Circuits Assembly Online Magazine - Still Strong in Singapore

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Two decades after making its mark, Singapore remains an epicenter of manufacturing excellence. Here’s why.

Manufacturing output within the Biomedical Sciences (BMS) sector reached $15 billion in 2006, a 30.2% increase over the prior year, according to Singapore’s Economic Development Board.1 Pharmaceuticals accounted for 91% of the total output, while medical technology topped $1.3 billion. Value-added services grew 47% over 2005 and employment expanded by 3.9%. Of the total jobs in the BMS manufacturing sector, 62% are in medical technology.

A growing number of large multinational medical OEMs are locating R&D centers or regional headquarters within Singapore because of its strong IP laws, skilled labor pool and easy access to a variety of emerging consumer markets. Many medical OEMs also outsource within the region. A cluster of EMS providers, including a mix of Tier One and mid-tier providers, drive part of this growth. Medical OEMs have also invested in the region, setting up regional headquarters to better support supply base strategies in lower-cost nations within Asia, including China, Thailand, Indonesia, Malaysia and Vietnam.

Lower-cost labor regions often come with hidden cost tradeoffs in terms of breadth of infrastructure, availability of skilled labor and adherence to regulatory requirements. A key reason Singapore has remained a center for manufacturing excellence for more than two decades is its combination of a legal system based on English Common Law, foreign investment-friendly trade agreements and incentives, strong IP protection and a highly educated workforce. Singaporean suppliers often offer the best of both worlds by sourcing both in low-cost and high-skilled regions, depending on product requirements.

In addition, Singapore’s government has long had a track record of listening to the needs of MNCs and designing programs that support their critical infrastructure needs. Within medtech, a number of committees and agencies provide support for research, regulatory policy standardization, workforce training and availability of key technical capabilities.

An example of specific support for the medical device manufacturing community is the Medical Technology Advisory Committee (MTAC), established in 2006. This committee’s purpose is to enhance development of new technical capabilities, regulatory policies and infrastructure to support the rapid growth of the medical technology sector in Singapore. The MTAC comprises 19 major medical technology companies involved in manufacturing and R&D.

SPRING Singapore (spring.gov.sg) is a government agency that supports adoption of third-party quality standards, including ISO 13485, IEC 60601, Good Laboratory Practices (GLP), Technical References (TR) and Singapore Standards (SS). As Singapore’s national standards body, it works to align Singapore standards with those of the international community. Additionally, SPRING manages the Singapore Accreditation Council (SAC). SAC’s primary objective is to develop, maintain and improve the standard of conformity assessment activities in Singapore. It has signed mutual recognition arrangements (MRAs) with regional and international accreditation organizations covering more than 90 accreditation systems.

Singapore’s supply base is able to team with these organizations, as well as access other resources in ensuring their businesses meet the needs of their multinational customers. At the same time, the indigenous EMS and precision engineering supply base has pressed to develop points of differentiation in their business models and range of services that provide points of competitive advantage. These points of differentiation include:

Supply base consortia.
Greater breadth of industry-specific services.
Support of high-mix, lower-volume production and schedule flexibility, in addition to the standard Asian EMS business model of access to lower-cost regions.
More focused facility placement, to capitalize on lower-cost Asian manufacturing options without the overhead associated with a large network of legacy facilities in higher labor-cost regions.
Emphasis on adoption of industry-specific quality standards and continuous improvement programs to reduce waste and better align with customer requirements.

The following examples illustrate ways these strategies are used to support key medical customer outsourcing goals.

Product development support. SEM Manufacturing Pte. Ltd. (semitech.com.sg) provides circuit, production and test equipment manufacturing capabilities. Its certifications include ISO 9001:2000 and ISO 13485. While it also has manufacturing facilities in Indonesia, only the Singapore facility currently manufactures medical products. The company is a part of the I-Partner manufacturing consortium, which enables it to provide a one-stop manufacturing solution, working closely with partners whose services include precision plastic injection molding, metal stamping, precision zinc die cast components, tool making, component design and precision rubber fabrication. The consortium addresses a challenge found in many lower cost regions – that of finding a full complement of regional niche service suppliers with appropriate quality systems and industry expertise.

