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Benchmarking Quality Staffing & Performance:
  How Medical Device & Technology Companies Ensure
   Quality & Safety While Managing Cost Effectiveness




        Best Practices, LLC Strategic Benchmarking Research




                                                              BEST PRACTICES,   ®
                                                                                    LLC
TABLE OF CONTENTS
I.     Research Objective & Methodology p. 3-15
II.    Quality Organization Cost & Staffing p. 16-24
III.   Quality Organization Structure p. 25-37
IV.    IT Solutions for Quality Activities p. 38-46
V.     Managing Document Control p. 47-56
VI.    Employing Quality Audits & Management Reviews p. 57-67
VII.   Deploying Quality Training p. 68-72
VIII. Managing Software Quality p. 73-79
IX.    Managing Supplier Quality & Incoming/Receiving Inspections p. 80-87
X.     Managing Manufacturing/Outgoing Inspections p. 88-95
XI.    Managing Laboratory Testing & Scientific Quality Processes p. 96-103
XII.   Complaint Management & Resolution Activities p. 104-118
XIII. Managing NCE Activity p. 119-124
XIV. Managing Corrections & Removals p. 125-127
XV. Supporting R&D Clinical Trials p. 128-131
XVI. Quality System p. 132-135
XVII. Future Directions for Quality Organization p. 136-143

                                                                        BEST PRACTICES,   ®
                                                                                              LLC
Research Objective &
   Methodology




                   BEST PRACTICES,   ®
                                         LLC
Research Background and Methodology
Best Practices, LLC conducted this benchmarking study to establish meaningful
benchmarks for the resource levels and the activities scope of the Quality function for
medical device companies.

  Background:
  Medical Device and Technology companies devote significant resources to ensure their products meet
  quality standards and regulations at every stage of the product life cycle, from R&D and product
  development through manufacturing, sale, and post-market activity. Increasingly, companies are
  challenged to ensure quality and safety while managing costs and assessing risk. This survey benchmarks
  how companies are addressing these critical quality, safety, regulatory and business requirements.

 Field Research & Insight Development:                                                 Objective:
  Surveyed 11 leaders at 11 medical device                                  To uncover resource and activity




                                                               INFORM
   companies.                                                                benchmarks as well as forward-
  Conducted five deep-dive executive interviews to                             looking insights about the
   collect qualitative insights from selected survey                            Quality function at medical
   participants.                                                                   device companies.


 Deep Dive Interview Questions:
  1.   What improvement initiatives are you working on in the Quality function?
  2.   Where are you taking out headcount – why is this an area for cuts?
  3.   How are you approaching risk with fewer resources - fewer inspections, etc.?
  4.   What are the primary drivers of outsourcing or off shoring Quality activities?
  5.   What are your systems for effectively and efficiently managing complaints?
  6.   Does sustaining engineering include production line support and product design?

                                                                                              BEST PRACTICES,
                                                         4                                                      ®
                                          Copyright © Best Practices, LLC                                          LLC
Universe of Learning: 11 Companies Engaged
Research participants included 11 executives from 11 medical device companies. Five
executives participated in interviews.




                                                   Nitinol Devices & Components




  Participating Companies: Bausch & Lomb; Boston Scientific; Covidien; Edwards Lifesciences; Ethicon;
     Medrad; Medtronic; Nitinol Devices & Components; Roche Diagnostics; Terumo Medical; Zimmer

                                                                                   BEST PRACTICES,
                                                       5                                                ®
                                        Copyright © Best Practices, LLC                                    LLC
Medical Device Revenue Averages $5.6B
Medical device and technology companies of all sizes face regulatory changes and must
adapt resources to meet demand. Medical device revenue in the benchmark class averages
approximately $5.6B.

    Q. Please estimate your company's 2010 annual revenue from medical device sales and related
services. (Provide figures in U.S. dollars, using data from 2010 or most recently completed fiscal year.)



