Menu


When outsourcing is not the answer

Medical OEM conducts go vs. no-go outsourcing analysis

By Mark Zetter

Deciding when outsourcing is right—and when it’s not—can be a major undertaking for medical technology executives. But using a process that models a company’s possible scenarios can help to make even a complex decision simpler. Whether you’re outsourcing, reshoring or moving your program from one EMS provider to another, read on.

Rita Medical Systems Inc. (Mountain View, CA) is a medical device manufacturer that builds and markets its own radio-frequency (RF) generators and disposable needles for tissue ablation. Although the company had achieved high profit margins by manufacturing in-house, it was leaving money on the table because its high-cost Silicon Valley facility was operating under low-volume conditions. (Get list of contract electronics services in Silicon Valley/Bay Area)

Volumes were growing, but not fast enough to cover the company’s Silicon Valley overhead.

Eventually, outsourcing became a serious option. Seeking outsourcing partners, the company entertained proposals from several contractors. Proposals received from outsource providers were significantly less expensive than Rita’s loaded unit cost.

As sometimes happens to executives who have not outsourced previously, however, Rita’s management was struck by the amount of infrastructure that would have to be maintained in order to manage an outsourcing strategy effectively if they decided to outsource to medical electronics solutions providers.

Still, even when the cost of internal functions necessary to support an outsourcing infrastructure was added in, outsourcing remained a cheaper option than continuing to manufacture in-house.  (See: Outsourcing Calculator for OEMs)

SEE ALSO
China alternatives for low or now tariffs
How manufacturing supply chains free up working capital to be more competitive

Then came along a strategic opportunity to merge with Horizon Medical Products, a medical business across the country that was already producing high-volume medical devices. That company had a sales force synergistic with Rita’s, and its location in a rural area in economic decline allowed for low-cost manufacturing. Moreover, the acquisition would provide Rita with a 60,000-sq-ft manufacturing facility in Manchester, GA.

READ FULL ARTICLE: Full content is available to logged in electronics OEM site users only. Registration is free. If you are an electronics OEM professional working in an electronics OEM company please Register or Log In.





Private message OEM peers. Access all content.

For electronic OEM professionals working in OEM companies. Connect with OEM peers and access exclusive content.

Add your comment

Comments

Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

TIP: Anyone can post article comments whether or not you are registered. But, if you register or log in you can attribute your posts to your user profile in GlobalNet Community.

Your email address will not be published. Required fields are marked *


*


*

You might also like:

EMS Factory Cost vs OEM Quote vs OEM Target Price

https://www.ventureoutsource.com/contract-manufacturing/outsourcing-offshoring/when-outsourcing-is-not-the-answer

Provider spotlight

About VentureOutsource.com

VentureOutsource.com is the leading online destination helping electronics OEM decision makers make more informed decisions and reduce risk. We offer educational Webinars, thousands of original articles and helpful tools, a community of influencers who understand the challenges facing your company today, and a comprehensive directory of electronics provider services.



Copyright Venture Outsource, LLC. All Rights Reserved
The material on this site is for informational purposes only and is not a substitute for legal, financial or professional advice. Distribution and use of this material are governed by our User Terms Agreement and by copyright law. By using our Website you agree to site Terms and Privacy policies. For questions please contact VentureOutsource.com at 1-888-860-1193 or visit www.ventureoutsource.com