MPO’s 2023 Medtech Supply Chain Survey

The supply chain for the medical device industry has been in flux ever since the onset of the COVID-19 pandemic. Global shortages of necessary components caused manufacturers and policymakers globally to panic. Supply chain disruptions impacted medical device development and manufacturing along with almost every industry that relies on a complex network of logistics to design, develop, and produce products for end-users.

To address the continued interest in medtech supply chain trends and issues, MPO conducted a survey to get an idea of what’s happening in the trenches of the medical device supply base.

In my opinion, the most illuminating data came from the survey response to the preference for specialized shops, full-service “one-stop shops,” or a mix of both. Over half (about 55%) of survey-takers responded that a mix of both types of suppliers was their ideal situation to source. When asked to elaborate, one respondent noted that “for medical device packaging, we prefer a one-stop-shop, but for component suppliers we are open to specialized shops.”

The types of components and services being farmed out to partnering organizations aren’t surprising. They run the gamut of precision and advanced manufacturing of complex components, as well as ancillary services that device manufacturers have neither the expertise or money to have within their walls.

Survey respondents listed complex machined components, electronics (specifically connectors, sensors, computer boards, lithium batteries), plastics, packaging components, raw materials, and drug delivery systems as their main products to seek outside help providing.

The main manufacturing services respondents are seeking out include injection molding, 3D printing, as well as other capabilities like assembly, sterilization, and coating services.

Similarly, manufacturing and ancillary services that firms are looking to source soon aren’t surprising and cover many of the same products and services. Components to be sourced included electronics like PCBs, wire and cable, sensors, flexible circuits, sub-assemblies, and valves. Many also cited raw materials as something they look to partnering firms for like plastics (largely polyethylene) and diagnostics reagent materials.

The manufacturing services they aim to outsource included injection molding, extrusion, forming, machining, laser welding, sterilization, passivation, and anodizing.

Despite this clear trend toward complex components and specialized services, over half (about 55%) of the respondents indicated that they weren’t planning to adjust the number of suppliers they partner with anytime soon. Thirty-four percent indicated that they aimed to either increase of reduce their supplier base.

Finances reigned supreme among survey-takers’ reasons for altering the supply base. The costs of dealing with multiple suppliers, the rise in cost of materials, and high unit price were among the chief reasons to do so.

Following closely behind was the simple need for efficiency: quality and less QA work, resource management, and risk mitigation came up several times. Apart from that, device makers look to alter their supply chain for supply base reduction and streamlining their supply chain, core technology acquisition and control, and diversification in their base. One respondent simply needed “to find the right fit for project volumes and cost.”

One respondent noted that “some vertical integration had made it possible to reduce suppliers, [because there] were redundancies of their services [that] would no longer be required.”

The main pain points in respondents’ supply base were undoubtedly lead times—almost a dozen respondents cited “long lead times” as their main source of frustration.

One in particular mentioned “delays and changing availability. Suppliers often quote prices and availability on one day, and when calling back the next day to place an order, availability and most often pricing has significantly changed. Reputable suppliers often quote different price and delivery only days apart.”

Among these challenges, some respondents specifically pointed to cost and delivery time and shipping point constraints as their main issues. Particularly, as one cited, “switchgear, PLCs, linear servo motors, electrical controls enclosures, and the materials that go inside them. These are impacting our delivery schedules the most.” Other problems encountered today included material availability and shortages, quality control, and supplier capacity.

Another issue that arose among the respondents was “finding the right fit for project volumes. As we do medical device development and contract manufacturing, we typically need small quantities during development, and much higher volumes in contract manufacturing. Cost/lead time [were problems] as well, as offshore suppliers typically compete better on cost, but add significant lead time.”

General concerns about the medical device industry, when polled, covered a broad range of issues. Some were general, like regulatory concerns and over-regulation, time-to-market, industry consolidation and “marginalization of smaller players,” lack of workers, political issues, and computer chip shortages. Cost of materials once again came up for several respondents.

Some of the respondents pointed to specific challenges that are likely experienced by many device makers. One even mentioned considering bringing manufacturing that was previously sourced in-house to mitigate the issue.

“The few remaining suppliers in China are particularly problematic, since what they supply is usually heavy and must come by ship to keep costs low,” they said. “We have moved 80% of past Chinese sources to the U.S. and will do so for the remainder if we can just find someone who makes what we need, or we’ll start making them ourselves, e.g., larger torroid transformers.”