Ralph Tricomi, director, market development, Web Industries, shares three ways a contract manufacturing organisation (CMO) can help medical device businesses expand internationally despite supply chain challenges.
From Brexit to Omicron, medical device original equipment manufacturers (OEM) are always adapting to uncertainty. Who would have thought that first quarter 2022 would bring blockages at the Canadian border, continued ports congestion, truck driver shortages and escalating container costs? For U.K.- and Ireland-based OEMs, these are just a few challenges associated with entering the North American market.
But the potential spoils make it worth the effort to consider international American expansion. The U.S. medical device market alone is the world’s largest, with 40% of global market share, according to SelectUSA, and it’s projected to grow to $208 billion by 2023.
The opportunity to expand across the Atlantic is sizeable. Some OEMs choose to engage CMOs to expedite and ease the entry process. A Grand View Research study found that “the U.S. medical device outsourcing market size was valued at $21.8 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 10.3% from 2021 to 2028.” Contract manufacturing made up 55.5% of overall outsourcing in 2020. This data suggests many device OEMs are prioritising outsourced manufacturing. Here are three answers why.
1. Collaborative innovation
Medical device OEMs benefit when they can focus on core competencies and outsource other processes to contract manufacturing partners. It’s increasingly common for brand owners to devote attention to design, development and marketing while delegating other processes to third parties, trends, and product innovation.
When they use CMOs, medical device makers can direct their resources to product design, development, patient care, healthcare provider expectations and demand trends while assigning manufacturing details to a CMO partner.
OEM-CMO collaboration is made seamless these days by enhanced business-to-business digital communication. Companies can establish secure virtual connectivity for sharing and collaborating on designs, project plans and production forecasts. In-person visits and on-site inspections still are important but boots on the ground are not necessary to keep information flowing and projects moving forward around-the-clock.
2. Supply security and predictability
Since the pandemic’s onset, one of the greatest issues facing OEMs has been supply chain uncertainty. Partnering with a nearshore or onshore CMO close to the target market eases materials inventory management, supply chain predictability and securitisation.
Stretched global supply chains are vulnerable to delays, capacity constraints, ports congestion and supply shortages. In 2021, approximately 8,000 to 12,000 containers of medical supplies were delayed an average of 37 days by U.S. transportation congestion at ports, on railroads and with trucking, according to research by the Health Industry Distributors Association.
By outsourcing to a North America-based CMO, OEMs simplify raw materials and components sourcing. They rely on their contract manufacturing partner’s supply chain knowledge and relationships. The CMO connects the dots to match vetted suppliers with the bill of materials and can manage raw materials inventory.
In addition, OEMs who outsource to an established CMO partner will have a skilled workforce, already in position. This factor is important amid a competitive labour market.
3. Speed and scale
Speed to market matters. The ability to manufacture and distribute — at mass scale — within the target launch window plays a significant role in whether a device is a commercial success. Unfortunately, there have been COVID-19 diagnostic tests and other solutions that never made it to market because of supply chain challenges or regulatory issues. While these risks can impede any organisation, they are intensified for international OEMs trying to expand in the U.S. market. Hurdles might have been avoided or overcome if they had the right partners to help them build their North American business.
A full-service CMO collaborates with an OEM to take a device from late-stage product development to mass-scale commercialisation, including these stages:
- Feasibility Evaluation
- Project Definition and Planning
- Technical Transfer, Process Verification and Validation
- Commercial Production
For U.K.- and Ireland-based OEMs looking to expand internationally, a CMO partnership offers a rapid means of accessing new geographic markets without extensive capital expenditure and time to stand up new factories or convert facilities into medical-grade operations.
With strong medical device industry growth, it’s an ideal time to consider international expansion, particularly in the United States. There are headwinds, including global supply chain shortages and delays. With the right CMO relationship close to market, device OEMs will have a trusted partner to help surmount the difficulties, seize on new opportunities, and share their innovations with more customers.
CMO Capabilities Checklist
- Facilities certification and standards compliance: ISO 13485, Current Good Manufacturing Practices (CGMP), ISO 9001, ISO 14001, and in U.S., designation as U.S. Food and Drug Administration (FDA) Registered Medical Device Establishment.
- Systems integration and security: Connectivity via ERP, CAD/CAM, EDI and other technologies, with rigorous security standards and protocols.
- Automation: High-speed, continuous manufacturing and packaging lines.
- Tech transfer: A proven process for transferring an OEM’s solution from small batches to mass production.
- Experienced team with industry expertise.
- Positive references.
- Ample clean room manufacturing capacity.
- Openness to site visits and inspections.
- Compatible corporate culture.
- Strong supply chain relationships.
- Financial stability.
