Explain strategic manufacturing management
Business and Management
Topic:strategic manufacturing management
Aurora Pty Ltd is a small producer of a proprietary implantable cardioversion – defibrillation
(ICD) device, the ‘ACCUTRON’. These are small devices implanted in the chest wall of patients
with serious and life threatening cardiac arrhythmias. The device consists of a small computer
with Wi-Fi, a pulse generator and a long life lithium battery encased in a titanium shell. It
monitors the patient’s ECG and analyses it for various arrhythmias. The Accutron can
differentially diagnose an arrhythmia and respond quite specifically to any abnormality by
delivering an appropriately modulated electric shock directly to the patient’s heart. The device
is programmed and checked wirelessly by the surgeon, general practitioner and patient with
equipment also designed and manufactured by Aurora.
There are other competing devices available, but the variety of approaches that once existed
has more or less settled down as competitors have merged or acquired each other and the ICD
format is now much the same (though the internal hardware and software varies). Other
manufacturers include Biotronik; Boston Scientific (formally Guidant); Medtronic; St Jude
Medical and Ela Medical.
Some of the core components – titanium, battery, cardioversion leads are made by a small
number of specialist companies and so are common across products. The companies
differentiate their products on the basis of size (particularly thickness) and implantation; ease
of programming; product life; the particulars of the cardioversion software and the extensive
service provided (which includes representatives advising surgeons in theatre).
The devices are almost entirely hand built under a microscope in a cleanroom environment.
Aurora has invested over USD650 million in its primary facility and workers spend 6 months in
training and development before they can assemble units unsupervised.
The design, testing and quality standards are all regulated by the Government device
regulatory agency and strict standards must be met. In the past there have been product
recalls, which have focused the entire industry on product safety. The most recent of these was
in April 2012, when Guidant recalled 73 000 ICDs and Cardiac Resynchronization Therapy
Defibrillators (CRT-Ds) worldwide.
Other cardioversion technologies are available, such as transcutaneous pacing and
antiarrhythmic drugs. Some patients prefer to take medication, whilst others prefer the
certainty of an implanted device. The patient’s costs for all therapeutic modalities are covered
to varying degrees by public and private insurance.
The choice of therapeutic approach depends on the patient’s characteristics as well as the
treating physician’s preferences. Preferences have changed over time, not only as the result of
the published clinical literature, but also due to changing culture towards technological
interventions such as the ICD. Where preferences have changed in the past, they can also
change in the future.
The ACCUTRON sells for an average price of $18 750 per unit, though this can vary
considerably since the major buyers are state tender bodies, who focus primarily on cost (by
comparison, physicians focus on features; company reputation and support services; and ease
of implantation). Aurora’s engineering group report that the per-unit manufacturing cost is
around $7 685.
Year 2013 2014 2015 2016 2017 (1Q)
Unit 3151 9540 12530 8260 5570
In 2016, Aurora experienced severe shortages of the microcontroller used in the ACCUTRON, when
a tsunami destroyed the Freescale production factory in Sendai in Japan. Aurora was totally reliant
on its relationship with the Freescale Company to maintain its production of the ACCUTRON, as
changes to a different microcontroller would have meant product design changes; reprogramming;
revalidation and possibly regulatory review of the new devices. As a result, 2016 sales were around
66% of forecast.