Outsourcing medical device manufacturing can dramatically lower the cost of operations and can play a central role in the product strategy for gaining a competitive advantage. The goal of course is in lowering prices without compromising on quality, on-time delivery, and other industry expectations. For many device designers, one of the biggest hurdles to outsourcing is finding the best geographic location for manufacturing.
The country you choose will impact everything from the cost of labor to the reliability of your supply chain and the quality of the manufacturing partners you can choose from.
This article provides an overview of the strategic considerations in choosing a new manufacturing location. We will also highlight some of the top countries for medical device low-cost outsourcing as per the industry status as of 2020.
Medical device designers have been hit particularly hard by the US’s recent trade spat with China. But the US-China trade war isn’t the only trade issue that manufacturers looking to outsource production need to worry about.
For example, device makers that work on US government contracts are required to abide by the Trade Agreement Act (TAA). That puts strict limitations on what products can be manufactured for the federal government in countries like China, India, and Indonesia, which are not TAA-compliant.
When a large medical device manufacturer seeks a new low-cost country to outsource manufacturing to, workforce considerations are an important factor to consider. These considerations include:
Ultimately, when transferring the production to a new less expensive country, the manufacturer should carefully consider the nature of the workforce. When comparing countries, we looked to understand the reason for the higher productivity coming from China’s facilities. A closer look revealed the answer in the characteristics that the workforce demonstrated; higher professionalism, discipline and commitment.
One of the biggest advantages for a large medical device company to outsource manufacturing to facilities in Mexico is cost savings. Mexico has a lower cost of labor compared to other developed countries, allowing companies to reduce their manufacturing expenses while still maintaining high quality standards. Additionally, Mexico offers tax incentives and other benefits to companies that invest in the country, further reducing the cost of operations.
Another advantage is the proximity to the US market. Mexico is located in close proximity to the United States, which is one of the largest medical device markets in the world. This allows companies to quickly and efficiently transport their products to the US market, reducing transportation costs and allowing them to respond more quickly to market demands. Furthermore, Mexico has a highly skilled workforce with a strong tradition in manufacturing, particularly in the medical device sector, providing companies with access to a pool of skilled workers and cutting-edge technology. This makes Mexico an attractive destination for companies looking to outsource their manufacturing operations.
The recent USMCA US-Mexico-Canada Agreement (USMCA), which replaces the North American Free Trade Agreement (NAFTA), offers greater market access and a more predictable trade environment for companies operating in North America, making it easier for medical device companies to do business in Mexico. The agreement also includes updated and strengthened provisions on intellectual property protection, which are particularly important for the medical device sector where innovative products and proprietary technology are key.
The USMCA is important for large medical device companies who are committed to ethical and sustainable manufacturing practices as it includes provisions on labor and environmental standards, which help to ensure that companies operating in Mexico maintain high levels of corporate responsibility.
The USMCA provides a framework for companies to operate in Mexico with confidence, knowing that their operations are supported by a strong and reliable trade agreement.
However, when examining the comparison of medical device outsourcing in Mexico vs China, the number of quality manufacturing partners in Mexico is still limited in comparison to the major manufacturing hubs in China.
Asian countries, and particularly China , have been the prime location for medical device production over the past several decades. Manufacturing in this region makes sense for several reasons.
Many countries in East Asia, including China, Thailand, Malaysia, and Indonesia, have excellent access to ports. That makes these countries’ manufacturing supply chains more robust when relying on imported materials. It also ensures that you can get your device to market on schedule.
Vietnam While Vietnam has very low-cost labor and is developing, small ports and a nascent supply chain make it less than ideal for medical device outsourcing.
Thailand Thailand’s domestic supply chain is also still developing, so it is generally best for low-complexity medical devices.
China Of countries in the Asia-Pacific MedTech market, China has the largest and most robust supply chain. This makes it the ideal destination for highly experienced contract manufacturers. For this reason alone, one might say that China remains the best option for low-cost medical device manufacturing. Even despite the trade war.
China’s Medical Device Manufacturing Regulations China has established clear regulations around medical device manufacturing, which can make it easier for designers to gain access to the massive Chinese medical market. Critically, China also has IP protection laws that are crucial to any Western medical company looking to outsource production overseas.
Choosing a country for outsourcing manufacturing for your medical device is a major decision. While many companies have looked for alternatives to China in the wake of the trade war, China is still the best option for low-cost manufacturing of complex medical devices. The country boasts a strong domestic supply chain and has a wealth of high-quality contract manufacturers. For less complex products, Thailand offers an attractive alternative.
If you’re considering low-cost outsourcing for your medical device, contact a Quasar expert today to discuss the best option for your device among our several manufacturing plants in China and Thailand.
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