                                                     Estimated Medical Device
                                                         Revenue ($USD):

                            Max                            $16,000,000,000
                            75th Percentile                 $9,903,000,000
                            Mean                            $5,551,636,364
                            Median                          $4,300,000,000
                            25th Percentile                 $1,075,000,000
                            Min                               $62,000,000



(n = 11)

                                                                                    BEST PRACTICES,
                                                        6                                              ®
                                         Copyright © Best Practices, LLC                                  LLC
Nearly 2/3 Increased Quality’s Staffing during Past 3 Years
Almost two-thirds of the benchmark class indicated growth in quality function staffing
and only 18% of companies indicated a decrease in the number of FTEs over the past
three years. The average percent change of total FTEs was positive 8%. The range of
percent changes for staffing was -7 to 13%.
   Q. Staffing Change Trend: How has the total numbers of FTEs of your company's medical device
  Quality function changed during the past three years? (Choose direction, then fill in the % change.)



         Decreased,                       Increased,                             % Change of Quality
            18%                              64%                               FTEs in Medical Devices
                                                                                and Related Services:
                                                             Max                        13%
                                                             75th Percentile            12%
                                                             Mean                       8%
                                                             Median                     10%
                                                             25th Percentile            9%
Remained the
   same                                                      Min                        -7%
    18%



                        (n = 11)                                                      (n = 7)

                                                                                     BEST PRACTICES,
                                                       7                                                 ®
                                        Copyright © Best Practices, LLC                                     LLC
Quality Span of Control Ranges from 5 to 12 Direct Reports
Some companies provide a robust span of control for managers and senior managers.
Managers oversee twice as many direct reports as Vice Presidents, and more than five
more direct reports than their counterparts. Directors in quality have the smallest span
of control, averaging around five direct reports.
   Q. Quality Span of Control: What is the average number of direct reports for a dedicated Quality
                              employee at each of the following levels?




                              Vice
                                                    Director               Senior Manager      Manager
                            President

  Max                           8                       8                       20               60
  75th Percentile               7                       6                        7                8
  Mean                          6                       5                        7               12
  Median                        6                       5                        5                6
  25th Percentile               5                       4                        3                4
  Min                           1                       1                        2                3
  (n =                          9                        9                       7                10)



                                                                                            BEST PRACTICES,
                                                       8                                                      ®
                                        Copyright © Best Practices, LLC                                          LLC
Compliance/Document Control is Automated with Some
Centralization
All medical device companies indicated some level of automation, with nearly half
responding that they highly automate in order to achieve high performance. In contrast,
centralization of this function is not as prevalent, as the benchmark class demonstrated
varying levels of centralization.
 Q. Organizational Approach For Achieving High               Q. Organizational Approach For Achieving High
 Performance in Compliance/Document Control:                 Performance in Compliance/Document Control:
 How centralized is this function? (Choose one)              How automated is this function? (Choose one)


      Highly
                    9%                                            Completely
    centralized                                                                0%
                                                                  automated
      Mostly
                               27%                                   Highly
    centralized                                                                               45%
                                                                   automated
Some activities                                                     Some
                                     36%                                                            55%
  centralized                                                     automation

    Mostly
                    9%                                        Mostly manual    0%
 decentralized

  Completely                                                      Completely
                         18%                                                   0%
 decentralized                                                     manual




(n = 11)                                                   (n = 11)

                                                                                        BEST PRACTICES,
                                                          9                                               ®
                                           Copyright © Best Practices, LLC                                   LLC
Corporate Level Quality Management Reviews are Completely
Standardized for 55%
Over 90% of corporate quality management reviews are mostly standardized, with 55% of
these reviews being completely standardized. More importantly, almost two-thirds of
business unit and manufacturing sites have mostly standardized quality management
reviews as well.
Q. Standardization of Quality Management Reviews: Please indicate the standardization of your Quality
                      Management Reviews at each level. (Choose one per level.)

     N/A   No standardization   Some standardization      Mostly standardization      Complete Standardization
                                                                                                                     n=


                     Corporate      9%              36%                                  55%                              11



                  Business                                                                                                11
                                    9%          27%                            45%                    18%
                units/divisions



           Manufacturing sites        18%           18%                        45%                    18%                 11



                           Other                  50%                                      50%                            2

                                                                               Other:
                                                                               • Operations Quality Management Review
                                                                               • Regions that don't have a manufacturing site

                                                                                                     BEST PRACTICES,
                                                          10                                                                   ®
                                            Copyright © Best Practices, LLC                                                       LLC
About Best Practices, LLC

Best Practices, LLC is a research and consulting firm that conducts
work based on the simple yet profound principle that organizations
can chart a course to superior economic performance by studying
the best business practices, operating tactics and winning
                strategies of world-class companies.




