The medical device manufacturing cluster in West Michigan may be relatively small and fairly young, but the network of companies can offer the end-to-end design and production services OEMs and startups need to commercialize their products.
Unlike in cutthroat industries such as the automotive sector, the region’s contract medical device manufacturers embrace the notion of collaborative competition. Because no one company has the full gamut of capabilities to satisfy an OEM’s needs, they need to work together and refer business to one another if the sector is to succeed in West Michigan.
That’s according to representatives from a handful of contract manufacturers who recently met with MiBiz for a roundtable discussion on the region’s nascent industry. The participating companies were members of MiDevice, an industry consortium for sharing best practices and facilitating growth that’s convened by The Right Place Inc.
Participating in the roundtable with this reporter and MiBiz Managing Editor Joe Boomgaard were:
- John Berchulc, marketing development manager, Kent Manufacturing Co.
- Craig Finkel, director of sales and marketing, Rose Technologies Co.
- Eric Icard, business development manager, The Right Place Inc.
- Jim Medsker, president, Keystone Solutions Group
- Robert Nesky, director of sales and product development, Keystone Solutions Group
- Tom Vreeman, CEO, K.I. Medical Device Manufacturing L3C
- Chris Williams, president, MedBio Inc.
- John Woodhouse, sales and marketing manager, MedBio Inc.
The executives discussed talent recruitment issues, best practices for growth, capital needs across the development spectrum and why it can be beneficial to be a small company in a field of giants.
Here are some highlights from the discussion.
What is driving the growth in the medical device sector in West Michigan?
Woodhouse: (West Michigan) is getting branding from the work we have been doing for so many years, and it’s finally taking hold. I also think, from my perspective, we bring a lot of engineering strength and commitment to customer service that they may not see from, say, a California manufacturer. It comes back to the West Michigan roots and how we deliver a product and a service. But I think it’s been a branding exercise that we all go through as a whole. And we work together. We promote the region, not just Medbio.
Nesky: I think the one thing that nobody could argue with – from a global basis – is that Michigan knows how to manufacture at a world-class level. I believe that the more we collectively (manufacture medical devices), the more the message will get out there. They can’t argue that we have the infrastructure and the know-how to manufacture things and be globally competitive at that. If we could just attract more people to come and see what we do, we are going to be able to grow our businesses. I think that is what attracts people here. We don’t have to argue ‘can we do it?’ It’s just a matter of – for each individual project – are we the best solution? We’re pretty diversified, too, with different market segments.
Vreeman: I think the business culture that is here is unique. We’re all contract manufacturers, we’re all competitors, but we’re all partners and we depend on each other. We make each other better. … We compete with each other, but for the customers, we’re not afraid to say this (project) is not best by me. It’s best by (another company in the region). That has strengthened us and it does attract people from the outside. Most of my customers are from Texas, California, Israel. People from the outside come because we can do (all their manufacturing) right here and get it all done in one place, and get it back to them with quality and at a reasonable price. This consortium is evidence of that.
How is the industry different from others in the region, in particular the automotive sector?
Woodhouse: I spent 16 years in automotive, and it’s cutthroat. In this industry, we have a common goal, which is patient safety. We all want to grow and be profitable, but in automotive, you’re guilty until you prove yourself innocent. If there is an issue (in the medical device sector), we work together to protect the patient. That’s why the relationships are good.
Finkel: I think the trend is that everyone is looking for a simplified process and a simplification in their supply chain. My impression is that if they can get it all done in one house, (customers) are interested in that.
With the exception of Stryker in Kalamazoo, there isn’t much of an OEM presence in West Michigan. How does that affect the industry dynamic?
Williams: There are still one or two very small OEMs in the area, but if you take away Stryker, there are no real volume OEMs in (West Michigan). SkyTron is probably the biggest in town. So we are largely a contract manufacturing community in West Michigan. There’s no doubt about it. … Most of us are decently diversified now. If we had one big OEM here, we’d be relying on them for 50 or 60 percent of our business.
Nesky: With the infrastructure that is going in with medical schools coming to Grand Rapids and the Van Andel Institute … I think more OEMs will be attracted here even just to run clinical trials. There will be technology that comes out of one of these institutions. A big OEM is going to spring out of here organically. It’s bound to happen. That will be big for all of us long term.
Speaking of that research infrastructure and the development of the Medical Mile in Grand Rapids, how have those institutions affected the medical device cluster here?
Williams: There have been collaborations with Spectrum Health Innovations. There has been a little bit of germination that comes from our medical institutions, but I think we have really yet to see it come to fruition. It’s in its infancy because the Medical Mile isn’t a decade old.
Nesky: At Keystone we do product development and we have done some tech transfer coming out of local universities. Students with good ideas got some seed funding and we spun them out to be a corporation and brought them to the marketplace. We’re working with one right now and we believe that in the next year, someone is probably going to scratch them a pretty nice-sized check. … That’s good for everybody. They’ll still be young and they’ll want to do it again.
Woodhouse: It’s going to take time. That’s just the reality. It is a long cycle from inception to product.
Is it in the startup phase where capital is most needed, or is the need at later stages of development?
Williams: For Medbio and other companies looking to get into medical devices, your customers are broken down into a subset in the first place. If you have the big guy that has money, you’re never worried about him cutting you a check, and you’re pretty sure if they give you volume projections you’re quoting on, you’re going to get that kind of volume out of them. Then with the medium-size companies, you’re still pretty sure you’re going to get your check. … (They don’t have the marketing presence of the larger firms) but they are nipping at the heels of the big guys. Then you have true startups and those are the guys you have to worry about. … For those startups, money almost 99 percent of the time is the stumbling block out of the gates. So funding is probably most critically needed at the early stage.
