Increasing opportunities for outsourcing are shaking up the role EMS providers’ play in the medical device ecosystem. Those OEMs for medical devices used to EMS partnerships are opening up to extending the outsourcing contract beyond only manufacturing. There is more demand from OEMs to extend capabilities and expand into full product realization, as opposed to merely printed circuit board assembly. EMS providers are now focused on offering full product realization services, which in turn means ramping up design services and engineering services for medical devices. There needs to be increased understanding of complex process of design and requirements in the medical industry. EMS providers are still in the building phase of capturing projects, ramping up services and generating significant revenue. This is still an evolutionary point and the increasing role of EMS in design is expected to be a gradual process over the next five years.
In spite of great progress, there are still areas of improvement and challenges for EMS providers. The challenges EMS providers face are constantly evolving. There is the challenge of meeting all regulatory compliance and successfully registering with the FDA (if the product is to be sold in the U.S.). Operating in the medical industry entails a whole new level of quality requirements and FDA registered facilities. Continuous improvement of processes, knowledge, and capabilities are some things all EMS providers must focus on in order to compete effectively.
Leading EMS providers have aligned internal strategies to better identify and seize opportunities. Companies such as Plexus have improved internal processes and focused on shaping service offerings around design services to remain competitive. Others like Celestica have reinvigorated its medical focus with identifying the high-growth product line that best suits its capabilities and organizational structure.
“Medical technology is not the safe haven investment market it was in the past. Market pressures including healthcare payer austerity programs, comparative effectiveness initiatives and the new US medical device excise tax are impacting medtech companies' top and bottom lines,” said Richard Rubin, market director at Celestica HealthTech. “In the face of these challenges, medical device manufacturers are increasingly considering strategic outsourcing to help them drive balance sheet improvements - freeing up cash to invest in R&D and/or acquisitions to fuel their growth. By outsourcing manufacturing, and sustaining engineering functions, for example, companies can drive greater focus, operating flexibility and cost effectiveness across their product portfolios. Specifically, by leveraging a partner to support older platforms, they can free up their most precious resources to focus on next-generation technology and innovation. Additional bottom-line benefits can be achieved by leveraging an outsourcing partner's global operating network and information technology platform to optimize the supply chain.”
Another company already making headlines for its high growth earnings, SMTC Corporation, is also witnessing interesting growth opportunities in the medical devices space.
“As we continue to grow our medical EMS business, we’re seeing increased customer demand from medical OEMs for our Value Engineering service offering. Most significant demand from OEMs has been for AVL expansion, to drive cost reduction, as well as component life cycle analysis and component end-of-life inventory services, to address the OEM’s broader product level life cycle requirements,” said Paul Blom, executive vice president, Operations, for SMTC Corporation.
As electronic content continues to revolutionize medical devices, winning strategies for OEMs will be tied to strong EMS partnerships. Similar to other traditional EMS markets, as competition intensifies, sustainable success will depend on flexibility to serve a demanding customer base, developing new business models to emulate customers, and smart marketing.
About the author
Lavanya Rammohan is a research analyst and acting manager within Frost & Sullivan's Electronics and Contract Manufacturing Practice. She has over eight years of experience in research, strategic consulting solutions, and project management, particularly for electronic devices, contract manufacturing, and supply chain providers. She has a Master's degree in information technology from Coventry University, UK, and a Bachelor's degree in electronics and communication engineering from Madras University, India. Since joining Frost & Sullivan in 2005, Lavanya has completed several research studies and consulting projects in the SMT equipment market, electronics manufacturing equipment market, semiconductor market, contract manufacturing, and many more.
Contact her at firstname.lastname@example.org
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