# Presentation: 830810

## Moving From R&D To Manufacturing Under SBIR/STTR

- February 27, 2007

**Notes:**
Welcome and thank you for the opportunity to talk with you about manufacturing strategies as it relates to SBIR & STTR

## What’s an “MEP”

**Notes:**
OBJECTIVE: To build a sense of NIST MEP and build creditability in this area
NIST – the old Bureau of Standards...we keep the official time for the US and the official weight
The MEP program was started in 1990 and today consists of 59 centers providing service in every state...NIST actually provides cooperative funding to the centers who are non-profits, economic agencies or universities – NIST provides 1/3rd the funding and centers have to raise the rest, typically raising a third from states and a third from client revenues.
Our focus is on improving the productivity of small and mid-sized manufacturers throughout the US
Today there are close to 1,600 field engineers – a field person is probably within a two hour drive of any manufacturer in the US, and connected with local resources for companies who need access to facilities, funding or other resources.
Since 2004 we have worked with companies that have won 9% of the SBIR/STTR awards, over 130 companies...so we are connected not only to manufacturing but to SBIR as well.
We also have several national accounts where we work with large companies such as Catapiller, John Deere and others helping them improve their supply base as well as a couple of programs supporting DOD efforts in acquisition of newly supported R&D.

## The Road to Manufacturing

**Notes:**
OBJECTIVE: To take the impressions people have of the cross-over from R&D to manufacturing and add some issues or concerns people should be thinking about.
As you are doing R&D, often people think that the roadway to manufacturing is going to be smooth sailing, with perhaps a few potholes in the way on occasion...but it’s something for the future to worry about.
The reality is that the transition from R&D to manufacturing can be fraught with many issues such that they can impact your ability to provide the level of output, quality or cost necessary to be successful in the marketplace.  Often even if you can figure out how to address all these issues you’ve lost time to the market and perhaps sacrified some or much of your profits as you wrestle with these types of issues.

## Manufacturing

- 25% - 30%
- Process
- Quality
- Labor
- Materials
- Start-Up Costs
- “Price Points”

**Notes:**
OBJECTIVE: To illustrate how focused on small margins and operational issues typical manufacturing operations management is when running.
How many of you are with an operating manufacturer...and what is the focus your company has in manufacturing on productivity improvement?  How many look on a daily basis, on a weekly basis, on a monthly basis?
This is a constant focus...productivity enhancements
One of our centers, the Michigan Manufacturing Technology Center operates something called the Performance Benchmarking Service where they track the financial and operating performance of several thousand companies a year.
While it’s a very broad generalization...we estimate that companies see 43% of their costs in materials, while 13% of their costs are in labor.  Other aspects of manufacturing also includes the ways in which things are processed and assembled.
In addition many companies have to meet product quality certifications in industries like Aerospace, Automotive and for exporting for even entering the market.
About 60% of the work MEP does with manufacturers is helping them drive cost out of their production, raising their productivity through things like Lean Manufacturing, Six Sigma and other techniques...in fact there are industry and association certifications in many of these areas and several degreed university education programs supporting a focus on manufacturing alone...it’s not a simple thing to achieve and it’s a driving daily focus of energy if you take this on.

## NPD Perspective

- Phase II

- Phase I

**Notes:**
OBJECTIVE: To help audience understand that there are things you can do early on in the development stage that can help improve speed to market and profitability downstream.
The good news is that the way a product is designed up-front can help you with many of these issues...as you can see from this graph typically 85% of the product costs are established or committed prior to design and development.
Below is my attempt to lay out where Phase I and Phase II SBIR stages map against this...and really what it’s saying is that particularly in Phase II you can begin to help lower the costs of manufacturing as you validate and design your idea.

