Five Questions to Ask When Choosing a Medical Component Manufacturing Partner

Do you have a medical project that requires engineering and/or manufacturing to bring it to life? Do you know how to choose a partner to support you as you move to bring your product to market? 

There are a lot of options and a lot of potential (and costly) mistakes you can make along the way – especially when it comes to medical components. Your contract manufacturing partner needs to meet the highest standards to ensure you end up with a reliable, quality product.

Finding the right partner isn’t easy. Here are five important questions you will need to ask before choosing a partner to guide your project through production.

  1. Can your prospective partner meet the standards that medical manufacturing demands?

The manufacturing of medical components is highly controlled and held to the utmost standards. The appropriate certification in the medical industry is ISO 13485, which sets out the requirements for quality and compliance, as well as defining approved manufacturing processes. If you are looking for a partner to manufacture medical components, give serious consideration to a company with a ISO 13485 certification – but don’t necessarily rule out those that don’t if your products don’t require it, as it will raise your costs.

Other ISO (International Standards Organization) certifications include ISO 9000 and 9001, which stipulate international quality management system (QMS) standards and guidelines, ISO 14001, which is the standard for environmental management systems (EMS), and there are many, many more. Make sure your prospective manufacturer has all the relevant certifications for your project.

For medical devices, federal approval will likely be required, such as FDA (Food and Drug Administration approval in the United States or compliance with Canada’s Food and Drugs Act for Medical Instruments. Other market certifications can also come into play, such as CSA (Canadian Standards Association) or UL (Underwriters Lab) if you’re planning to sell in Canada. In Europe, products may require the CE mark, which certifies that they have been assessed to meet high safety, health, and environmental protection requirements.

If your partner’s facility is approved to these standards and certifications, then they know that representatives from these agencies can conduct surprise audits. A partner experienced in dealing with these agencies will not deviate from the approved processes and ensure any audit runs smoothly. They will also have the experience to work with the investigator to resolve any issues.

  1. Do they have proven experience in contract manufacturing for the medical industry?

More and more companies are outsourcing portions of their medical device engineering and manufacturing. It can be a complex process due to the industry’s many regulations, so relevant experience is essential.

In addition to being subject to stringent protocols and regulatory standards, the manufacture of your product may also require testing facilities, a proven testing process, and skilled, experienced staff. The partner you choose should have people, both in-house and in the factory, who are intimately knowledgeable about medical component manufacturing. You can’t take the risk of having them learn the ropes on your project.

  1. Can they guarantee protection of your intellectual property?

Ensure your contract manufacturing partner has confidentiality agreements, and that they extend to all third parties, as well. It might be beneficial to consult with an attorney who specializes in international trade and intellectual property (IP) protection. They can ensure you don’t get caught up in IP entanglements that can limit your future plans. If your manufacturing partner has facilities offshore, make sure they have team members in-country who understand the local business culture and keep your products and ideas secure.

  1. Can they do everything you need them to do (even the things you haven’t considered)?

Are you looking for the full array of design, engineering, and manufacturing – or a subset? Here, again, experience in medical components is a must. An engineering team that also understands the regulatory documentation and submission process can properly prepare your medical project for hand-off to manufacturing. An experienced manufacturing team can then ensure those regulatory requirements are met and ensure a safe, reliable component and satisfied end customer.

Ideally, you should select your contract manufacturer as early in the process as possible and include them in every project phase. If you choose a company that offers turnkey medical engineering and manufacturing, you will benefit from fully developed, standardized and compliant processes, whether you’re starting from scratch or just need to outsource the manufacturing.

  1. Are they manufacturing in China – with reliable partner facilities?

There are advantages to taking manufacturing offshore, and an inexpensive workforce is a big one. On the other hand, factors like punitive tariffs need also be considered, such as the US tariffs on certain medical goods manufactured in China. That’s one reason it’s smart to select a partner that understands customs and logistics associated with offshore manufacturing, and can assign the proper HS codes to avoid issues with tariffs altogether.