                   Best Practices, LLC
      6350 Quadrangle Drive, Suite 200, Chapel Hill, NC 27517
                          919-403-0251
                bestpractices@best-in-class.com
                     www.best-in-class.com




                                                            BEST PRACTICES,   ®
                                                                                  LLC

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Quality Staffing & Performance: Ensuring Quality and Safety While Managing Cost Effectiveness for Medical Device Companies

  • 1. Benchmarking Quality Staffing & Performance: How Medical Device & Technology Companies Ensure Quality & Safety While Managing Cost Effectiveness Best Practices, LLC Strategic Benchmarking Research BEST PRACTICES, ® LLC
  • 2. TABLE OF CONTENTS I. Research Objective & Methodology p. 3-15 II. Quality Organization Cost & Staffing p. 16-24 III. Quality Organization Structure p. 25-37 IV. IT Solutions for Quality Activities p. 38-46 V. Managing Document Control p. 47-56 VI. Employing Quality Audits & Management Reviews p. 57-67 VII. Deploying Quality Training p. 68-72 VIII. Managing Software Quality p. 73-79 IX. Managing Supplier Quality & Incoming/Receiving Inspections p. 80-87 X. Managing Manufacturing/Outgoing Inspections p. 88-95 XI. Managing Laboratory Testing & Scientific Quality Processes p. 96-103 XII. Complaint Management & Resolution Activities p. 104-118 XIII. Managing NCE Activity p. 119-124 XIV. Managing Corrections & Removals p. 125-127 XV. Supporting R&D Clinical Trials p. 128-131 XVI. Quality System p. 132-135 XVII. Future Directions for Quality Organization p. 136-143 BEST PRACTICES, ® LLC
  • 3. Research Objective & Methodology BEST PRACTICES, ® LLC
  • 4. Research Background and Methodology Best Practices, LLC conducted this benchmarking study to establish meaningful benchmarks for the resource levels and the activities scope of the Quality function for medical device companies. Background: Medical Device and Technology companies devote significant resources to ensure their products meet quality standards and regulations at every stage of the product life cycle, from R&D and product development through manufacturing, sale, and post-market activity. Increasingly, companies are challenged to ensure quality and safety while managing costs and assessing risk. This survey benchmarks how companies are addressing these critical quality, safety, regulatory and business requirements. Field Research & Insight Development: Objective:  Surveyed 11 leaders at 11 medical device To uncover resource and activity INFORM companies. benchmarks as well as forward-  Conducted five deep-dive executive interviews to looking insights about the collect qualitative insights from selected survey Quality function at medical participants. device companies. Deep Dive Interview Questions: 1. What improvement initiatives are you working on in the Quality function? 2. Where are you taking out headcount – why is this an area for cuts? 3. How are you approaching risk with fewer resources - fewer inspections, etc.? 4. What are the primary drivers of outsourcing or off shoring Quality activities? 5. What are your systems for effectively and efficiently managing complaints? 6. Does sustaining engineering include production line support and product design? BEST PRACTICES, 4 ® Copyright © Best Practices, LLC LLC
  • 5. Universe of Learning: 11 Companies Engaged Research participants included 11 executives from 11 medical device companies. Five executives participated in interviews. Nitinol Devices & Components Participating Companies: Bausch & Lomb; Boston Scientific; Covidien; Edwards Lifesciences; Ethicon; Medrad; Medtronic; Nitinol Devices & Components; Roche Diagnostics; Terumo Medical; Zimmer BEST PRACTICES, 5 ® Copyright © Best Practices, LLC LLC
  • 6. Medical Device Revenue Averages $5.6B Medical device and technology companies of all sizes face regulatory changes and must adapt resources to meet demand. Medical device revenue in the benchmark class averages approximately $5.6B. Q. Please estimate your company's 2010 annual revenue from medical device sales and related services. (Provide figures in U.S. dollars, using data from 2010 or most recently completed fiscal year.) Estimated Medical Device Revenue ($USD): Max $16,000,000,000 75th Percentile $9,903,000,000 Mean $5,551,636,364 Median $4,300,000,000 25th Percentile $1,075,000,000 Min $62,000,000 (n = 11) BEST PRACTICES, 6 ® Copyright © Best Practices, LLC LLC
