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 other reason manufacturing is interrupted in one location. 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) 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.
Unlike those who deal with the time-zone challenges of working with colleagues in Asia, U.S.-based employees can communicate with Costa Rica during the regular business day. There’s no 12-hour delay to get questions answered or a need to work late at night instead of spending time with family. Flights are frequent and reasonable, making travel less time-consuming and arduous. There are no issues with transit times or getting products through customs.
Also, with the robust medtech marketplace in Costa Rica (more than 60 medical device manufacturers call it home), components and devices are often being manufactured very close to where they need to be shipped.
Perhaps most notable, Costa Rica has a steady supply of well-educated, English-speaking workers. The people are well known for taking a huge amount of pride in the quality of their work. Ingrained in their culture is a high value on trust and ethics, putting to rest fears of intellectual property being compromised as it is in some other parts of the world.
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.