According to a recent study by the Boston Consulting Group, the medical technology industry is at a turning point. Only those who systematically rethink their production networks have a chance of success in the long run. WILD has developed a method that allows it to devise an ideal setup together with its customers..

“Never change a running system” is a much-quoted saying that also seems to apply to the production strategy of many medical technology companies. A recently published study by the Boston Consulting Group (BCG) titled “Medtech Manufacturing’s Inflection Point”, however, demonstrates that this reliance on a system which still operates currently may cause many to fall behind. According to the authors of the study, it is now time for medical technology manufacturers to become proactive and systematically reflect on the necessary setup of their production network. This is the only way in which they will manage to remain successful in a dynamic and increasingly competitive environment.

In a comprehensive study, the BCG analysed FDA-listed companies and interviewed their executives on their production strategies. Their conclusion: although the medical technology industry has undergone significant changes in recent years, a majority of these companies still cling to the status quo in their production strategy. Many rely on their validated processes for too long. Established production networks are never challenged. According to the study, several companies have not adequately considered an optimisation of these networks, which would allow them to meet challenges like price pressure, innovation pressure and volatility.

Dr. Christian Rabitsch, Strategy & Corporate Development Manager at WILD Group, identifies the high product and component volatility, combined with the regulatory obstacles of process conversion, as one of the reasons for this. “This is often used as an argument to postpone necessary changes in the production network.” In doing so, several medical technology manufacturers are overlooking the fact that contract manufacturers such as WILD have developed dramatically in recent years and, as a result, have become far more effective and efficient. The BCG also identified a significant increase in Contract Manufacturing Organisations (CMO) in the medical technology industry during the period of the study. The report establishes that “as a whole, the CMO market has grown faster than the overall manufacturing market and the increased penetration is likely to continue.” (BCG article, December 6, 2017)

Contract manufacturers are an attractive option

There are several reasons why the relevance of systems partners like WILD is on the rise and why rethinking the production strategy would make sense not only in medical technology but in other branches as well: these suppliers gradually develop competencies and are increasingly capable of delivering turn-key solutions. This makes them more attractive for manufacturers. The fact that they enter the process at an increasingly early stage and are already involved in the product design and throughout the entire development process, is also yielding results for several medical technology manufacturers. One of the conclusions of the Boston Consulting Group was therefore that “In the aggregate, these trends make CMOs an attractive option for larger medtech manufacturers that are looking for ways to outsource more volume, more complexity and a greater range of functions across their supply chains.”

In search of compatibility

Rethinking one’s production strategy, however, is not an easy task. Staff availability, personnel costs, required know-how, responsiveness in case of market fluctuations, logistics costs, production technologies and the proper integration of contract manufacturers are just a few of the decision factors that need to be taken into account. “Every product portfolio is unique. The numerous variables in the equation may result in complexity, but they also offer room for manoeuvre”, says Rabitsch. As the BCG study established, “the goal is to determine not the universally ‘best’ manufacturing strategy, but the strategy most compatible with the company’s objectives. The right scenario for a company aiming to optimise speed and responsiveness will differ from the right scenario for a company seeking to optimise cost.”

Process innovations through digitalisation

With regard to production strategies, one should not underestimate the role of digitalisation, for instance, which is rapidly gaining ground in production technologies and in the supply chain. “Greater agility, higher efficiency and improved vertical and horizontal integration are required”, says Rabitsch, summarizing the most important potentials. The BCG study shows that contract manufacturers are often ahead of medical technology OEMs themselves. “Contract manufacturers are often more focused on process innovations and digitalisation, since such innovations open up great potential in their core business”, Rabitsch explains.

Finding the ideal setup together

WILD has several years of experience as a strategic outsourcing partner and can definitely provide support in the decision whether to outsource or not. “We have established a structured approach to developing the ideal setup of the production network together with the customers to best meet their respective goals”, says Rabitsch. There are various reasons for a company to consider outsourcing: capacity bottlenecks, focus on core competencies, creation of internal resources, greater efficiency, benchmark for its own production, increased flexibility, process stabilisation, reduced complexity, smaller number of suppliers or production closer to the market.

“As a systems partner with distinct skills regarding development, manufacturing technologies, stable processes across the entire value-added chain and an agile supply chain, we make sure that customers can focus on their true strengths. We take care of all the rest”, says Rabitsch. WILD also offers modular systems for software and electronics solutions in product development. At the customer’s request, WILD can also develop prototypes. For instance, the company implemented a pipetting arm for an in-vitro diagnostics (IVD) customer – from the first idea to a working prototype – within a space of just three months. This was only possible because the necessary application know-how in IVD, the concept, design and prototyping all came from WILD itself.

Reducing complexity

If requested, WILD can also offer an overall package in production and assembly. “We manufacture, test and document turn-key solutions. Our customers can have these delivered directly to their end customers”, says Rabitsch. Another additional advantage is the single point of contact, which results in a massive reduction in effort and complexity on the customer side.