Onshoring — also known as reshoring — can help medtech manufacturers reduce their exposure to a host of new and evolving challenges.
Ralph Tricomi, Web Industries Inc.
Medical device manufacturers currently face unprecedented challenges to production and supply chain continuity. Successful onshoring — or reshoring, as it’s sometimes called — can mitigate these risks.
High on the list are the threats of continued global economic shutdowns due to the COVID pandemic, newly emerging pandemics and other global health crises, and geopolitical conflict and instability around the world.
Manufacturers are also dealing with rising transportation and energy costs, labor shortages affecting logistics, manufacturing and services, supply and logistics bottlenecks continuing to plague all sectors of the economy, and ongoing effects of weather and climate instability on transportation, energy production, agriculture and input materials production.
Onshoring strategies involve tapping regional supply sources and relocating essential production tasks closer to a manufacturer’s home base. The process calls for due diligence, planning at the highest management level, and resources that are not always part of the core competence of an original equipment manufacturer (OEM). Expert outside assistance often offers the fastest and least disruptive way to bring production close to home.
For example, contract manufacturing organizations (CMOs) can handle changes and upgrades to tasks ranging from regulatory compliance and materials sourcing to production and shipping. They typically have or can easily acquire the technical resources, manufacturing equipment and space, and flexible business culture needed to manage a manufacturer’s onshoring initiative.
Shift in strategy
Some background: Offshore sourcing strategies emphasizing lean manufacturing and low-cost-country sourcing solutions have traditionally taken precedence over risk mitigation.
This approach was feasible when supply chains were predictable and stable. But the strategy removed resilience from supply chains and made them more vulnerable to certain external market forces.
A single adverse event overseas could shut off critical materials or components, slowing production. In the wake of recent supply problems, medical device manufacturers are increasingly reassessing their supply strategies.
Onshoring empowers manufacturers to balance cost efficiency and disruption risks better. It typically requires the involvement of top management, application engineering, compliance, quality control, logistics and supply chain management. Quality personnel, for example, must check that quality standards are maintained during the transfer and manufacturing transition.
A CMO’s design and manufacturing engineering staff are an additional source of support. Their consultative services concerning designing for manufacturability and scale often reduce the number of components in a medical device manufacturer’s products without affecting performance.
In a globalized world, total onshoring of all supply sources and production tasks is usually impossible. In its place are compromise strategies such as multi-regional sourcing, which balances domestic sourcing with sourcing from foreign locations to hedge against disruptive events and ensure continuity of supply and production.
Another example is near-shoring, which involves relocating production to domestic sites and nearby countries with a reputation for political stability. Yet another is a substitution strategy, whereby manufacturing disrupted at one factory can be quickly channeled to production facilities elsewhere.
The primary onshoring challenges are enabling the transfer of technology from overseas and optimizing automation in new domestic facilities. These include needs to hire and train technical staff and ramp up the labor force to meet production requirements. CMOs are structured to address these tasks.
Consider the process of onshoring lateral flow immunoassay (LFI) test device production. LFI diagnostic test manufacturers can team with an experienced medical sector CMO to expertly oversee projects from start to finish, including planning, technical transfer, process validation and commercial-scale production. During planning, the CMO will consult with the manufacturer to determine staffing needs and equipment and infrastructure requirements.
In a typical technical transfer scenario, the OEM shifts its chemistries and reagents to the CMO’s biochemistry labs and manufacturing platforms, where technical specifications are developed and finalized. Then, critical machines are installed and undergo validation.
Close collaboration among supply partners is essential to realizing onshoring’s full potential.
Medical manufacturers and CMOs, for example, can conduct joint risk assessments of supplier companies in the newly formed network. This covers risks spotted upstream from the supplier, such as those related to the supplier’s raw material providers. Risk assessments might also include supplier audits, interviews with supply managers and reviews of manufacturing qualifications.
In addition, medical device manufacturers and CMOs can further integrate their enterprise resource planning (ERP) systems to exchange data in real-time. This enables sharing of accurate demand and forecasting information between partners, eliminating time-consuming manual data entry. The integration can drive cost efficiencies and help supply partners deal with staffing and material shortages.
When selecting a CMO, look for a proven track record in the medical device sector. Qualifications should include adherence to industry standards, FDA certifications and GMP protocols.
Ralph Tricomi is the director of market development for Web Industries, overseeing the market development and marketing activities for the Medical, Aerospace, Personal & Home Care and Industrial business units. He previously held business development positions at Bose Corp. and Ford Motor Co.
The opinions expressed in this blog post are the author’s only and do not necessarily reflect those of Medical Design & Outsourcing or its employees.