Contract manufacturing
is limited capital available. Large medical device OEM’s generally have the technical and financial resources to build internal capabilities and the capacity to manufacture products. Smaller OEM’s and start-ups do not have the same resources. Protection of intellectual property is also a key factor in whether to produce inside or outsource. Primarily, OEM’s will look at the core competencies including what is visible and most important to the customers, and maintain control over those factors through insourcing.
How has the relationship between medical device companies and CDMO/
CMOs evolved over the past decade? While the growth in CDMO/CMO revenue eclipses the overall medical device industry growth by several percentage points, indicating a trend toward outsourcing, the level of outsourcing of specific products and technologies is less based on overall relationship between OEM’s and CDMO/ CMO, and more based on strategic objectives and factors that affect outsourcing decisions. Outsourcing processes and technologies that are non-core is the best way to maintain that focus, and that is generally what is done. For cost reduction, it is most effective to outsource components or products that are segmented as less custom and more toward commodity, and to leverage the CMO ability to consolidate demand and provide better efficiencies. Smaller companies may not have a choice, lacking capabilities as well as resources, and may need to outsource the majority of their manufacturing. A major change in the past ten–20 years is an explosion of small start-up medical device companies, working to bring innovation to the industry. Many of these companies do not possess manufacturing capabilities, so they leverage the CDMO/CMO to develop and bring products to market. Many of them also lack the capital and infrastructure to fully commercialise the products, so the most promising are likely acquired by larger OEM’s and integrated into their operations.
Over the years there’s been a move from traditional CMO’s handling outsourced production contracts to CDMO’s, which play a greater role in the design and development of products. What drove this change? The story of outsourcing
manufacturing is one of progression. The first stage is to cost through utilisation of low-cost labour zones, tax or other financial incentives, or placing production near markets. As the traditional CMO performs the basic manufacture of products, the progression is to drive continuous process improvement through manufacturing technology advances. This leads to hiring higher level
42 Medical Device Developments /
www.nsmedicaldevices.com
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