Insource versus Outsource for Medical Device Manufacturing?
Many companies make decisions in relation to the medical device product, service, technology or process that they either want to insource or outsource. The issue is not with the actual decision to use one or the other, the issue lies solely with the selection process and tools used to gather the information that is required to get to this decision.
Some companies take a very clear cut view, outsource all non-core business and insource all core business technologies. This sounds very simple, however I believe the use of the term “core business versus non-core business” can be misinterpreted and can mean something very different depending on the individual or teams who are receiving this directive.
Firstly the words “core business” needs to be replaced with core processes/technologies and the words “non-core business” needs to be replaced with peripheral process/technology inputs.
Many medical device manufacturers reviewing the requirements for their “core business” may conclude that all processes that are required to complete that product/service from beginning to end require insourcing. As a result there are numerous projects and several teams set up to achieve this directive. The reality is that one team most likely doesn’t communicate effectively with the other teams and in turn the apparent savings, yields, improvements etc. first estimated are being consumed by the investment of the required technology, shortage of in house knowledge & expertise and the additional resource constraints.
However, medical device manufacturers that focus on insourcing their core technologies/process and outsourcing all other peripheral technologies/processes tend to get a far better result. Real estate and revenue per square foot will be at a premium. In working with companies with expertise in the production and supply of the peripheral inputs required, the quality and supply of those products/services will improve. This helps companies to produce a product at the highest standard possible, gaining advantage above their competitors in the medical device industry.
By taking this approach it enables medical device manufacturers to invest in their main profit centre without distraction and by strategically positioning experts internally, corporations will experience greater innovation, increased growth, profitability and market share.
- Location? Do you need the potential partner to be in close proximity to your facility, does it really matter?
- Expertise and Flexibility: Can the potential partner supply in pilot and volume manufacturing mode to support future NPI? Can they adapt to change in requirements within a reasonable time frame?
- Business Model: Understand their long term growth strategy and vision, you need to know that your partnership has longevity, there is no point outsourcing to a potential competitor!
- Priority: Understand how important your project is to the medical device contract manufacturer, are you a small fish in a big pond and how is that likely to affect your goals and objectives?
- Costing: Yes, it has to be mentioned, cost is an important factor when medical device outsourcing. The key here is to ensure that you are comparing like for like. For example, some companies view freight and product cost as two separate cost entities within the corporation. In doing this, you may achieve an attractive piece price but you may end up paying extraordinary freight and taxes.