One of the major trends currently in the medical device industry is the increase in medical device outsourcing. Globally, the outsourcing market is forecasted to grow 11.5% over the next seven year period, while the U.S. market is steadily growing at 1.5% annually. The reason a medical OEM would choose to have their production carried out overseas, instead of close to home in the US, is very straightforward: cost cutting. By outsourcing their devices’ production offshore, to where the factories can offer lower total costs, these OEMs accomplish their cost cutting goals.
New taxes and regulations, eroding price margins and the pressure on shorter production cycles have also made outsourcing offshore quite an enticing option. A new industry tax was introduced as part of the Affordable Care Act in 2013 and came into effect recently, on Jan. 1, 2018. In addition to hospitals having tighter budgets, faster production cycles, and other regulations that are already pushing medical device manufacturers to further squeeze their profit margins, the medical device excise tax forced medical OEMs to cut even more costs in order to stay competitive.
Every company looks for advantages over their competitors who are trying to appeal to the same group of consumers as they are. Just like these medical OEMs, their consumers are also making their purchasing choices based on price as long as the quality still meets all of their standards.
Since consumer choice dictates the direction of the market, and they want less expensive products, so too the medical device OEMs need less expensive quality products.
OEMs faced with this cost dilemma, even after staff cutbacks and reduced R&D spending, often find their answer in offshore contract manufacturing.
Once they shift their production offshore, the question becomes how to choose the right contract manufacturing partner. It’s a strategic decision as important as choosing to outsource rather than produce in-house. With a massive and still growing contract manufacturing industry, making the right choice becomes harder and harder. It only makes sense for medical device manufacturers to choose to work with contract manufacturers who can offer low shipping costs, or, like Sanbor Medical, those that include ocean shipping as part of their service. Our customers only have to worry about picking up their finished device from our California warehouse. (Some choose instead to air ship their products directly to their business.) When we quote our customers, we include even the soft costs in the manufacturing process so they know exactly what they will be paying for. (Our blog on consolidation has a handy chart to help you visualize this.)
Another consideration medical OEMs have is what some refer to as “Asia Fatigue”. Many offshoring companies did not consider the time difference between the overseas factory and the US time zones when they decided to go offshore. We at Sanbor Medical made it our priority to eliminate this issue for our clients by having a fully functional headquarters in the US. We work at the same time as our clients and speak the same language as them thereby completely eliminating the 12-hour time difference and language barrier. Sanbor Medical’s service and staff are available whenever you need them.
In our last blog we addressed that Sanbor Medical possesses an FDA registered, QSR compliant manufacturing space with a clean room and all of the credentials an offshore factory can offer to make sure the finished products shipped to the US adhere to all quality and regulatory standards.
With such high demand for outsourcing coming from countless medical device OEMs in need of competitive prices, there exists many offshore factories trying to offer their low prices with quality devices. When choosing the right strategic partner as your contract manufacturer, price is only one factor to consider. Sanbor Medical has over 17 years of experience in this field, has all the qualifying certifications, and has a US Headquarters to provide timely service. These are qualities that are very rare to find consolidated into one single contract medical device manufacturer. ***** Added note: Sanbor Medical added a U.S. manufacturing facility to its global footprint in 2021.
If our expertise has piqued your interest, please contact us either through the form below or directly through email or phone at sales@sanbormedical.com or 484-664-2673.
