Medical device makers weigh the costs and benefits of building in the USA
The present and future state of American manufacturing is a hot topic for discussion. Witness the last presidential campaign. In anticipation of Labor Day 2017, Repertoire asked executives from three medical companies that manufacture products in the United States to share their thoughts about the challenges and opportunities of doing so. They were:
- Jonathan Sabo, vice president of marketing, DETECTO.
- Ken Harris, vice president, sales and marketing, Health o meter.
- Harold Chan, vice president, IVD, R&D and manufacturing, Sekisui Diagnostics.
Repertoire: What are the greatest challenges facing companies that make medical products in the United States?
Jonathan Sabo: We face a lot of competition from overseas manufacturers that attempt to undersell based on price. Most DETECTO products are made in the USA of American and foreign components at our factory in Webb City, Mo., so our production standards are different here than would be employed in Asia and developing countries. Because we fight against lower-cost medical products made overseas on a daily basis, we have to combat that with intelligent engineering that incorporates state-of-the-art, next-generation features in our products, like sonar height rods in our physician scales or ultra-low platforms in our wheelchair scales. We have to harness better technology to produce products that are unlike anything else on the market.
In the medical industry, lower cost isn’t always the distinguishing factor it might be in other industries, so that’s one reason why DETECTO has been able to stay highly competitive over the years. Consumers don’t always naturally gravitate to the cheapest-cost product in the medical industry, especially products used on children, such as our baby scales with weighing trays and stand-on patient scales.
Ken Harris: We make products all over the world. At the end of the day, those products have to meet our customers’ needs. Those needs are wide and deep, and they cover a spectrum of topics. Healthcare has an incredibly limited amount of resources. Every dollar that our customers save can be allocated to treating patients. Some say, “We want ‘made in the USA.’” We understand that. But if “made in the USA” drives costs up, that may be in direct conflict with the customer’s need to control spending. So we work with them on balancing their priorities.
Years ago, I read a book whose author showed that a cheap supply of labor isn’t the only factor that drives manufacturing to particular parts of the world. It’s the ancillary support mechanisms as well. For example, when electronics moved to Asia, it wasn’t just chip makers, but screw manufacturers, glass manufacturers, injection moulding suppliers. We see some of that coming back to the United States. In our case, as in the case of the iPhone and other products, regardless of where our products are assembled, all of our scales are designed, engineered and supported by our U.S.-based employees; the actual assembly is not the largest part of our overall costs.
Also, while labor costs clearly do matter, supply chain costs do, too, especially for sophisticated equipment. Shipping parts, equipment or finished goods around the world is a cost that has to be considered.
Harold Chan: Producing in the United States does have its challenge. Probably the single biggest one is the labor cost. As product matures, companies tend to move overseas for lower cost labor.
Repertoire: One publication described the so-called “Fourth Industrial Revolution,” sometimes referred to as Industry 4.0, as “a catch-all term for talking about the integration of smart, internet-connected machines and human labor.” Are you seeing indications of the Fourth Industrial Revolution, the “smart factory,” or the “Internet of Things” in your manufacturing systems?
Jonathan Sabo: IoT devices are very much a part of life at DETECTO, and we utilize IoT machinery in our manufacturing for real-time efficiency reporting. Each time we replace production equipment with the newest generation, the equipment becomes smarter and more connected. We’re also developing IoT scales in the future for the industrial market and other sectors, so that our customers can view real-time diagnostics on the equipment they use. Consumers now have higher expectations for the products they purchase and use every day. Real-time data reporting on those products is simply a part of life now.
Ken Harris: Like a lot of revolutions, every industry has to consider, “Is this making my product more efficient to make and cheaper for my customers to use?” I’ve been in manufacturing since 1980, and I have watched companies implement the “next thing” before it is clear whether it adds value for the customer. The only thing that matters is, “Can this technology help us make products that are better to use or cheaper to make?” So, the Internet of Things may actually provide little function for our users, and end up adding cost rather than taking it away.
Harold Chan: As we scale and introduce new manufacturing systems, we have the “smart factory” in mind and have incorporated design elements to meet those new requirements. We have also introduced new platforms that allow us to connect to existing manufacturing equipment, which then provides real time, actionable information. This will help us with on-time delivery to our customers as well as further improvement to already good product quality.
Repertoire: What is the future of “additive manufacturing,” or 3D printing, in the medical products industry?
Jonathan Sabo: At DETECTO, we use 3D printing often for our engineering prototypes, so research-and-development personnel can see how parts work together within a new product design. 3D models also allow product managers to see and feel the product design and make critical changes before more concrete prototypes are manufactured. It has become a part of our standard R&D workflow to develop 3D-printed prototypes for review within the design stages of a new product.
Ken Harris: I think 3D printing will be a transformational technology in every industry, including the medical business. But I will go back to what I said earlier: All of these technologies matter only if they create value at some level for someone. NASA has figured out that with 3D printing, astronauts can build necessary wrenches while in space, rather than carrying multiple wrenches with them. It makes for a lighter payload. And if we don’t have to make parts until we absolutely need them, we will drive down supply chain costs. But at some point, the cost of making 3D parts may exceed the value. The market will have to tell us how to balance those two things.
Repertoire: Last year, the Guardian newspaper wrote, “Customer experience encompasses a number of things, customer service being one of them. But essentially it is any interaction a consumer has with an organization, and the perception of how a company treats them. Ultimately, a positive customer experience leads to customer satisfaction and loyalty, which results in customer retention as well as increasing cross-selling and up-selling opportunities.” Would you agree? If so, how is this exhibiting itself in the U.S. medical marketplace, and how is your company responding?
Jonathan Sabo: Yes, we find this very much to be true. This fact influences how we go about our daily customer service experience. When a customer interacts with DETECTO, all of our customer service and sales, technical support, and aftermarket parts orders are handled through our factory in Webb City, Mo., where those personnel are highly trained in how best to treat a customer, so they have fluid communication and feedback from us at the factory. We view everything the customer sees and touches about DETECTO as highly critical for how they shape their opinion of our brand, from our websites, catalogs, and advertisements to our exhibitions at clinical trade shows and videos showcasing our products. We want the customer experience with DETECTO to be not only positive, but one of the highlights of the day for our customers.
By taking care of our customers properly since the company was founded in 1900, DETECTO has earned a reputation for quality and good customer care. This, in turn, leads to cross-selling and up-selling opportunities. I think you’ll find, especially in recent years, that DETECTO has diversified itself well beyond just being a “scale company,” with our product offerings in waste receptacles, glove box holders, medical carts, stadiometers, and the HealthySole UVC disinfection device.
Ken Harris: We all have to create a customer experience that causes people to want to use our products again and again. I think that where you manufacture something can affect a customer’s experience, but that’s just one component. You also have to consider other things, like how you service it. In all aspects, a total customer experience drives loyalty and satisfaction completely. You want to buy from companies who give you the experience that helps you meet your goal. All companies strive to do that, though we approach it differently. We focus on ensuring that we not only have excellent products for our customers, but that we also make the acquisition and use of our products as easy and simple as possible at all times.