Louis Columbus, Enterprise Software Strategist06.05.23
More medical product manufacturers are reshoring and nearshoring to strengthen their competitive position by improving time-to-market, speeding customer response times, facilitating regulatory compliance, and increasing visibility across their supply chains. In fact, the global market for medical device outsourcing will reach $162.5 billion by 2027, and the contract manufacturing segment alone will grow to $82.6 billion during this time period, ResearchAndMarkets predicts.
In many cases, the price for achieving these strategic gains is paying the higher wages of skilled workers in local markets. However, medical product manufacturers can offset these investments by reducing transportation expenses and cutting costs related to production and other operational processes.
Let’s look at some of the drivers that are leading manufacturers in the medical industry to adopt reshoring and nearshoring, along with five strategies for using automation to cut the cost of implementing these approaches.
A key factor in nearshoring and reshoring is the need to comply with a diverse range of regulatory requirements from the US Food and Drug Administration (FDA) and European Medicines Agency, among others. By reshoring or nearshoring to serve customers in these regions, medical product manufacturers can more easily engage in real-time communication, collaboration, and control over operations to support local and regional government mandates.
Additional considerations in reshoring and nearshoring mirror those of other industries, most notably a lack of visibility and stability across critical supply chains. A case in point is a medical product manufacturer headquartered in the US Midwest. The CEO there explained that she and her board moved production back to the United States in order to address supply chain delays, as well as gain better visibility and shipment accuracy.
Finally, cost containment remains an important driver, from avoiding international tariffs to controlling shipping and logistics costs. In the past, labor savings in Asian manufacturing centers balanced out these expenses. However, as wages in these markets have gained near-parity with Mexico, Canada and even some US locations, nearshoring and reshoring have become more affordable strategies.
1. Optimize Inventory Management
Real-time shop floor data is helping medical product manufacturers optimize inventory management. Here data is captured from smart machines and sensors and then shared with both the company’s manufacturing execution system (MES) and the inventory management software.
The accurate, real-time, inventory counts enable manufacturers to adjust their sourcing and production strategies to reduce inventory overhead while ensuring they can meet customers’ deadlines. The insights also help companies track and validate each step of a medical device or products’ path from the sourcing of products to customer delivery, facilitating regulatory compliance.
2. Run Lights-Out or Near-Lights-Out Operations
Manufacturers can add production runs without increasing staff by using automated processes to run lights-out or near-lights-out operations. For example, Eldon James Corporation is a Colorado-based manufacturer of medical tubing and connection solutions that uses a combination of real-time production monitoring, MES, and enterprise resource planning (ERP) software to support its lights-out manufacturing.
Real-time production monitoring software provides data that helps to drive the MES and ERP solutions; it also alerts manufacturers to any potential issues, so they can be addressed before becoming problems. Armed with both real-time and historical data, the MES software automatically plans, tracks, and manages production, while the ERP system automates inventory supply chain management to ensure the right level of materials and components are in place to support on-time delivery.
3. Increase Worker productivity and Consistency
Work center dashboards connected to the ERP system improve efficiency and consistency by giving operators the information they need for their tasks—and no more. So, these employees can get to work faster while applying best practices rather than having to wade through unnecessary data. When linked to real-time production and process monitoring software, work center dashboards can also help operators quickly identify and fix issues further boosting productivity and consistency.
A case in point is Comar, a medical industry contract manufacturer with multiple operations across the US (including Puerto Rico) and Ireland. Production managers at the company have dashboards that are auto-refreshed every 15 minutes with real-time data from their quality management, ERP, MES, and real-time process and product monitoring software, so they can fine-tune production efficiency and quality in real time.
4. Automatically Adjust Customer Pricing
The rapidly fluctuating costs of raw materials mean medical product manufacturers risk either eroding their margins or competitiveness if they cannot quickly and dynamically adjust their customer pricing. An ERP system that receives automated updates of raw material cost data in real time can automatically adjust customer pricing to align with these costs, helping to ensure competitiveness and profitability. Additionally, as one manufacturer found, it can also reduce employees’ workloads. In the past, updating individualized pricing for customers manually would take up to 40 hours; now the automated process is typically completed within 2 hours.