A newer project involves assembly of an input/output board for a ventilator. Phase I of the project is at the board assembly level. Phase II adds the entire submodule. The consortium supply base will be used to support the plastics housing requirement. The company supported the customer in prototyping, and production has commenced. Currently, the product is sold in the U.K. and EU, and eventually will be sold in Asia. The assemblies are manufactured in Singapore. The company supported the design effort with DfM/DfT recommendations. Suggesting improvements related to board panelization and test optimization is standard practice for all new projects.

A key design concern when products may be sold in China is RoHS compliance. While medical companies currently are exempt under the EU RoHS Directive, all product sold in China is required to be compliant with China’s RoHS legislation. SEM Manufacturing offers RoHS-compliant and leaded manufacturing capability, and its engineering staff has expertise with various market requirements.

A final area of importance to medical customers is traceability. The company has developed custom software that traces date codes on all critical components and the number of times a component has been replaced. This makes it easy to keep a thorough device history on all medical products. Database record retention is based on product lifecycle length defined by the customer plus two years. If the customer finds the product’s lifecycle exceeds initial estimates, the records retention date is extended.

While the example here is a higher value, lower volume project, the company also runs projects with volumes in the hundreds of thousands. This variable volume focus can be particularly valuable to medical customers because product volumes can be fairly low as a product goes through various market qualification processes, ramps to high volume and ultimately drops to lower volumes again as the product enters end-of-life.

Product development, enhancement and cost reduction. Forefront Medical Technology (FMT) provides product development with capabilities in design engineering, prototyping and manufacturing, plus post-manufacturing support services such as sterilization. Its molding capabilities include extrusion, injection and blow molding. Its Singapore manufacturing facility includes a Class 7 (10,000) clean room. Quality registrations include ISO 9001:2000, ISO 13485, ISO 13488 and EN 46002. FMT is also FDA-registered. It manufactures a range of LMA laryngeal mask airway devices for the global market. In addition to a facility in Singapore, it recently added manufacturing capability in southern China.

FMT manufactures a full LMA product line (single use) for its largest customer. It started the project in 2000, helping its startup client with product development, prototyping and ultimately volume production. What began as 50,000 units per month has grown to 500,000. Key points of initial cost reduction focus were in mold design, mold flow analysis, mold fabrication and design for semi-automated assembly. As product volumes have grown, the company has tooled multi-cavity molds and cut labor costs by 50 to 60% by developing a semiautomated assembly process. Automation has the added benefit of improving assembly accuracy.

While FMT’s initial focus has been precision engineering and mechanical assembly, product trends in the inhaler market are driving greater levels of vertical integration, since electronics are increasingly becoming a part of inhaled drug delivery mechanisms. Next-generation product includes an electronic viewer designed to make device insertion easier and enhance functionality to permit product use in a wider range of applications. FMT works with local industry specialized in PCB assemblies and other components, and performs final assembly in its Singapore facility when electronics content is involved. It also provides post-manufacturing support for distribution, as Singapore is a good transport hub with significant shipping and air options.

Cost reduction methods. Beyonics Technology Ltd. (beyonics.com) has pioneered vertical integration within the medical devices sector. Its capabilities include EMS, die-casting, precision machining, plastic molding and precision metal stamping. Products manufactured include modules or sub-system assemblies for ICU/critical care and medical diagnostics equipment, electromechanical surgical tools and components, disposables for clinical and point-of-care devices such as IV system components, safety syringes, syringe cartridges, surgical scrubs and lancets. The company operates facilities in Singapore, China, Malaysia, Indonesia and Thailand. Quality certifications include ISO 9001:2000, ISO 13485, and FDA registration.

