Last month, The Offshore Group Executive Vice President of Business Development Eduardo Saavedra sat down with industry publisher Medical Product Outsourcing magazine to talk shop about nearshoring for medical device manufacturing and what to expect from the industry with a truly global reach.
Medical Product Outsourcing is the world's only trade magazine for outsourced medical device manufacturing. The publication features in-depth trade information, including industry best practices, regulatory and legal requirements, and market intelligence needed to navigate the complex landscape of medical device manufacturing.
From Mexico to the Czech Republic and from China to Costa Rica, everyone is looking for a piece of the health care market. For nearshore labor markets the workforce, regulatory environment and supply chain logistics combine to define competitiveness for outsourced manufacturing. When it comes to medical device manufacturing, some markets are well positioned for success.
But what about China?
Nearshore, offshore, go ahead and pick a shore - it's all but impossible to talk about manufacturing without addressing China. Medical Product Outsourcing asked questions about the apparent downfall of China and other emerging markets as the go-to option for manufacturing. Saavedra's responses were both pragmatic and grounded in economics.
"There isn't a market in the world that is resilient to the effects of supply and demand," Saavedra said.
In China's case, rapidly narrowing wage rates mean Chinese labor is no longer too cheap to pass up. Due to steadily rising costs in China, some companies "are evaluating the option of nearshoring some or all of their production to North America, which includes Mexico."
Price isn't the only downside to the current-day labor market in China. Medical devices manufacturing requires highly technical and specific skill sets that China's workforce can't currently provide. Near-term, this is unlikely to change as the country's educational structures aren't set up to develop those skills.
Pros and cons
If China is no longer an offshore panacea for manufacturing labor, what's the appeal of nearshoring? Are there challenges associated with nearshoring? These are familiar questions for Saavedra, and there's a trick to taking advantage of the pros while mitigating the cons. You need to have the right nearshore partner for your industry and market.
"Mexico provides the best of both worlds."
Saavedra told Medical Product Outsourcing it can be difficult to balance geographic nearness to the end user with access to low-cost labor. For the U.S.- and Canada-centric medical device market, he said, "Mexico provides the best of both worlds. The proximity of Mexico to the United States and Canada is especially advantageous when not only the ultimate consumer but the supply chain is located near the manufacturing site."
Saavedra told Medical Product Outsourcing the challenge to successful nearshoring is unfamiliarity. Interacting with an unknown labor structure can be difficult for companies that require workers with highly specific technical skills. It might be possible for large, multinational companies to tackle the steep learning curve of a new, nearshore market. However, for most small to mid-sized companies, an established service provider is the cure for the unknown.
Preparing for the future
Nearshoring, like most successful business endeavors, starts by asking the right people the right questions. For medical device manufacturers considering a new workforce in an unknown market, talking to companies that have already made the move is invaluable.
"While governments and consultants have information to impart, there is no substitute for information from those that have manufacturing staff on their payroll, who pay rent, and who interact day to day with logistics, utilities and compliance entities in those countries," Saavedra said.
With more than 16,400 employees in the U.S. and Mexico supporting nearly 60 successful nearshoring companies, it's fair to say both The Offshore Group and Saavedra's responses to Medical Product Outsourcing are very well informed.