In the last couple of
decades, China has attracted manufacturers from all over the world because of
low labor costs and excellent export infrastructure. By outsourcing their
production, China was a way to cut costs when producing big quantities. The
medical device sector was no different than that.
However, this trend may be
about to change. Chinese wages and the value of Chinese currency are rising.
The government mandate to raise the minimum wage, so it could bring labor cost
increases of 15–20% per year in Chinese factories. Meanwhile, freight and other
costs associated with offshore manufacturing are continuing to rise. There are
other risks when outsourcing in China, such as intellectual property protection
and quality control.
So manufacturers are
rethinking their strategies of outsourcing in China. Some US-based are
returning their production back to the United States. This is particularly good
when the product is meant for the American market. This reduces shipping costs
and challenges, gives OEMs a higher quality control and allows them to take
advantages of improving efficiencies in U.S.-based manufacturing.
It is difficult to make these arguments to CEOs and Managers. They are easily blinded by the low supplier piece price. They have little experience with such hidden costs as shipping, decreased yields, and losses caused by poor communication. They also do not realize the added value of being able to hold the supplier directly accountable for quality, having them follow GMP and supplying proper paperwork/certifications.
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