What does it cost to manufacture a medical device?
You may have designed the most incredible new medical device with the potential to improve health outcomes in markets around the world, but without getting the right manufacturing strategy in place – it may never see the light of day.
How you decide to manufacture your device, whether that’s in your own factory or outsourced to a contract manufacturer is a critical decision in terms of cost.
This checklist is to help those businesses weighing up the options on the most cost effective way to get their products into manufacturing.
It explains the choices businesses face when deciding whether or not to manufacture in-house – and how it can be more cost efficient to outsource. We’ve gone into a bit more detail below.
The ticks indicate where there is a cost to your business.
Quality Assurance/Regulatory Compliance
As you know, Manufacturing in-house means that you have to deal with a lot of red tape.
Subject to getting the right contract in place, outsourcing frees you up to focus on your product development at the front end and sales and marketing at the other.
It saves you having to expend cost and time setting up and maintaining things like a Quality Management System (QMS), accreditations and the risk management burden.
On top of risk management there is the requirement to audit suppliers. When outsourcing, you simply need to audit your contract manufacturer whereas if you manufacture in-house you will need to audit all of your critical suppliers.
Machinery and Equipment
The costs of getting your own machinery and replacing obsolete equipment can be prohibitive – and that’s before ongoing maintenance is considered.
Outsourcing takes that huge hit to the bottom line out of the equation.
Materials Costs and Packaging
This is the one area where you will incur costs regardless of manufacturing in house or outsourcing. The difference is in the amount of working capital required, in particular to fund materials purchasing.
As an example, ITL’s customers pay a deposit up front and then have nothing to pay until goods have been delivered, often on 30 day payment terms. This means they may have already recovered the sub-contract costs, from orders placed, before the payment is due.
Compare this with having to pay for everything up front, on risk, from new suppliers with whom you don’t have a close relationship and the benefit is clear.
Building or renting production space may give you total control, but it is an expensive outlay, particularly if your product is new to the market. On top of this are the costs of packaging and storage which can quickly be overwhelming to take care of in-house.
Outsourcing removes that financial burden and the ongoing costs such as rent, utilities etc. are also taken away.
Paying staff is not the only cost when it comes to manufacturing your product in house. The costs of HR and Training, sick and holiday cover etc. soon stack up. There are also ongoing costs of managing your staff.
A contract manufacturer will have numerous products on their shop floor which allows them to spread their staffing costs. All you pay for is the labour time for your product.
If you would like to know more about our contract medical device manufacturing services get in touch.