The KPMG’s China Economic Monitor is a publication of an extensive quarterly report. For the purpose of this article, we reference the stats showing China’s successful recovery in manufacturing production in comparison to the significantly slow recovery around the world
China’s overall economic recovery in part has been attributed to the strong rebound in the manufacturing sector. The medical device manufacturing sector specifically, recorded an astounding 46.4% growth.
In this article, we layout six factors that we believe to be the primary drivers of these statistics.
Despite living in the age of automation, labor still remains one of the larger costs of manufacturing. Manufacturing companies in the west have to deal with worker’s unions, paying high wages, as well as inflexible staffing that cannot readily scale and resize as fluctuating production output needs may require. On the other hand, achieving this level of flexibility is easier for Chinese manufacturers, due to China’s readily available, efficient workforce. This used to be -and in many cases still is- the primary reason for companies to outsource their manufacturing activities in China.
Manufacturing in China can bring down overall production costs significantly and a large part of those savings is due to the efficiency of Chinese labor. Chinese facilities have been optimizing manufacturing costs for decades, and have largely achieved very efficient workforce operations. Depending on the labor intensity of product manufacturing activities, a Chinese facility can offer an excellent number of parts produced per work hour spent.
Another most important cost of manufacturing is raw materials cost, for which China also provides a cost-effective option, due to two main reasons. Firstly, the same labor efficiency condition exists throughout the entire raw materials production value chain. So Chinese manufacturing companies can themselves access cost-efficient raw materials than most companies based in other countries. Secondly, the transfer of materials is cheap since it only happens from close sources and within China. This results in avoiding long shipping routes, additional customs tariffs, and long delivery waiting times. At a time when manufacturers in all industries are trying to cut expenses and maximize profits in order to remain competitive, access to affordable raw materials can help bring down manufacturing costs to a considerable extent.
Most Chinese manufacturing facilities will typically have low cost local (or close) material suppliers. This way they gain a significant cost advantage, that further contributes to their cost-effectiveness. Quasar for example has its own approved vendor list: an extensive list of trusted and tested materials and spare parts vendors. This way it can offer its customers high quality, low-cost alternatives to otherwise costly mechanical and electronic spare parts for manufacturing medical devices.
Companies worldwide are nowadays targeting the growing Asian markets, so much so that the phrase “expand to Asia” has become somewhat of a cliché business term. China is the largest of those markets, with its consumer market surpassing $6 trillion in value. Moreover, it also benefits from its proximity to a number of large and growing markets, such as India and South Korea. In terms of regulatory compliance, medical devices of Chinese manufacturing have no issues in being accepted in both the country’s domestic as well as other Asian markets. So outsourcing medical device production to China gives manufacturers access to its rapidly growing domestic market, as well as immediate access to its developing neighboring markets.
In times of market, instability is when a supply chain is a huge determining factor for a manufacturer’s chance for survival. Chinese materials suppliers have been rapidly evolving, following the growing trend of the country becoming an international manufacturing hub. This has made it easier for medical device contract manufacturers to identify and establish a trustworthy network of reliable local suppliers.
This gives the more top tier Chinese manufacturers such as Quasar, the opportunity to take advantage in creating resilience in face of the coronavirus outbreak. Additionally, a robust supply chain allows for a manufacturer’s flexibility to offer simple, efficient, and flexible options for increasing or scaling production as market needs change. What’s also important is that this supply chain evolution has resulted in also increasing quality standards, which is a decisive factor when it comes to medical device manufacturing.
Realizing the potential of its market in the era of globalization, China has spent the last decades developing its technology. Heavy investments in research and development, importing talent and technology, as well as the emergence of specialized tech hubs, have helped China gain an innovation edge over other emerging countries. The mentality of rapid research and development is of notable importance and in many cases surpassing the speed of many tech hubs in the west. Part of the reason this happens is that such a large portion of the world’s product manufacturing has been outsourced to China. And the low costs achieved by Chinese companies are not the result of just cheap labor, but also to an extent involve practical applications of innovative technologies as well.
Another benefit of manufacturing in China is the ability to scale up or down as needs change. Top tier Chinese factories such as Quasar’s facilities are manufacturing products for many companies at the same facility, so they have the means to produce large quantities and adapt according to the market’s and customer’s needs. And being able to easily scale up is an obvious advantage. A critical characteristic of every trade is offering product availability. As you market your medical device to new markets, customers, importers, and distributors, you will be required to increase quantities and ensure timely delivery. Manufacturing your medical device in a Chinese facility that can support scaling up production, becomes an obvious advantage.
Quasar offers a competitive advantage. With headquarters in Hong Kong, research & engineering in Israel – one of the world’s top innovation hubs and multiple manufacturing facilities in China and Thailand. Quasar is the partner of choice if you’re looking for improvements in quality, device streamlining, and significant BOM cost savings.
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