availability a. Benefits of distribution b. Benefits of at/near final tolerances

2. Guaranteed supply chain a. Supply chain inventory position b. Minimum stock programs c. Reduction of in-house inventory costs

ii. Reduced supply base mitigation 1. Sole source vs. key supplier diversification 2. Single site vs. inventory positions 3. Specialty material supply chain guarantee



iii. Product availability 1. Local inventory 2. Supply chain inventory position

a. Converter inventory base b. Coil to bar inventory base c. Consignment position at key stages of

supply chain



Raw Material Distribution


1. Quality/Reliability a. Material condition as received

i. Mill tolerances ii. Mill variations iii. Added material traceability step

2. Lead Time/Availability a. Nominal diameters typical

i. Some custom availability b. Sub-Contract service logistics

i. Heat treat ii. Cutting iii. NDT iv. Grinding



c. Less than mill quantities i. Smaller quantities to meet early demand ii. Shorter lead time iii. Re-source material to ramp to production demands

d. Responsiveness i. Standard requirements

1. Certification review prior to purchase ii. Material issues

1. Middle man back to mill delays (adds a layer)



3. Regulatory Compliance a. Material sourcing restrictions

i. Chemical composition 1. REECH, RoHS

ii. Element sourcing 1. Conflict minerals

iii. DFARs 1. Country of origin

b. Mill certifications only/pass through i. Part specific chemical/mechanical properties ii. Certification review to meet requirements



4. Price, Volume, Benefit a. Inventory

i. VMI (Vendor Managed Inventory) 1. Local availability 2. Inventory dictates supply chain

ii. Product availability 1. Alloy product group selection 2. Reduced lead time if available 3. Off the shelf inventory 4. Limited technical service

b. Cost vs. i. Small quantity ii. Regional availability



Originating Melting Source


1. Quality/Reliability a. Tolerances

i. Wide tolerances ii. Typical nominal diameters

b. Surface quality i. Mill surface quality ii. Increase removal iii. Greater potential for surface imperfections

c. Yield Impact i. High volume lots ii. Scrap impact down the supply chain iii. Slower response



2. Lead Time/Availability a. Lead Time

i. Long - weeks to months ii. Fluctuate routinely iii. Slower response time iv. Drives inventory positions down the supply chain

b. Mill Minimums i. Typically mill/heat volume minimums ii. 2-5 thousand lbs. iii. Least flexible on demand quantities



c. Alloy selection i. Limited sources

1. OEM specification limits ii. Tend to specialize in specific alloy groups

1. Stainless steel 2. Aluminum 3. Titanium 4. Red metals

d. Responsiveness i. On time delivery ii. Limited custom specifications iii. Limited expedite capability



3. Regulatory Compliance a. Documentation/certification b. Mineral/raw material source control

4. Price/Cost Benefits

a. Price vs. volume benefit i. Commodity pricing ii. High volume iii. Best linear price vs. high minimums

1. Volume required vs. cost iv. Total process cost vs. commodity pricing


In Conclusion…

• Material Identity, Material Integrity and Process Validation • Supply Chain Management • Protection Against Catastrophic Event • Material Quality and Consistency • Quality Systems and Control Processes • Employee training requirements to support these needs • Total Cost =

Liability Coverage + Material Availability + Process Efficiency + Traceability Throughout the Supply Chain

Risk mitigation = balanced approach to:

THANK YOU

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Raw Materials Risk Management