Medical Device Manufacturers Turn to Mexico to Lower Costs, Closer to Home

 

January 25, 2011

Manufacturing costs will always be a paramount consideration in producing products, as indicated by the enormous number of goods sent offshore for manufacturing by U.S. companies and many others. Yet, the “true costs” of manufacturing overseas – most notably in China – are coming under increased scrutiny by domestic manufacturers, particularly when it comes to manufacturing controls, regulatory compliances, delivery times, value-added services, and improved communications.

All of those factors contribute to outsourced manufacturing costs, which is why an increasing number of U.S. manufacturers are turning to job shops in Mexico for the fabrication and assembly of products that must meet stringent standards and global acceptance. Perhaps most notable are manufacturers of medical devices that must comply with regulations and standards set by the U.S. Food and Drug Administration and the American Medical Association.

“We have experience in injection molding of products in China, and there are a number of problematic factors that have led us to relocate that business to a shop in Tecate, Mexico,” says Don Forrester, a product manager at Centurion Medical Products (Williamston, Mich.), a major manufacturer of medical instruments, trays and procedure kits. “For us the benefits of dong business with a quality shop that is located fairly close to our assembly and distribution centers considerably outweigh the ‘price’ advantage of having those products made overseas.”

Manufacturing Controls

Centurion Medical Products has trays and other plastic components for it’s broad range of medical kits produced at Formula Plastics, an ISO-9000 certified state-of-the-art injection molding facility that specializes in medical devices and other products that require precision manufacturing. Tecate is located just over the U.S. border with Mexico.

“All of our products must meet FDA standards, so ISO certification is critical to us,” explains Forrester. “We periodically travel to the molder’s plant in Tecate and perform audits so that we can verify and document that they are in control, and that we have to have traceability by part number, lot number, and batch.”

Formula Plastics features a Class-100,000 particle clean room and metrology lab with advanced instrumentation, so that customers requiring clean room molding environments or ultra-tight quality assurance on products are assured consistent high quality.

Logistical Costs and JIT

There are several logistical costs to be considered when using a contract manufacturer that is located thousands of miles away on another continent, including erratic freight costs, locking up inventory at sea for weeks at a time and the inability to rely on just-in-time (JIT) needs or demands. Centurion Medical Products ships its finished plastic trays from Tecate to nearby Mexicali for assembly, then to Yuma, Ariz., for sterilization and packaging. Each of these plants is only hours away via ground transportation, making JIT deliveries dependable and easy to coordinate.

“The JIT capability is especially important to our Mexicali assembly process,” says Forrester. “If our supplier is late on delivering just one component of our kits it can stop an entire production line.”

Not only is JIT from China out of the question, but also the cost of having inventory in transit on the high seas for weeks is considerable. In some cases this may be complicated by minimum orders and labor shortages.

“We’ve purchased plastics from as far away as China, but the logistics and shipping costs make a significant difference when you consider the weight involved” says Michael Parks, manager of Supply Chain Planning and Logistics for Scantibodies Laboratory Inc. (Santee, Calif.) an international manufacturer of more than 1,500 diagnostic products used by clinical laboratories throughout the world.

“We’re producing literally millions of parts each month and I have to keep the optimum inventory levels, which are constantly revolving. Due to their location, Formula Plastics meets our product requirements without overburdening our warehouses with inventory,” Parks says.

Forrester adds, “You’re not likely to send products back to an overseas contract shop, so you have to look at that as a limiting factor. For example, you may order 100 parts and expect 95 of them to be good.”

Critical Communications

Most manufacturers would agree that communications is an important aspect of a supplier relationship.

“Doing business in China means dealing with another culture that is half way around the globe and a time zone that is probably over 14 hours,” says Jeff Lawrence, manager of business development at Formula Plastics. “Communicating with Mexico is far more convenient, plus you can come here and meet someone face-to-face if need be. And that’s a lot easier than flying across the Pacific.”

For more information: www.formulaplastics.com