Outsourcing Is Crucial for Success in Medtech & HealthcareOutsourcing Is Crucial for Success in Medtech & Healthcare
An industry expert shares why and how healthcare and medtech are turning to outsourcing, or "network optimization," to improve efficiency, reduce costs, and focus on innovation amid rising pressures and long product development timelines.
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At a Glance
- Rising costs and long product timelines push healthcare and medtech companies to improve operations through outsourcing.
- Outsourcing is expected to grow by $50.44 billion by 2028.
- Firms must carefully select outsourcing partners to meet strict regulatory standards while focusing on product development.
The healthcare sector is currently grappling with a myriad of challenges, primarily driven by escalating cost pressures across various areas of care. The lengthy timelines associated with bringing new medical devices and drugs to market—often spanning three to seven years for devices and an average of 12 years for drug approvals—underscore the urgent need for healthcare and medtech companies to enhance their operational efficiency without compromising on quality and reliability.
Having spent many years in leadership roles within healthcare organizations, I have consistently sought innovative strategies to mitigate risks and reinvest resources into product development. One of the most effective strategies I discovered was outsourcing to reliable partners. For large-scale business transformation, this is often referred to as “network optimization” in the healthcare industry. In my view, network optimization is not merely a tactical decision; it represents a paradigm shift in how healthcare and medtech companies can operate.
Outsourcing to transform business operations
Network optimization is an emerging trend in the healthcare industry, where companies are increasingly outsourcing various functions to refocus their resources on core business activities. When executed effectively, this approach allows organizations to revamp their operational frameworks, minimize risks, and concentrate on their primary competencies while simultaneously reducing capital expenditures.
A recent report from Technavio projects that the medical device manufacturing outsourcing market will expand by an impressive $50.44 billion from 2024 to 2028, with a compound annual growth rate (CAGR) of 10.9%. This growth indicates that many healthcare and medtech companies are recognizing the potential to rethink their manufacturing models. A well-structured outsourcing strategy can yield numerous advantages, including heightened efficiency, diminished supply chain risks, and the opportunity for in-house teams to focus on innovation and product development.
Leveraging expertise through outsourcing
In 2023, FDA approved a record number of novel medical technologies, intensifying competition among healthcare and medtech companies to deliver innovative solutions. Coupled with rising cost pressures and global supply chain uncertainties, organizations must find ways to allocate resources effectively to maintain their competitive edge.
By collaborating with specialized and trusted manufacturing partners, healthcare and medtech companies can tap into their partners' expertise in complex manufacturing processes and supply chain management. This collaboration allows organizations to redirect their internal resources toward core competencies, such as product innovation and development.
At Flex, we help customers optimize their entire product lifecycle while achieving sustainability goals. Our services range from ensuring product design manufacturability to efficient production scaling and reverse logistics. For example, we utilized advanced simulations to create a digital twin of a production line for a Class II diabetes product, which helped mitigate manufacturing risks and ensure continuity. Our extensive network of over 16,000 suppliers also enabled us to support a leading diagnostics company during the COVID-19 semiconductor shortages, ensuring they could deliver millions of sensors to patients in need.
Quality assurance in outsourcing
Despite recognizing the benefits of focusing on product innovation, many companies remain hesitant to outsource due to the stringent quality and regulatory requirements inherent in the healthcare industry. The Technavio report I mentioned earlier highlights that while outsourcing medical device production can provide access to cutting-edge technology and equipment, challenges persist, particularly regarding the high standards demanded by medical practitioners.
It is essential for companies to thoroughly evaluate potential manufacturing partners to ensure they can meet regulatory and quality standards confidently. Some manufacturing partners have decades of experience working with healthcare and medtech companies, which enables them to confidently comply with the rigorous standards for Class I, II, and III medical products.
Reimagining in-house manufacturing models
Transitioning from in-house manufacturing to outsourcing can seem daunting, even when the benefits are clear. Healthcare and medtech companies should first define their desired outcomes before crafting a strategy. Whether the goal is to move closer to end markets, consolidate multiple sites, or mitigate overall risk, there are various pathways to consider.
For instance, a company may choose to work with a manufacturing partner to consolidate their manufacturing sites into a single facility, therefore reducing duplicate processes and generating efficiencies that lead to cost savings and minimized risks.
Building strategic partnerships for future success
As the healthcare landscape continues to evolve, driven by technological advancements and an aging global population, companies must forge strategic partnerships with outsourcing providers. These collaborations can help organizations optimize their networks while gaining access to cross-industry expertise in the design, development, and manufacturing of medical products.
From my extensive experience in the healthcare sector, I have witnessed how companies can thrive by leveraging the capital assets and technological investments of their outsourcing partners. This approach allows them to focus on core innovations, respond more swiftly to market demands, and reduce risks. In an industry characterized by rapid change, it is crucial for healthcare organizations to continually reassess and reimagine their operational models to meet the evolving needs of providers and patients alike.
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