5. Strengthen Collaboration Across the Supply Chain
Whether companies directly sell to end-customers, act as contract manufacturers, or serve as suppliers, businesses in the medical industry need to collaborate to ensure that product deliveries are on time and meet customer requirements. With supply chain integration across platforms and applications, manufacturers can obtain continual updates on product quality at the network and individual supplier/contract manufacturer level to facilitate operational efficiency and greater knowledge sharing. Real-time data in combination with technologies, such as ERP, supply chain management (SCM), customer relationship management (CRM), and analytics can help medical product manufacturers and their partners orchestrate efforts to adapt to changes in demand in real time—without impacting quality levels
To offset these labor costs, companies need to automate more of their processes. Doing so, not only reduces demands on workers; it also serves to boost productivity, optimize quality practices, and gain the agility to capitalize on the rapidly evolving market for medical devices and products.
Louis Columbus is currently serving as principal of DELMIAWorks. Previous positions include product management at Ingram Cloud, product marketing at iBASEt, Plex Systems, senior analyst at AMR Research (now Gartner), marketing and business development at Cincom Systems, Ingram Micro, a SaaS start-up and at hardware companies. He’s also a member of the Enterprise Irregulars. Professional experience includes marketing, product management, sales and industry analyst roles in the enterprise software and IT industries. Columbus’ academic background includes an MBA from Pepperdine University and completion of the Strategic Marketing Management and Digital Marketing Programs at the Stanford University Graduate School of Business. He teaches MBA courses in international business, global competitive strategies, international market research, and capstone courses in strategic planning and market research. Columbus has taught at California State University, Fullerton: University of California, Irvine; Marymount University, and Webster University. You can reach him on Twitter at @LouisColumbus.
In many cases, the price for achieving these strategic gains is paying the higher wages of skilled workers in local markets. However, medical product manufacturers can offset these investments by reducing transportation expenses and cutting costs related to production and other operational processes.
Let’s look at some of the drivers that are leading manufacturers in the medical industry to adopt reshoring and nearshoring, along with five strategies for using automation to cut the cost of implementing these approaches.
Reshoring and Nearshoring Key Drivers
Compared to manufacturers in other industries, those producing medical products are more inclined to adopt reshoring and nearshoring strategies. For example, despite seeing a healthy compound annual growth rate (CAGR) of 9.1% from 2020-2027, the medical device outsourcing market for China will still be less than half the size of the US market, according to ResearchAndMarkets.A key factor in nearshoring and reshoring is the need to comply with a diverse range of regulatory requirements from the US Food and Drug Administration (FDA) and European Medicines Agency, among others. By reshoring or nearshoring to serve customers in these regions, medical product manufacturers can more easily engage in real-time communication, collaboration, and control over operations to support local and regional government mandates.
Additional considerations in reshoring and nearshoring mirror those of other industries, most notably a lack of visibility and stability across critical supply chains. A case in point is a medical product manufacturer headquartered in the US Midwest. The CEO there explained that she and her board moved production back to the United States in order to address supply chain delays, as well as gain better visibility and shipment accuracy.
Finally, cost containment remains an important driver, from avoiding international tariffs to controlling shipping and logistics costs. In the past, labor savings in Asian manufacturing centers balanced out these expenses. However, as wages in these markets have gained near-parity with Mexico, Canada and even some US locations, nearshoring and reshoring have become more affordable strategies.
Five Ways to Reduce Costs Using Automation
While medical product manufacturers have comparatively little control over wages, automation is helping to mitigate labor costs by lowering staff requirements and improving operational efficiency. Following are five of the most effective ways that manufacturing take advantage of automation to lower overhead, increase productivity, and gain greater agility in adapting to demand while maintaining high-quality standards.
1. Optimize Inventory Management
Real-time shop floor data is helping medical product manufacturers optimize inventory management. Here data is captured from smart machines and sensors and then shared with both the company’s manufacturing execution system (MES) and the inventory management software.The accurate, real-time, inventory counts enable manufacturers to adjust their sourcing and production strategies to reduce inventory overhead while ensuring they can meet customers’ deadlines. The insights also help companies track and validate each step of a medical device or products’ path from the sourcing of products to customer delivery, facilitating regulatory compliance.
