Outsourced manufacturing: A strategic advantage for the healthcare industry

“Network optimization” is a growing trend in the healthcare industry, where companies are strategically outsourcing to redirect company resources into their core business.

When done right, network optimization enables companies to revamp their entire network—transforming their resources to reduce risk, focus on core competencies, and lower capital costs in the process.

A recent Technavio report forecasts that the medical device manufacturing outsourcing market is set to grow by an impressive $50.44 billion from 2024–2028 at a CAGR of 10.9 percent, indicating that many healthcare and pharmaceutical companies see an opportunity to reimagine their existing manufacturing models. A well-executed outsourcing model offers numerous benefits, including increased efficiency, reduced supply chain risk, and the ability for in-house teams to focus on core competencies and innovation. By engaging the right partner, companies can ease concerns by leveraging capital and resources to manage investments in manufacturing lines and assuring adherence to stringent regulatory and quality standards—all while navigating the complexities of moving lines and manufacturing sites.

Focusing resources to gain expertise

In 2023, the U.S. Food and Drug Administration (FDA) approved more novel medical technologies than in any previous year, creating a more competitive landscape for healthcare and pharmaceutical companies to bring innovative solutions to market. Combined with rising cost pressures, higher margin demands, and global supply chain uncertainties, companies must find a way to free up resources so that they can focus on what they do best.

By working with specialized manufacturing outsourcing partners, healthcare and pharmaceutical companies can leverage their vertical integration and expertise in complex manufacturing processes and supply chain configuration. This allows companies to concentrate in-house resources on core competencies such as product innovation and development.

At Flex, we help our customers optimize their entire product lifecycle and meet sustainability goals—from ensuring product design manufacturability to scaling production efficiently, all the way to delivering reverse logistics and circular economy services—while sharing advanced manufacturing expertise and best practices from other industries.

For instance, we used advanced simulations to create a digital twin of the production line for a Class II diabetes product, helping to mitigate manufacturing risks and ensure production continuity. We also assist them in managing complex supply chains, enabling customers to focus on other areas while reducing risk. Leveraging a vast network of over 16,000 suppliers, we partnered with a market leader in diagnostics to ensure continuous supply through COVID-19 semiconductor shortages. In a time of adversity, the customer remained resilient, delivering millions of sensors to patients who relied on their product.

When quality is paramount

Even if companies recognize the wisdom in focusing their in-house resources on product innovation, they may still harbor hesitancies around outsourcing due to the high quality and regulatory requirements in the healthcare industry. The same Technavio report states that “outsourcing medical device production offers benefits like access to modern technology and state-of-the-art equipment. However, challenges exist. For instance, medical practitioners demand high product quality and stringent adherence to regulations.”

It is crucial to assess manufacturing partners to ensure that they can confidently meet regulatory and quality requirements.

At Flex, we draw on decades of experience collaborating with healthcare and pharmaceutical companies to provide a top-tier quality management system, helping our customers meet the strict compliance standards for Class I, II, and III medical products. And as regulatory expectations shift, we continue to evolve our approach to work with customers through the entire product lifecycle, starting with early concept and design, including Human Factors Engineering (HFE), all the way through to providing highly automated manufacturing and end-of-life services.

Working with a manufacturing partner like Flex—with our 14 FDA-certified sites and 21 sites with ISO 13485:2016 certification—empowers healthcare and pharmaceutical companies to meet the highest quality and compliance standards for regulated medical products.

Reimagining the in-house model

Even when presented with clear benefits to their end-to-end value chain, shifting manufacturing from in-house to an outsourcing partner can still seem daunting or risky. However, healthcare and pharmaceutical companies should first consider their desired outcomes before developing a strategy.

Whether moving closer to end markets, consolidating multiple sites, or reducing overall risk, companies have multiple options. At Flex, we leverage strong vertical integration capabilities and a global footprint to provide customers in the healthcare industry with the skillset, experience, and infrastructure to bring their outsourcing strategy to life with one partner.

In one example, we partnered with a customer in the diagnostic monitoring space to reduce their overall supply chain risk. By consolidating five manufacturing sites across several regions into a single Flex manufacturing site in North America, the customer was able to reduce duplicate processes and create efficiencies, which resulted in cost savings and reduced risks.

The Flex site selected had deep domain expertise in healthcare manufacturing and an experienced team, which made it possible to transition quickly and painlessly, with no impact to the customer’s business continuity.

Strategic collaboration for long-term success

The healthcare industry landscape will continue to gain complexity, with new market opportunities spurred by accelerating technologies, growing chronically ill patients, and a global population aged 65 and above expected to reach 1.5 billion by 2050. To stay ahead of future challenges and seize unprecedented opportunities, healthcare and pharmaceutical companies must build strategic relationships with outsourcing partners who can help them optimize their networks while providing access to cross-industry expertise, knowledge, and experience in the design, development, and manufacturing of medical products.

From my decades of experience in the healthcare industry, I have seen this scenario benefit companies seeking to remain competitive—by strategically leveraging an outsourcing partner’s capital assets, technological investments, and other resources, they can invest fully in core innovations and move with greater agility while reducing risk. In our rapidly evolving industry, it is essential to continually reimagine existing models to meet the changing needs of healthcare providers and patients.