For example, I was at a conference recently in Washington, DC. To my left was a woman from a cardiovascular device company in California. To my right was a gentleman from a midsize device manufacturer in the Midwest. As we chatted during lunch while waiting for the keynote speaker to begin, the executive from the West Coast and I discussed outsourcing—a.k.a. contract manufacturing. Though her company does much of its manufacturing in-house, it also partners with firms (one in Massachusetts and another in her home state) that manufacture components in addition to performing assembly and packaging. “We’d never have been able to get this far without it,” she said at one point.
Soon after, I turned to my right to give the gentleman my card. He quickly remarked: “Outsourcing? We keep all our manufacturing in the United States. We have no use for it.” Slightly surprised, I explained that “Outsourcing” in Medical Product Outsourcing refers to the relationships between contract manufacturing firms—mostly domestic—and OEMs of all sizes. It doesn’t mean the same thing as offshoring manufacturing to a foreign country, I explained, though many companies—contract manufacturers and OEMs alike—have operations overseas. He didn’t seem convinced. I handed him a copy of MPO and invited him to read it. I don’t know how persuasive I was, but the conversation certainly made me think.
To many people, outsourcing has a negative connotation. The word conjures images of call centers in India (the perception that they put US workers on unemployment) or ultra-cheap labor south of the border or in Asia (which some believe leads to inferior or flawed products). The problems with food and other products being imported from China this summer certainly didn’t help that perception.
In August, the FDA announced that it was evaluating whether 300 agency jobs could be done cheaper and more efficiently by the private sector. According to the Associated Press, the initial list of outsourced positions included lab technicians and field office workers working at facilities where food and medical products are inspected for safety (though the FDA has since revised the list, saying the positions are administrative and not actual inspectors). Two Democrats in the US House of Representatives—Michigan Reps. John Dingell and Bart Stupak—moved quickly to investigate the FDA’s plan. “It is truly incomprehensible why the agency would again consider reducing the expertise and institutional knowledge of the FDA at a time when FDA’s credibility with the American people is at an all-time low,” they wrote in a letter to the agency.
Whether this would be a good or bad idea certainly is open for debate. The point is that, depending on whom you ask and the context in which it is being discussed, the word outsourcing can take on many different meanings. In the world of medical device manufacturing, I think the meaning is a lot less … well … sinister.
As Stacey Bell reports in this issue’s feature examining the evolution of outsourcing, more companies see it as providing a competitive edge in launching products more quickly (and possibly with more features). It also frees internal resources to focus on new business and sources of revenue. In a recent MPO survey of more than 100 medical device companies, more than 56% of respondents said outsourcing is “very important” or “essential” to their strategic growth and profitability.
“We see outsourcing as an integral part of our business. Over time, the process has evolved from our managing every step the outsourcing company takes to defining projects in the most basic fashion and letting the contract manufacturer determine product specifications and run the project completely. By outsourcing in this way, we’ve been able to launch one of our latest projects in half the time it normally would have taken, and the project ran spectacularly well,” said one OEM executive quoted in the article (see page 68).
What does outsourcing mean to you? We encourage debate and always welcome your comments. E-mail and share your outsourcing story—good or bad (though we hope it’s positive). Maybe we could even do lunch at a conference near you.