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One thing is becoming clear: Onshoring is smart business.
August 4, 2014
5 Min Read
By Noreen King
Like many U.S.-based contract manufacturers, I have been a big proponent of onshoring manufacturing for over a decade.
And it’s easy to see why. When you consider the quality and communication challenges, increased time to market, rising wages in China, the increased cost of shipping, and political and environmental factors, one thing becomes clear: Onshoring is smart business.
Over the past few years, we’ve witnessed manufacturing’s slow but steady transition back to U.S. shores. There are many reasons for this shift, but data show that supply chains have played a significant role in this change. In fact, according to a February 2012 article in Bloomberg Businessweek, as companies have gotten better at reducing inventory and adopting just-in-time delivery, supply chains stretching around the world have started to look like liabilities. To limit these liabilities, an estimated 20% of Asia-sourced finished goods and assemblies consumed in the United States are expected to shift to the Americas in 2014 alone, according to a 2011 report by information technology research and advisory firm Gartner.
For medical device companies looking to capitalize on the reshoring trend, now is the time to step back and evaluate and address any potential weaknesses that may limit their ability to thrive and remain competitive in this growing marketplace.
While specific weaknesses within an organization vary from company to company, a number of challenges are common to most U.S.-based medical device manufacturers as they strive to bring production back to the United States. These challenges are rooted in scaling up to increase productivity, cultivating strong supply chain relationships, and tapping into the expertise of those who have successfully managed to do both.
Challenge No. 1: Go big. When my company first opened its doors in 1999, offshoring wasn’t a threat; it was a reality. To build a profitable, sustainable business, we specialized in higher complexity, lower volume manufacturing. Although that strategy served us well through several economic recessions, we have since made the shift to include high-volume manufacturing to our portfolio of services. Particular focus has been placed on miniaturization and the manufacturing of wearable technology, which has challenged us to scale operations so that we can now turn out tens of thousands of miniature components on a daily basis.
In your own business, where do your current manufacturing capabilities stand? And are your processes designed to ramp up without impacting quality? Once a liability for many U.S.-based medical manufacturers, thinking big now presents a host of opportunities. Find a way to make the most of these opportunities, and you’ll profit as a result.
Challenge No. 2: Build—and maintain—strong supply chain relationships. As mentioned earlier, I suspect that weak or ineffective global supply chains contribute in no small part to the current trend toward reshoring. That’s good news for contract manufacturers here in the United States, but it also poses its own set of challenges. When it comes down to it, a company’s ability to deliver is intricately tied to the performance of its suppliers, all the way down the chain. The goal, then, is to build and maintain strong supplier relationships with the help of an alliance management program. I’ve found there are three ways to do this:
Partner with key suppliers and train them, then establish problem-resolution protocols that keep things moving—even when the unexpected occurs.
Take steps to ensure that communication throughout the supply chain remains strong by staying close to your suppliers, keeping them informed and treating like the powerful allies that they are.
Implement—and enforce—shared systems for continuous performance measurement and improvement.
Remember that at the heart of every successful supply chain are the people, relationships, and strong business process cooperation that make that success possible. In establishing and maintaining an alliance management program with key suppliers, you’ll maximize your supply base’s talent and reap the rewards as a result.
Challenge No. 3: Tap into others’ expertise. All this talk of scaling up and building strong supply chains amounts to nothing if you don’t have the vision and practical know-how to retool your business systems for the next iteration. That’s why it’s crucial that you partner with someone who can guide your business through its next stages of growth. When Evolve began to make the shift from low- to high-volume output, we tapped into the expertise of Ydatum Operations Management engineering president Olivier LaRue. An industry veteran with more than 25 years of experience helping teams design and implement industrial engineering and managerial business solutions (his client list includes Toyota, Takata, Motorola, Nike, Merck & Co., and Genentech/Roche, just to name a few), LaRue has been instrumental in helping us to streamline processes and eliminate waste so that tasks that now take minutes to perform will one day soon be done in a matter of seconds. Your company stands to gain in a similar way from the fresh perspective an expert can provide.
As U.S.-based medical device manufacturers rise to the occasion to absorb production demands that reshoring will bring, I believe that those companies that possess a strong manufacturing base, solid vendor relationships, and the expertise needed to scale up productivity will have the competitive advantage. To be certain, this will require an investment of time and financial resources, but from my perspective, the payoff promises to be well worth it.
Noreen King is the founder, president, and CEO of Silicon Valley-based Evolve Manufacturing Technologies, an onshore contract manufacturer for the medical, biotech, defense, and semiconductor industries.
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