How to simplify your supply chain while still mitigating risk

So many factors can disrupt a medtech manufacturer’s supply chain, sometimes with disastrous effects: geography, weather, management and quality control issues, just to name a few. Thoughtful planning about facility siting can make all the difference.

Sean Mikus, Tegra Medical

You can’t always have your cake and eat it, too. But some companies are doing that when it comes to supply chain management in the medical device manufacturing industry.

First, let’s talk about mitigating risk in your supply chain. The recent blast and widespread flooding from Hurricane Florence in North Carolina and the massive, deadly Typhoon Mangkhut in the Philippines are chilling reminders that natural disasters are unavoidable and, often, terribly destructive. Storms, floods, earthquakes, fires – all are bad news for companies trying to keep manufacturing plants up and running without interruption.

Manufacturing a product in two different locations mitigates risk for OEMs if there’s a natural disaster or another type of interruption in one location. But spreading the manufacturing out often requires the use of two different suppliers, which then can complicate the supply chain.

The risk/complexity conundrum

The first step in dual-sourcing requires finding and validating the second source supplier, which is not a simple, quick or inexpensive process. Moving forward, it creates another supplier relationship to be managed from the executive suite to accounts receivable – and nearly every department in between. Then, as manufacturing progresses, there is the risk of differences in the actual product or part manufactured. Quality can be inconsistent from one supplier to another, or parts may not be delivered on time.

Depending on where the supplier is located, corporate social responsibility issues can also rear their ugly heads. Assuming it’s a different country, an OEM must be aware of the norms for environmental and worker rights issues. Problems such as sweatshops, unsafe factories and child labor have tripped up many unsuspecting and otherwise well-respected companies in other industries. Quality and compliance issues are a nightmare no manufacturer wants to face.

The Costa Rica connection

Working with a contract manufacturing organization (CMO) such as Tegra Medical – with an operation in Costa Rica – addresses these issues head-on. Manufacturing can be dual-sourced between their U.S. and Costa Rica plants, which provides the benefits of geographic dispersion in case of natural disaster or other localized disruptions. Yet, because it’s within the same CMO, there is no additional supplier to find and validate and no additional relationship to manage. Work is still being done in a U.S.-owned company, with close ties to its U.S. operations. Quality procedures and ISO certifications are apt to be the same in the company’s multiple locations. The technology and personnel training are consistent, so parts made in one location mirror those made in another. Risk is mitigated without making the supply chain more complex.

Other advantages include:

• You avoid the time-zone challenges of working, say, with colleagues in Asia, and travel and shipping times are shorter.
• Costa Rica has a steady supply of well-educated, English-speaking workers.

As a country, Costa Rica is dedicated to the medical device industry. According to the Costa Rican Investment Promotion Agency, Costa Rica is the second largest exporter of medical devices in Latin America and among the top seven suppliers to the U.S. market. Exports have tripled since 2007.

No one wants more risk or added complexity. With dual-sourced manufacturing in Costa Rica, you can have your cake and eat it too.

Sean Mikus is Costa Rica general manager for Tegra Medical.

The opinions expressed in this blog post are the author’s only and do not necessarily reflect those of Medical Design and Outsourcing or its employees.