Cost
cutting pressures, accelerating time-to-market and
focus on core competencies will drive original
equipment manufacturers to outsource their
manufacturing.
Globally, the growth of the medical device contract
manufacturing market during 2014 - 2024 is expected to
be driven by the growth of the medical device
industry, reimbursement challenges and demand from
emerging markets of the Asia-Pacific and Central and
South America.
Companies are rapidly adopting the use of contract
manufacturers as a strategic plan to stay ahead in an
intensely competitive market space. Although
traditional markets such as the US currently dominate
the contract manufacturing market, there is increasing
movement of facilities to lower cost regions. In order
to take advantage of this fast growing sector,
contract manufacturers need to satisfy their customers
that they can overcome intellectual proprietary
concerns, adhere to stringent quality standards and
offer excellent services.
Impact on the smaller contract manufacturing companies
The
market comprises of a large number of small contract
manufacturing companies with relatively fewer large
clients.
The
activity will grow targeting the expanding markets in
Asia Pacific and Central and South America.
By
outsourcing manufacturing, device manufacturers will
be able to adapt to any strong increases in demand for
their products; a more flexible strategy for companies
seeking to enter new markets especially by targeting
Asian markets.
Contract manufacturers will have to implement
stringent quality standards and offer added-value
services which would convince a move towards increased
outsourcing in the medical device sector.
China
and India are becoming increasingly important
outsourcing destinations for manufacturing mainly as a
result of the opportunities presented by their
respective domestic economies, the highly educated
workforce in association with competitively low
prices.
A
recent study estimates that outsourced contract
manufacturing ultimately allows original equipment
manufacturers (OEMs) to reduce their manufacturing
costs by an average of 10-30%.
Focus On Innovation
Under
more pressure from the market to develop products that
offer real value rather than incremental benefit,
medical device OEMs are refocusing on innovation and
demanding more from their contract partners. |
Changing dynamics in the healthcare markets due to the
Affordable Care Act in the United States and austerity
measures in Europe are likely playing into that
growth, and medical device companies are under more
pressure than ever to develop products that offer real
value and not just incremental benefit. As a result,
OEMs are concentrating more and more on their core
capabilities.
Other Important Considerations
-
Companies are focusing
on designing new and improved medical devices, not
on the manufacture of those devices.
- As OEMs are doubling down on innovation, they’re
asking more of their contract partners.
Increasingly, device makers are farming out
everything from front-end design to back-end
services including warehousing, distribution, and
regulatory
assistance.
-
Overall trend is for
more OEMs looking for contract manufacturers to
provide more value
- Medical device customers are seeking help with
everything from engineering and design assistance to
subassemblies and finished device manufacturing, as
well as asking the company to work directly with
other contractors that provide services such as
sterilization.
According to the Millennium Research Group report,
“overall trends in the medical device outsourcing
space indicate that [contract manufacturers] are
broadening their range of services, growing
organically or through acquisition to become one-stopshop
manufacturers.” OEMs want fewer suppliers that they
have to visit and audit.
Key
Factors For Global Outsourcing Success By Medtech
Executives.
Global
outsourcing is not a panacea, but it can help sales
and marketing support organizations do more with less.
Properly structured global outsourcing programs can
result in lower costs and greater flexibility and
innovation. But this requires a structured,
step-by-step approach. Medtech executives considering
global outsourcing need to have the proper mindset
before embarking on a program. They need to reconsider
any preconceived notions about outsourcing, shunting a
blanket approach in which everything is outsourced in
favor of a selective, discriminating view in which
only certain processes are outsourced.
Medical
Device Companies’ sales and marketing operations can
be more flexible and innovative than before and costs
can be kept low. An effective global outsourcing
initiative has several key factors, including the
following :
-
Selecting the right
business processes to outsource and defining success
clearly.
-
Choosing the right
operating model, recognizing that a onesize-fits-all
model will not serve different support functions.
-
Picking partners that
are aligned with the overall scope and objectives of
the project.
-
Establishing an
appropriate performance management and tracking
process, embodied in service-level agreements (SLAs).
-
Developing a workable
transition process.
What
To Consider When Partnering With A Contact
Manufacturer?
Medical
Device Contact Manufacturing Agreement defines the
foundation of business partnership objectives. It is
important that both parties take ownership within this
process to ensure their roles and responsibilities are
directly linked to service level requirements and that
the teams participate in on-going review meetings to
support the joint effort to produce the outcomes.
The
broad components of the process of determining how a
potential outsourcing partnership with a FDA
registered contract manufacturer can result in a long
lasting relationship are :
Potential Obstacles for
Successful Contract Manufacturer Partnerships could be
:
-
Poor “cultural fit”
between the OEM and the CM
-
Outsourcing of designs
not ready for manufacturing, resulting in
inefficient production yields
-
Poor Quality
-
Inaccurate forecasting
and lead-time obstacles
-
Poor communication,
incommensurate goal setting, or infrequent business
reviews
-
Insufficient investment
in people & time to manage outsourcing
-
Inadequate “partnering
effort” for either party can create manufacturing
transfer problems
-
Lack of internal buy-in
support from OEM’s cross functional organization
Outsourcing the production
of a medical device is a complex and difficult
process, which requires due-diligence and development
support by both partners. |