One project is an assembly used in a surgical application. It has a built-in sensor that drives a precision machining requirement. Beyonics manufactures the PCB assembly, plastics and insert molding. The company doesn’t perform metal fabrication; instead, it is sourced to an outside supplier. Beyonics also performs final assembly and packages the product. The customer handles sterilization. A dual labor market strategy is used under which assemblies are produced in Malaysia, and final assembly is performed in a clean room in the FDA-registered Singapore facility.

Singapore Supplier Selection Workshop

International Enterprise (IE) Singapore, an agency under Singapore’s Ministry of Trade and Industry that promotes overseas growth of Singapore-based enterprises and international trade, will conduct a conference on supplier identification and selection teams in October. Global-Asia Trade Exchange 07 (GATE), a business matching event designed to support the requirements of OEMs wishing to explore a range of sourcing options in a single location, takes place Oct. 10-11 in Singapore, with plant tours scheduled Oct. 12-13. Visit gate.gov.sg for details.

In addition to achieving cost reduction through DfM/DfT, the company looks carefully at supply chain and logistics cost reduction opportunities. To reduce cycle time, a local supply chain is emphasized. Where feasible, components are manufactured internally. Other material requirements are sourced within the region, with emphasis on selecting suppliers that offer the best price and shortest lead-time. Local sourcing can reduce product realization cycle time two to three weeks.

Sterilization and distribution logistics are also a cost reduction focus. While not used in the example above, in situations where Beyonics sources to a local sterilization contractor and distributes from a warehouse hub in Singapore, product realization cycle time has been further reduced by several weeks. While customers cover carrying cost of the finished goods inventory, logistics cycle time reduction typically translates to smaller finished goods inventory, as fewer goods are tied up in transit. There is also shipping cost savings because all post-manufacturing support is provided close to the build site.

Other factors that come into play in the cost equation include workforce stability and internal discipline. In Beyonics’ Singapore facilities, annual turnover is less than 3%. While some contract workers are used to support demand variations, these workers have a two-year commitment. Additionally, production personnel are focused on procedure adherence and the highest standards of hygiene. These factors help ensure product quality and regulatory compliance, while minimizing the potential for anticipated accountability costs.

A final potential cost savings is the company’s facility location strategy. Although its annual revenues exceed $600 million, Beyonics’ facilities are located in Asia. A global EMS provider can offer significant value to a high-volume OEM that wants to manufacture in multiple locations around the world. However, for companies choosing to manufacture in a limited number of locations, selecting contractors with strong regional presence may be more cost-effective than selecting a contractor with facilities around the world, since a smaller facility footprint can translate to lower overhead costs.

High-mix, medium-volume, full lifecycle support. Nestronics Ltd (nestronics.com.sg) is an EMS company also headquartered in Singapore. It has another facility in India. Quality certifications include ISO13485:2003, ISO 14001:1996, ISO 9001:2000 and AS9100:2004. Medical products currently represent about 20% of its revenue, and currently all medical product manufacturing is done in Singapore. Its project focus tends to be high mix with low-to-medium volumes. The medical products it supports include DNA analysis equipment, infusion pumps, ultrasound equipment and diagnostic equipment.

The company has been building assemblies for a DNA analysis equipment manufacturer for several years. The project involves three to four product families, each containing 10 to 20 part numbers. In addition to turnkey assembly, project support includes new product introduction services, DfM/DfT recommendations, test development, production, warranty service and refurbishment. Bonded finished goods inventory is held at the customer’s Singapore warehouse and paid for as product is pulled. The customer regularly measures quality, delivery, price and responsiveness; Nestronics has received a Best-in-Class Supplier award.

As these examples illustrate, the Singaporean outsourcing equation can deliver high service, reduced cycle time and flexibility. Each supplier uses best practices common within the global supply base, but also fine-tunes its strategy to tap advantages within the region. A supply base with lower labor cost than typically found in North America, combined with a focus on supply base optimization, automation, operational efficiency and industry-specific regulatory compliance, is a powerful tool in achieving critical outsourcing goals.

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