Note that the majority of medical products manufactured in China are not subject to these tariffs, which is why large medical companies are still choosing to manufacture there. Perhaps it’s because, outside of the US, China has more FDA-registered medical manufacturing facilities than any other country. Manufacturers like Roche and Johnson & Johnson – and soon Bayer and Novartis – have moved production to China, so they must be confident that quality and profitability will be maintained. (You can take a deeper look into this topic here.)

China is the hub of global manufacturing, and besides delivering electronic products around the world, they also have a thriving domestic medical device market of close to $79 billion, which has been growing in double-digits over the past decade. Western companies can leverage their knowledgeable, affordable workforce, healthy supply chain and cost-effective raw materials in a country focused on innovation.

Are you on track to choose a medical manufacturing partner?

The list above is by no means exhaustive, but it can help you sift through the sea of candidates to evaluate both what they say they can do and what you should be looking for.

If you have a medical product design, Kingstec can assist you on your journey through engineering and manufacturing. Our experienced logistics team can continue that support straight through to delivery, getting finished products to your door quickly and without hassle.

If you want to discuss this further, we would be happy to help.

Manufacturing Medical Equipment in China: Why it’s a smarter strategy than you think – even now.

China is the “world’s factory,” a global manufacturing hub that produces the vast majority of electronics components used around the world. Those components power everything from smartwatches to cars to appliances, as well as critical medical equipment such as ventilators, ultrasound machines, hospital beds, and more. But with incredibly high tariffs imposed by the US on many of those goods – including medical equipment – is it worth it for manufacturers to stick with their operations in China?

The industry has been divided on that. You’ve probably seen your fair share of stories about major OEMs moving some of their manufacturing operations to other countries. This past spring, as production lines shut down due to COVID, it’s no surprise people were contemplating the benefits of decreasing their reliance on China.

However, does avoiding those tariffs warrant the huge effort it takes to relocate operations? After a long year and many tough decisions, the overwhelming answer has been…no. For most manufacturers, the advantages outweigh the 25% tariffs.

So what are the advantages of manufacturing medical equipment in China?

Advantage #1: Staying in China poses less risk than moving

With change comes risk: that’s a fact of life. Switching manufacturing partners, even within a region, has significant challenges. Relocating to a whole new country is even more time-consuming, expensive and risky, with a steep learning curve that involves extensive travel, multiple factory tours, work sessions, and more. And it’s a level of risk many aren’t willing to embrace.

According to Forbes, “Manufacturers are sticking with partners they know and trust, despite the tariffs. With restricted travel, de-risking new partners has been incredibly difficult, so most have opted to work with teams they know.”

In addition, China lived through COVID-19 for months before it impacted the rest of the world: that experience has enabled them to be at the forefront of developing strict virus controls. With those controls, the types of shutdowns that happened in the first months of 2020 are highly unlikely, and medical equipment companies will be able to count on continuity and supply chain dependability moving forward.

Advantage #2: A massive, highly-skilled labour force

China has the biggest labour force in the world, topping out at 783 million workers. Unlike countries with comparable populations, like India, they have been a manufacturing hub for 20 plus years, and have the depth and breadth of specialized skills required to build the premium-quality electronics needed for medical equipment.

Advantage #3: Low labour costs

Yes, labour costs in China have been creeping up since minimum wages were instituted in 1995, with jumps related to wage increases in 2010 and 2019 – and they are higher than countries like India or Vietnam. But they are still dramatically lower than in western countries. For example, in Guangdong, a key manufacturing region in China, minimum wage is approximately $2.15 an hour.

Keep in mind that with those marginally higher wages come skills and experience you won’t find in other regions, with greater speed and much more efficient lead times than other countries can provide.

