To outsource or not?

The medical device industry hit a whopping $521.2 billion in 2017 and is expected to reach $674.5 billion by 2022, which in the age of longer life expectancy and ever-increasing expenditure on healthcare, is welcome news for contract manufacturers. Each year brings further demands on OEMs for more superior medical device technologies, but each year also brings further introductions of stricter regulations especially in the US and Europe who hold the largest share of the market.

It’s all go

Outsourcing is no new phenomenon and the bartering of better prices under pressures to keep prices down goes as far back as the stone age. Now in this fast-developing climate filled with breakthroughs and demands for innovation, the industry is seeing a boom. However, breakthroughs and innovations have not been the only bang: The industry has seen explosive growth with process advancements in re-engineering and a further boom in aging population with the global population over 60 years or more now numbered at 962 million in 2017; a figure more than twice as large as in 1980. But in the race to keep up with technology and the faster growing older population, it’s not just the private sector trying to drive down their prices, governments worldwide are putting increasing pressure on medical device companies to make healthcare more affordable without sacrificing on research and development, timelines or safety. As a result, more medical device manufacturers are choosing to outsource.

Release your capital strength

Competent and experienced contract manufacturers offer not just cheaper prices but faster and often more technologically savvy and streamlined operations, freeing up OEMs to focus on product design and marketing and not be bogged down with the day to day mundane time-consuming processes which are also difficult to manage and control. The freeing up of internal resources strengthens medical device owners financially as funds are injected back into the company, releasing capital for investment elsewhere and allowing them to start new and exciting projects quickly to keep up with the game or venture into new fields. In the mergers and acquisition world, companies turning fixed costs into variable costs also make themselves an attractive purchase to potential investors.

Focus on your core competencies

When it comes to workforce, outsourcing mitigates the headache when there is insufficient resource to cope with the demand, or even worse the vice versa and what should be done when there is too much resource and not enough demand as staff sit idle and power is turned to off. We see more and more device owners recognizing and understanding the huge cost benefits in reducing the indirect overheads like quality assurance staff, equipment technicians, lab technicians and some stock and purchasing roles. These sometimes-difficult decisions are seeing some big rewards and promotions as more and more companies are following the trend of redirecting their focus to their core competencies and letting their third party manufacturer be the one who manages the flex in labor demands to cope alongside the peaks and troughs of production.

Asia and Eastern Europe – is it worth the risk?

Sourcing cheaper goods and taking advantage of lower labour costs by relocating operations to Asia and Eastern Europe was also a move we saw OEMs initially carry out themselves. Perhaps there was a reluctance to trust foreign external partners particularly with the constant rise in regulatory requirements and the potentially huge risk if the partner couldn’t or wouldn’t adhere to the changes. We’ve all heard horror stories of quality issues from most sectors of industry who put their trust in a foreign supplier only to have it broken with bans and product recalls, all this while going to press for the wrong reasons. This is another one of the many reasons why contract manufacturers such as SteriPack thrive in the constant rise of changes to regulatory requirements. With us doing our job of keeping our eye constantly on the ball, we remain one step ahead of our customers, foreseeing and advising upon any upcoming changes with so many years of experience to make changes quickly and efficiently. We are that outsource production model that if the Chief Executive had to pick up his or her plant and place it somewhere else in the world and seamlessly keep on with business as usual, then he or she would want to do it like we do: A company, building on successful beginnings in 1994 in Ireland, and since taking that success and rolling it out to Poland, Malaysia and the USA.

Quality and trust

The criticality to have trusted and effectively controlled supply and distribution networks in place and the ability to satisfy the quality assurance and regulatory standards with absolutely zero compromise on any aspects of product quality was what medical device companies thought was too tall an order to expect when outsourcing. In the early days of outsourcing this was maybe a miracle to expect. But for experienced contract manufacturers like SteriPack these are part of our core competencies. It’s what we do and what our current customers trust us to do and one of the many reasons why we know that, to outsource is the right solution. We usually advise customers thinking of outsourcing to have a strategy or a set of criteria in place. We believe that a good sign of a competent outsource partner is one who assists to develop that strategy and get it perfect. One who reviews your quality plans and closes the compliance gaps.  A good outsource partner will improve and streamline all your processes and procedures and spend time to get your plan right, they will establish document controls and perform mock audits well before the green light.

In summary there are so many positive reasons to outsource and the positive factors usually always outweigh the decision to keep processes inhouse. 

So, to outsource or not to outsource? We hope this is not still a question.