## Manufacturing StrategiesRequired Investment, potential risk & skill levels

|  | Process “Scaling” Skills | Manufacturing Skill & Expertise | Equipment Capital Investment | Sales & Distribution |
| --- | --- | --- | --- | --- |
| Manufacture 
“In-House” | High | High | High | High |
| Manufacture & Assemble | Med | High | Med | High |
| Manufacture Outsource | Low | Low | Low | High |
| License | Low | Low | Low | Low |

**Notes:**
OBJECTIVE:  Illustrate some of the basic issues and advantages to some basic differentiated manufacturing strategies that people often don’t think about.
Manufacturing “In-House” is also known as vertical integration...used to be practiced by automotive manufacturers for instance, and many early stage companies thing this is the way they want to get going.  If you look at how the investment in personnel, skills or expertise, risk and financial investment you can see that against the topics across the top this is a very high risk strategy.
Manufacturing & Assembly – this approach is where significant components or sub-assemblies are developed and manufactured on a subcontract basis...you still are responsible for core manufacturing activities based on your expertise...however now you have an assembly step coordinating with your subcontractors.
Manufacturing Outsource – is when you completely outsource the  manufacturing of a product...there are many companies for instance that will do initial product runs for you until a product generates enough cash flow for you to bring in-house...or as with washing machines only 2 manufacturers make all the labels you see.
License – this is when you let others completely make and sell your product, or use your technology in such a say that you only receive financial rewards...it allows you to stay out of any responsibility for other functions in selling and supporting a product.  For many people this is a fine strategy for commercializing their intellectual property and let them focus on what’s fun and rewarding for them.

## Ambion, Inc., TexasBill Rafferty – TMAC Staff

- Bulk & custom manufacturing of kits, enzymes & reagents
- Prototyping of racks in reagent kits, rapid prototyping, initial production, Lean 101 training to reduce cycle times & inventory

**Notes:**
Won over $15M in Phase I and II awards from NIH.

Assisted with design of a rack system that would fit into some of their reagent kits, cutting manufacturing cycle time, using modern prototyping techniques & supporting overall assembly and manufacturing though generic lean 101 training activity.

They manufacture pretty much in-house

## Wavefront Sciences, New MexicoRon Burke – NMEP Staff

- Wavefront sensing metrology (such as detailed measurements for LASIK survery)
- Tech Transfer from Sandia National Labs
- Public seminars on Lean Principles, plant layout assistance as they expanded, ISO and GMP auditing assistance

**Notes:**
Four awards, two NIH – total SBIR is $578,000

## Phase II Perspective

- More agencies focusing on manufacturing plans
- Issues with Quality standards for many supply-chain opportunities & partnerships
- Cost estimations can support your ability to enter the market at a critical price

**Notes:**
OBJECTIVE:  To create an understanding of how a manufacturing strategy can impact a companies Phase II application.  For example, 45% of the SBIR Phase II’s in one DOD component failed because of a lack of adequate manufacturing strategy.  In another case companies have been turned down on an acquisition basis because they didn’t have an adequate scale-up strategy from the acquisition officers’ perspective and didn’t get a follow-on contract.

## Unique about Medical Field

- Regulatory Approvals
- Drugs – Clinical trials
- Biologics
- Devices – 510K
- Good Manufacturing Practices/Quality System Regulation
- Third Party Payments

**Notes:**
GMP - They require that domestic or foreign manufacturers have a quality system for the design, manufacture, packaging, labeling, storage, installation, and servicing of finished medical devices intended for commercial distribution in the United States. 

## How Do You Know if You’re a Manufacturer?

- If you like selecting & managing subcontractors for a major house project...you might be a “manufacturer” - suppliers
- If you enjoy talking to your accountants and lawyers as much as your spouse or family...you might be a “manufacturer” – breadth of issues
- If you liked working retail over the years...you might be a “manufacturer” – dealing with customers/raising funding
- If you liked being in a band, on a sports team and being a leader...you might be a “manufacturer” – personnel management

## Contact Information

- _http://www.mep.nist.gov/_
- Tab Wilkins
- Account Manager & Senior Technology Advisor
- (301) 646-4069
- _twilkins@nist.gov_

**Notes:**
Thank you!