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Best Practices, LLC Strategic Benchmarking Research

Benchmarking Quality Staffing & Performance: How Medical Device & Technology Companies Ensure

Quality & Safety While Managing Cost Effectiveness

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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

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Research Objective &

Methodology

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To uncover resource and activity

benchmarks as well as forward-

looking insights about the

Quality function at medical

device companies.

Research Background and Methodology

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:

Surveyed 11 leaders at 11 medical device

companies.

Conducted five deep-dive executive interviews to

collect qualitative insights from selected survey

participants.

INF

OR

M

Objective:

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?

Deep Dive Interview Questions:

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.

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Universe of Learning: 11 Companies Engaged

Research participants included 11 executives from 11 medical device companies. Five executives participated in interviews.

Participating Companies: Bausch & Lomb; Boston Scientific; Covidien; Edwards Lifesciences; Ethicon;

Medrad; Medtronic; Nitinol Devices & Components; Roche Diagnostics; Terumo Medical; Zimmer

Nitinol Devices & Components

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Medical Device Revenue Averages $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)

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.

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Nearly 2/3 Increased Quality’s Staffing during Past 3 Years

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.)

% Change of Quality

FTEs in Medical Devices

and Related Services:

Max 13%

75th Percentile 12%

Mean 8%

Median 10%

25th Percentile 9%

Min -7%

Remained the

same

18%

Decreased,

18%

Increased,

64%

(n = 11) (n = 7)

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%.

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Quality Span of Control Ranges from 5 to 12 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

President Director Senior Manager Manager

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)

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.

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Compliance/Document Control is Automated with Some

Centralization

18%

9%

36%

27%

9%

Completely

decentralized

Mostly

decentralized

Some activities

centralized

Mostly

centralized

Highly

centralized

0%

0%

55%

45%

0%

Completely

manual

Mostly manual

Some

automation

Highly

automated

Completely

automated

(n = 11) (n = 11)

Q. Organizational Approach For Achieving High

Performance in Compliance/Document Control:

How centralized is this function? (Choose one)

Q. Organizational Approach For Achieving High

Performance in Compliance/Document Control:

How automated is this function? (Choose one)

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.

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Corporate Level Quality Management Reviews are Completely

Standardized for 55%

Q. Standardization of Quality Management Reviews: Please indicate the standardization of your Quality

Management Reviews at each level. (Choose one per level.)

50%

18%

9%

18%

27%

45%

45%

36%

18%

18%

55%

9%

50%Other

Manufacturing sites

Business

units/divisions

Corporate

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

11

11

11

2

Other:

• Operations Quality Management Review

• Regions that don't have a manufacturing site

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.

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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