As much as any industry, the medical market may be "recession-proof'' for companies with a prime spot on the supply chain.
After all, people will always have critical health care needs and someone has to provide the solutions, and advances in technology will create more opportunities for players willing to make the necessary investments.
But with customer and government requirements as stringent as they've ever been, making products for the health care segment in North America is more challenging than ever. Companies may get those opportunities from a myriad of potential sources and regions, but each rubber manufacturer has to decide which steps are worth taking as their businesses continue to evolve.
Strong market
Elastomeric molders and extruders serving the medical industry agree that business right now is good: Their companies are generally busy and growing. Kevin Carver, president of custom silicone molder Sil-Pro L.L.C. in Delano, Minn., said his operation has been expanding at a good rate, and from what he's seen, the general medical market has been strong.
In particular, revenues from higher-end bodily implantable components-as opposed to disposable medical parts-have been driving up business, Carver said.
Don McMillan, president, North America, with West Pharmaceutical Systems Inc.'s Pharmaceutical Systems Division, agrees that the majority of the company's business is relatively recession-resistant. Diseases such as diabetes will always require medicine to treat them, he said, but in cosmetic areas, that may not always be the case.
The Lionville, Pa.-based medical components manufacturer serves its North American customers with products made domestically and abroad, but it gets more pressure on pricing from the disposable device side of the business, McMillan said. With higher-end pharmaceutical and biotechnical elastomer components, the quality of the product has to be protected first and foremost, and the cost is not as important, he said.
Silicone and rubber molder MRPC-formerly Molded Rubber and Plastic Corp.-has transitioned into the medical market over the past 10-15 years, and for the bulk of that time price was never an issue, said Greg Riemer, the firm's vice president for business development. Customer demands typically have focused more on high quality, receiving parts quickly and getting into production on time.
Today, being on-time and providing top quality are givens, and price is in the discussion, he said.
Wayne Kelly, president of Minneapolis-based custom silicone molder ProMed Molded Products Inc., said pricing is a bigger factor than in the past, and customers may ask for price reductions of up to 5 percent annually. But it's difficult to change implant technologies, so suppliers have to find ways to make their operations more efficient-ProMed, for example, relies heavily on lean manufacturing, he said.
Relatively small companies in the market, like Butler, Wis.-based MRPC, need to find their niches and market themselves within that niche to succeed, Riemer said. MRPC's formula is to find materials that can serve its customers, develop tooling resources to support needs and use technology lending itself to meet those needs, he said.
That's one of the reasons automation is a long-term solution for many companies in the medical field requiring high precision and quality. Scott Pakenham, MRPC vice president of marketing and sales, said a company needs to decide if continuing business from a customer or customers justifies the investment. A robot can replace a labor unit to save costs and provide repeatability for consistent parts, he said.
Carver said the automation Sil-Pro has in-house is an advantage in providing better service, quality and repeatability and proves to be more economically efficient down the road. "Both sides can save money without affecting quality,'' he said, noting that automated production makes up about 15 percent of the company's business.
McMillan said that while labor is a large percentage of the cost of manufacturing in North America, he doesn't believe there is a risk of taking capacity out anytime soon. "Customers within the biotech segment want perfect, value-added parts,'' he said. "They are not saving pennies to take on greater risk with million-dollar products.''
Kelly agreed, saying that he doesn't see ProMed making the types of high-tech, high-service silicone components his company specializes in outside of North America. "I don't know of a competitor doing what we do with an offshore facility,'' he said. "Single-use disposable products, those are what you see offshore.''
Meeting tough demands
One of the biggest challenges facing medical suppliers is the increasing demand put on engineering and quality standards, Carver said. "It's definitely a tougher business than eight or nine years ago,'' he said. "If we meet those demands, it's good for us, but bad for someone trying to get into the market for the first time.''
Kelly said while the manufacturing qualification process once took six to eight weeks, it now takes six to eight months, thanks to more stringent standards and, most recently, a medical implant recall that hurt the industry. Companies now must go through increased scrutiny of their processes, which draws out the timeline for qualification, production and ultimately, company growth, he said.
Manufacturers like ProMed must provide "verifiable objective evidence'' to support their claims, he said, unlike the past where having a good process yielding a good part was enough. "The saying now is 'In God we trust-all others must show data,' '' he joked. "You have to be patient. It's not for the faint of heart.''
West's McMillan said regulatory agencies like the U.S. Food and Drug Administration require the company's customers to be aware of what the changing standards in the field are, and they rely on the firm's services to test for consistencies and inconsistencies-for example, leachable and extractable elements-in their materials.
Like Kelly, McMillan said the ramp-up time for components can be long, sometimes lasting several years, and suppliers need to stay a step ahead of what standards are required. Providing value-added products, such as ready-to-sterilize materials, that customers can use translates into a "win-win'' scenario for both parties, he said.
"We believe companies in leadership positions have an obligation to identify opportunities to enhance and evolve their products,'' he said. "In taking new products to the market, West expects its employees to proactively evaluate the needs of our customers and suppliers-sometimes before they even know what those needs are.''
Staying here
The rising number of challenges on many levels may actually make device makers more willing to rely on domestic suppliers. Sil-Pro's Carver said the medical device community is tight, and he doesn't believe customers want to risk saving money to throw away quality.
"With tighter tolerances and greater demands, their best bet for getting the quality they want is at home,'' he said.
MRPC's Riemer said the regulations the medical industry has put upon it probably insulates many of the players from offshore pressures today, but down the road five or 10 years, that might change. Continuing to push in the direction of automation and technology may make the difference between a customer purchasing from his company or going offshore, he said.
One obstacle in keeping the technical advantage in North America is filling available technical jobs-engineers, chemists and scientists-with good people, McMillan said. For example, a company of West's size is smaller than the bulk of its suppliers and customers, and those multibillion-dollar firms expect a lot from the people making decisions on the supply chain; they have to be ready for the responsibilities that come with the job, he said.
Another problem is West is competing for talent with bigger and better-known companies, McMillan said. "People generally love working here, and keeping them isn't hard once they see the opportunities we have here,'' he said. "But finding them is.''
The key for medical molders, Kelly said, is to always look for what creates value. Right now, there are opportunities with established OEMs and start-ups in medical bases like Minneapolis; Boston; Austin, Texas; Chicago; Salt Lake City; and northern and southern California, Pakenham said.
There also are some offshore ventures like Ireland and Puerto Rico-ProMed has three major customers with manufacturing capacity in Puerto Rico and operates a low-cost facility there-but there are plenty of avenues for business on the mainland.
"We'd like to grow into some of the medical hubs,'' Riemer said, adding that MRPC wants to expand its manufacturing capacity-internally and externally-in the U.S. as its needs dictate.
But would the company take the step to follow a customer out of North America?
"If the opportunity came and we could justify it, we might have to do it to stay competitive or stay in business,'' Riemer said. "But that kind of decision is down the road. We'll cross it when we get to it.
