Reshoring, precision technologies, and an inflationary economy are establishing new parameters for bringing innovative products to market quickly.

By Mark Shortt

As the medical industry confronts urgent healthcare challenges ranging from transmissible infections to terminal illnesses and chronic infirmities, the supply chains of U.S. medical device makers are evolving in ways that keep alive the hope that patients everywhere can receive the timely treatments they need.

Some of these changes—such as OEMs’ increasing reliance on domestic contract manufacturers (reshoring and onshoring) and the growing use of precision technologies—began before the Covid-19 pandemic and have only intensified since then.

“We’re seeing that the biggest change is more in the reshoring and the nearshoring,” said Neal Walters, a partner in Kearney’s Strategic Operations practice, in an interview with Design-2-Part. “When you look at the supply chain and the order fulfillment rates and statistics like that, companies are really looking towards shortening the lengths of their supply chains. We are certainly seeing that trend in a significant way after Covid.”

Now, companies like medical diagnostics firm 3EO Health are intent on demonstrating that healthcare products and components can be manufactured cost-effectively in the United States. The company is working to establish a solid U.S.-based supply chain by collaborating with key domestic manufacturing partners, including the injection molding firm Plastikon Industries. (See Diagnostics Company Aiming to Protect U.S. Population Through Domestic Manufacturing.)

“We believe in the importance of domestic manufacturing,” said Jeremy Schubert, CEO of 3EO Health, in a release. “The pandemic taught us that where you manufacture healthcare products matters.”

That way of thinking is shared by numerous medical product manufacturers that are seeking to reduce supply chain risks while serving the U.S. market.

Schott Pharma, a manufacturer of glass and polymer syringes, said in a March release that it plans to build a new manufacturing facility in Wilson, North Carolina, expanding the U.S. supply chain for syringes that deliver lifesaving injectable medicines and vaccines. Schott envisions the facility will enable the company to triple its contribution of glass and polymer syringes to the U.S. market by 2030. Bringing production to the United States is expected to reduce lead times and transportation costs while protecting against future shortages of critical drugs and ensuring preparedness for pandemics.

“The impact of this facility will go far beyond local job creation in North Carolina and will relieve stress on the entire pharmaceutical industry supply chain,” said Schott Pharma CEO Andreas Reisse, in the release. (See Maker of Glass and Polymer Syringes to Expand U.S. Manufacturing Operations.)

Ascential Technologies said in November that it expanded its capabilities and domestic manufacturing footprint by opening a “state-of-the-art, 100,000-square-foot facility in Blaine, Minnesota.” The new Ascential Medical and Life Sciences facility is reported to employ 150 people while integrating advancements in automation technology to facilitate production of medical and life sciences products and devices. The facility is intended to “help customers revitalize global supply chains through reshoring,” Ascential said in a release. (See New Facility to Help Customers Reshore Medical and Life Science Manufacturing to Minnesota.)

Now, as medical device makers increasingly outsource production to domestic contract manufacturers, they’re also expecting more than a transactional relationship from them.

The entire design to manufacturing process has become more complex as medical product innovations, such as robotically assisted surgical systems, enable greater precision in the use of critical treatments and procedures. These higher levels of precision achievable by end-use surgical instruments and drug delivery systems are now highlighting the need for manufacturing partners who can provide the design and manufacturing expertise—including precision fabrication, machining, and coating capabilities—needed to create these instruments, assemblies, and systems.

Rather than asking them just to produce parts, many OEMs and device makers are expecting contract manufacturers to take on the expanded role of a more strategic, integrated  manufacturing partner, according to Walters. They’re making it known that they want a true manufacturing partner that can contribute capabilities from conceptual design to advanced engineering, planning, production, and supply chain visibility.

“The trend is the transitioning from a transactional cost base to a more holistic measurement of performance,” said Walters.

Custom automation systems manufacturer ATS Life Sciences Systems (ATS LSS) reported in November that its engineering team is working in collaboration with robotic systems manufacturer Staubli Robotics to build a large-scale syringe assembly system in the eastern United States. The companies are working to create a highly efficient and reliable system—spanning molding systems to end-of-line pack-out—that is said to consistently deliver high quality and performance, ATS Life Sciences Systems said in a release.

“Staubli and ATS LSS have established a strategic partnership to develop high-end automation projects for the pharma and medical industry,” said Oliver Cremoux, who leads the North American Sales and Marketing team for Duncan, South Carolina-based Staubli Pharma and Med Devices, in the release.

The fully automated syringe assembly system is just one example of an innovative product that can be created by ATS LSS and Staubli Robotics as they work together strategically to meet market demand for medical devices, according to ATS Life Sciences Systems.

Walters said that in the past, a more transactional five-year contract between an OEM and a contract manufacturer might involve an agreement to supply X amount of product at X dollars a unit. “But what happens when the raw material price goes up 50 percent?” Walters asked. “And how do you equitably ensure that each party is treated fairly?”

The inflationary post-Covid environment of the last few years, he said, has reinforced the need for device makers to develop business relationships with stable partners based on trust, rather than saying, “How can we extract as many concessions out of this party as we can?” The latter type of transactional approach, he said, can cause supply chain challenges for OEMs if the contract manufacturer isn’t able to operate within the parameters of an agreement.

For more insights from Neal Walters, see Rebuilding the Medical Manufacturing Supply Chain.