Advantage #4: Quality of logistics and infrastructure

Companies can benefit significantly from China’s established manufacturing history. They have robust infrastructure in place to move everything from raw materials to finished products quickly and efficiently through the country and across international borders. 40% of China’s roads are national highways, and they have 2/3 of the world’s high-speed rail lines, spanning 290,000 km, with trains that can travel up to 250 km an hour. Add modern cities, world-class airports and marine ports to the mix, and you have a setup no other country can come close to.

According to Wharton Magazine, “China has arguably the best physical infrastructure outside the western world.”

Advantage #5: A robust domestic medical device market

The scale of the manufacturing China does for their own medical market is enormous, representing close to $100 billion in health care spending. Which means western companies have access to a market focused on quality and innovation – one they can leverage for their own production and expansion. This also means they can draw on the country’s robust manufacturing supply chain, including top-quality, cost-effective raw materials that can be used for local production.

Advantage #6: State-of-the-art manufacturing facilities

China has more FDA-registered medical manufacturing facilities (Class II and Class III) than any other country apart from the US. That may be why a number of large medical manufacturers,  including Roche and Johnson & Johnson (with Bayer and Novartis announcing upcoming plans), have moved not just production facilities to China, but also R&D operations.

The “Made in China” initiative is also increasing manufacturer confidence in the quality of Chinese goods. President Xi Jinping has committed to making the words “Made in China” synonymous not with cheap, low-quality goods, but with top-quality manufacturing, especially for complex products like medical electronics.

The big disadvantage: 25% tariffs have a huge impact on profitability

Thanks to trade wars between the US and China, tariffs have escalated to punitive levels. And not only do they include finished goods, but also metal alloys (including steel and aluminum) used in many medical devices. From this perspective, there’s no arguing that manufacturing in countries that haven’t had this tariff imposed on them is the cheaper option.

Not all medical items are subject to the tariff, however. There are a few exceptions, which include microwave ablation antennas, tube suspensions used to position X-ray equipment, and food allergen analyzers. Plus, medical device manufacturers can apply for individual exemptions, but that may not be easy: several big medtech firms have had their applications rejected.

As a workaround, some manufacturers have been routing Chinese-made goods through other countries, like Vietnam, adding “Made in Vietnam” labels to avoid the tariffs. We don’t recommend this tactic: both the US and Vietnam frown upon fraudulent labeling, and any companies found doing this are likely to face heavy fines.

Negotiations with the US Government over tariffs continue, and there is hope that with the incoming administration, the issue will be addressed in a way that’s favourable to the industry. However, the outcome of the new Presidency remains to be seen: political analysts predict that Biden is likely to be a little softer with China than Trump has been. But despite some initially promising statements, there’s little indication he will lift the current tariffs.

Ultimately, the talk we’ve been hearing about restructuring supply chains has ended up being mostly that: talk. Despite punitive tariffs and COVID complications, manufacturers have overwhelmingly chosen to stay put. They’re sticking with trusted partners, a skilled workforce, sophisticated manufacturing capabilities, and low labour costs, which for most, outweigh the tariffs.

Not sure if manufacturing your medical equipment in China is the right choice for your company?

If you’re thinking about moving your operations out of China, talk to us about factors to consider. We can help you weigh the pros and cons to see what works best for your operation.

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With more than 37 years in business and 5000 projects completed to date, Kingstec is a leading engineering, manufacturing, and logistics business partner serving companies of all sizes in North America and Europe. Working with startups and established brands alike, Kingstec employs a team of highly specialized engineers, logistics professionals, and experienced project managers to shepherd projects from ideation straight through to market.

Kingstec connects customers in a broad range of niches with world-class and engineering services in North America, and with cost-efficient, highly adaptable contract manufacturers in Asia. Solving even the most complex engineering challenges, the company has earned customers’ trust by maintaining the strictest quality standards while helping to get their products quickly and reliably into the marketplace.

Established in 1983, Kingstec is headquartered in Toronto, Canada and partners with ISO-certified manufacturing facilities throughout Asia. Learn more at www.kingstec.com.