Medical device manufacturing continues to move toward outsourcing (See 2020 Forecast), with a Markets and Markets report indicating the medical device contract manufacturing market will nearly double to $91 billion by 2024, up from an estimated $55 billion in 2019.
Most medical device manufacturers outsource some or all manufacturing projects, limiting internal capabilities and capacity to focus on strategic products and initiatives. Firms that do not yet outsource may consider the value proposition that contract manufacturers deliver.
Companies are taking advantage of the technology and speed that outsourcing offers, and external product development manufacturing contractors are increasing these capabilities. Suppliers concentrate on mastering and building a core set of competencies to handle tough challenges within their domain and offer a broad scope of services.
As technology advances, outsourcing becomes more advantageous by eliminating the medical device manufacturer’s need to invest in all the latest equipment. Even if companies could keep up with changes, it’s not cost-effective to invest in countless cutting-edge systems. With ever shortening time-to-market requirements and product life cycles measured in months, not years, speed is a defining competitive advantage.
With outsourcing, organizations could change the competitive landscape, repositioning themselves to renovate how they do business. Engaging a partner with the expertise and capacity to rapidly commercialize new innovations enables producers to beat the competition to market.
An experienced development manufacturing partner also supports firms as they swiftly enter and execute in new markets. Reducing investments in non-critical functions increases flexibility by reducing financial burdens, allowing companies to respond opportunistically in other commercial efforts. Manufacturers that outsource can focus on core competencies, building those skills that directly add value for customers.
When to outsource
Outsourcing only makes sense once a company builds effective management systems. Companies often outsource prematurely and end with a negative experience. Therefore, ensure that management systems include:
- Capabilities to find, evaluate, hire the outsourcing firm
- Methods, protocols, communication resources to manage the outsourcing firm
- Tools, resources, plans for knowledge transfer
As the benefits of outsourcing amass, firms frequently extend business relationships and look for more powerful ways to leverage the contracted company. These relationships support greater innovation, fundamentally changing the status quo by allowing the contractor and recipient to focus on exactly what they do best.
In the near term, most companies will maintain some level of product development and manufacturing expertise to help evaluate new product ideas, manage product development, and maintain and support existing product offerings. Longer term, outsourcing provides a powerful way to improve business focus, improve asset use, and generate greater corporate value.