Vreeman: (With the amount of contract manufacturers here) a startup can talk to everybody (they would need to launch their product). They can get it from ground zero … but they don’t have funding. So you need the diversity of having the guys who have a lot of money and the medium-sized companies where you’ll probably get paid. And then you can take a risk on one or two (startups) but you have to turn away a lot of good ideas because of funding.
Nesky: I have heard that our biggest problem in West Michigan is maybe not the funding. It’s the entrepreneurs that lead it. It’s the horse and jockey. Right now, there are plenty of horses – plenty of great ideas – but there aren’t many jockeys in the med device space that you can point to (who have) ‘been there, done that.’ I think that’s maybe an issue (that will get solved) with time.
Are there advantages to having a cluster of small contract manufacturers in West Michigan?
Finkel: (I have) noticed that on occasion, you get a customer that’s glad you’re not that really big conglomerate. They’re happy that they can work directly with an engineer and an owner. Oftentimes, that’s the same person. We often have that advantage. … Whatever it is, they are happy that you’re not a $5 billion organization.
Williams: We have specifically gotten work for that reason: We’re not big enough to cause any problems.
What are some of the trends you’re seeing as startups look to enter the medical device space?
Berchulc: I’ve been noticing people from bigger companies come up with an idea that they didn’t want to talk to their company about … because they know they won’t (get) anything for it. They step away from the company (to work on the idea). … Having only been with Kent for nine months, I’ve (seen) four of these people, and they have valid ideas.
Woodhouse: Some of the startups we’ve worked with are not in the state, they come from out of the state. They are attracting leadership from people who have retired from larger med device OEMs. These older leaders have stepped aside, but they are coming in to help guide these startups to get them through the regulatory process so it doesn’t get stalled in the engineering or clinical (trials).
Williams: They rely on us to do the manufacturing for them. Two companies specifically we have worked with have executives from previous launches … and then they’ll have a regulatory person that spent 20 years in the business. Those are the individuals that we are dealing with to bring the product to market. It’s a successful model but the original founder or owner has to understand that dilution occurs. … You can have 100 percent of nothing or 20 percent of a big idea. That’s hard to tell an inventor or founder or owner. It’s very difficult, and I have that conversation I don’t know how many times per year.
Nesky: Not all good ideas are commercializable either, especially in the medical device space. … Having worked in med device for about 10 years, there is a lot more deal flow in the med device space now than there was 10 years ago. There’s no doubt about it. I have to believe that more medical device infrastructure is also leading people to think that they can launch their thing here in West Michigan.
What is the perception of the West Michigan medical device cluster around the rest of the country?
Medsker: We were just talking with a client from California. She is with us because of our culture and how we deal with customers and the personal relationships. It’s a different environment where she is.
Nesky: She said she specifically doesn’t want to launch her device in California for a couple of reasons. One is the culture. Two is that the technology may be somewhat disruptive and she doesn’t want everyone in her backyard knowing what she is doing. She says that the (difference in) cultures between here and California is night and day.
Finding a talented workforce is a major headache for the region’s manufacturers. How is that playing out in the medical device sector?
Williams: We’re primarily a plastics injection molding firm but we only operate in the medical and biotechnology space. But we are injection molders at heart. Our engineering staff is almost all from Ferris State University. It’s an excellent (plastics) program. It has to be one of the top in the nation. We are very lucky to have them here. It’s very difficult to find higher-level technicians (who are) not engineers – the kind of guys who do the molds. With the 2009 downturn, those guys left. They’re not in the state anymore. We are having a heck of a time finding those individuals. That is a difficulty for us.
West Michigan med device manufacturers say they’re better together
Companies in West Michigan’s medical device manufacturing cluster will compete against one another all day for contracts, but they’ll also refer business to their neighboring competitors when they know the project doesn’t fit their capabilities and the other company could do it better.
That’s according to Tom Vreeman, the CEO of Holland-based K.I. Medical Device Manufacturing L3C.
K.I. Medical and the two dozen other members of MiDevice span the region from Grand Rapids and the lakeshore to Kalamazoo and collectively offer customers concept, design, prototyping, validation, manufacturing and distribution capabilities.
Here are short profiles of the companies represented at a recent MiBiz roundtable discussion on the medical device manufacturing sector in West Michigan.
Kent Manufacturing Co., Grand Rapids
A contract manufacturer for the automotive and medical device sectors, Kent offers bonding and fastening solutions for a wide range of medical equipment and works with customers’ designs for form-fitting functions. The company also offers light assembly.
Keystone Solutions Group , Kalamazoo
The product development and contract manufacturer serves the medical device and other sectors and works with companies of all sizes, including startups. The firm invested about $500,000 into a new 24,000-square-foot facility in Kalamazoo where it’s consolidated its operations.
K.I. Medical Device Manufacturing L3C, Holland
K.I. is a low-profit contract manufacturer exclusively serving medical device OEMs owned by Holland-based nonprofit Kandu Inc., which provides work opportunities for people with barriers to employment. Last year, Kandu secured a three-year contract to produce more than 1.2 million “Israeli bandages,” which are made in its new FDA-registered and ISO-certified clean room in Holland.
Medbio Inc., Grand Rapids
A contract manufacturer for medical and biotechnology industries, Medbio emphasizes injection molding, design support and assembly. The company recently acquired plastics mold builder Concept Molds Inc. of Schoolcraft to bolster its tooling capabilities.
Rose Technologies Co., Grand Rapids
The contract manufacturer for medical device firms focuses on tube-related products, catheters, shafts and medical balloons. It recently added a third clean room at its facility and broadened its ISO certification to be able to manufacture, assemble and package finished products that can be sent to a sterilizer and drop-shipped directly to a customer’s warehouse.