  • 7. Nearly 2/3 Increased Quality’s Staffing during Past 3 Years Almost two-thirds of the benchmark class indicated growth in quality function staffing and only 18% of companies indicated a decrease in the number of FTEs over the past three years. The average percent change of total FTEs was positive 8%. The range of percent changes for staffing was -7 to 13%. Q. Staffing Change Trend: How has the total numbers of FTEs of your company's medical device Quality function changed during the past three years? (Choose direction, then fill in the % change.) Decreased, Increased, % Change of Quality 18% 64% FTEs in Medical Devices and Related Services: Max 13% 75th Percentile 12% Mean 8% Median 10% 25th Percentile 9% Remained the same Min -7% 18% (n = 11) (n = 7) BEST PRACTICES, 7 ® Copyright © Best Practices, LLC LLC
  • 8. Quality Span of Control Ranges from 5 to 12 Direct Reports Some companies provide a robust span of control for managers and senior managers. Managers oversee twice as many direct reports as Vice Presidents, and more than five more direct reports than their counterparts. Directors in quality have the smallest span of control, averaging around five direct reports. Q. Quality Span of Control: What is the average number of direct reports for a dedicated Quality employee at each of the following levels? Vice Director Senior Manager Manager President Max 8 8 20 60 75th Percentile 7 6 7 8 Mean 6 5 7 12 Median 6 5 5 6 25th Percentile 5 4 3 4 Min 1 1 2 3 (n = 9 9 7 10) BEST PRACTICES, 8 ® Copyright © Best Practices, LLC LLC
  • 9. Compliance/Document Control is Automated with Some Centralization All medical device companies indicated some level of automation, with nearly half responding that they highly automate in order to achieve high performance. In contrast, centralization of this function is not as prevalent, as the benchmark class demonstrated varying levels of centralization. Q. Organizational Approach For Achieving High Q. Organizational Approach For Achieving High Performance in Compliance/Document Control: Performance in Compliance/Document Control: How centralized is this function? (Choose one) How automated is this function? (Choose one) Highly 9% Completely centralized 0% automated Mostly 27% Highly centralized 45% automated Some activities Some 36% 55% centralized automation Mostly 9% Mostly manual 0% decentralized Completely Completely 18% 0% decentralized manual (n = 11) (n = 11) BEST PRACTICES, 9 ® Copyright © Best Practices, LLC LLC
  • 10. Corporate Level Quality Management Reviews are Completely Standardized for 55% Over 90% of corporate quality management reviews are mostly standardized, with 55% of these reviews being completely standardized. More importantly, almost two-thirds of business unit and manufacturing sites have mostly standardized quality management reviews as well. Q. Standardization of Quality Management Reviews: Please indicate the standardization of your Quality Management Reviews at each level. (Choose one per level.) N/A No standardization Some standardization Mostly standardization Complete Standardization n= Corporate 9% 36% 55% 11 Business 11 9% 27% 45% 18% units/divisions Manufacturing sites 18% 18% 45% 18% 11 Other 50% 50% 2 Other: • Operations Quality Management Review • Regions that don't have a manufacturing site BEST PRACTICES, 10 ® Copyright © Best Practices, LLC LLC
  • 11. About Best Practices, LLC Best Practices, LLC is a research and consulting firm that conducts work based on the simple yet profound principle that organizations can chart a course to superior economic performance by studying the best business practices, operating tactics and winning strategies of world-class companies. Best Practices, LLC 6350 Quadrangle Drive, Suite 200, Chapel Hill, NC 27517 919-403-0251 bestpractices@best-in-class.com www.best-in-class.com BEST PRACTICES, ® LLC