2. Run Lights-Out or Near-Lights-Out Operations
Manufacturers can add production runs without increasing staff by using automated processes to run lights-out or near-lights-out operations. For example, Eldon James Corporation is a Colorado-based manufacturer of medical tubing and connection solutions that uses a combination of real-time production monitoring, MES, and enterprise resource planning (ERP) software to support its lights-out manufacturing.Real-time production monitoring software provides data that helps to drive the MES and ERP solutions; it also alerts manufacturers to any potential issues, so they can be addressed before becoming problems. Armed with both real-time and historical data, the MES software automatically plans, tracks, and manages production, while the ERP system automates inventory supply chain management to ensure the right level of materials and components are in place to support on-time delivery.
3. Increase Worker productivity and Consistency
Work center dashboards connected to the ERP system improve efficiency and consistency by giving operators the information they need for their tasks—and no more. So, these employees can get to work faster while applying best practices rather than having to wade through unnecessary data. When linked to real-time production and process monitoring software, work center dashboards can also help operators quickly identify and fix issues further boosting productivity and consistency.A case in point is Comar, a medical industry contract manufacturer with multiple operations across the US (including Puerto Rico) and Ireland. Production managers at the company have dashboards that are auto-refreshed every 15 minutes with real-time data from their quality management, ERP, MES, and real-time process and product monitoring software, so they can fine-tune production efficiency and quality in real time.
4. Automatically Adjust Customer Pricing
The rapidly fluctuating costs of raw materials mean medical product manufacturers risk either eroding their margins or competitiveness if they cannot quickly and dynamically adjust their customer pricing. An ERP system that receives automated updates of raw material cost data in real time can automatically adjust customer pricing to align with these costs, helping to ensure competitiveness and profitability. Additionally, as one manufacturer found, it can also reduce employees’ workloads. In the past, updating individualized pricing for customers manually would take up to 40 hours; now the automated process is typically completed within 2 hours.
5. Strengthen Collaboration Across the Supply Chain
Whether companies directly sell to end-customers, act as contract manufacturers, or serve as suppliers, businesses in the medical industry need to collaborate to ensure that product deliveries are on time and meet customer requirements. With supply chain integration across platforms and applications, manufacturers can obtain continual updates on product quality at the network and individual supplier/contract manufacturer level to facilitate operational efficiency and greater knowledge sharing. Real-time data in combination with technologies, such as ERP, supply chain management (SCM), customer relationship management (CRM), and analytics can help medical product manufacturers and their partners orchestrate efforts to adapt to changes in demand in real time—without impacting quality levelsConclusion
A growing number of medical product manufacturers are reshoring and nearshoring to improve their competitiveness by gaining control over production, accelerating time-to-market and customer response, and improving supply chain visibility—all while lowering lower transportation and operational costs. Yet, for many manufacturers relying on locally or regionally based operations, wages for skilled workers can cut into the profit margins.To offset these labor costs, companies need to automate more of their processes. Doing so, not only reduces demands on workers; it also serves to boost productivity, optimize quality practices, and gain the agility to capitalize on the rapidly evolving market for medical devices and products.
Louis Columbus is currently serving as principal of DELMIAWorks. Previous positions include product management at Ingram Cloud, product marketing at iBASEt, Plex Systems, senior analyst at AMR Research (now Gartner), marketing and business development at Cincom Systems, Ingram Micro, a SaaS start-up and at hardware companies. He’s also a member of the Enterprise Irregulars. Professional experience includes marketing, product management, sales and industry analyst roles in the enterprise software and IT industries. Columbus’ academic background includes an MBA from Pepperdine University and completion of the Strategic Marketing Management and Digital Marketing Programs at the Stanford University Graduate School of Business. He teaches MBA courses in international business, global competitive strategies, international market research, and capstone courses in strategic planning and market research. Columbus has taught at California State University, Fullerton: University of California, Irvine; Marymount University, and Webster University. You can reach him on Twitter at @LouisColumbus.