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KPIs evaluation while partnering with medical device CMOs

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by Satish Tiwari
23 December 2014

Medical devices industry is on a brink of shift in terms of outsourcing needs. Medical technology industry has traditionally been the one where most of the production and related functions are still under strict control of the OEMs. Current medical devices outsourcing market is valued at USD 46 bn. In near future increasing pressure to cut down costs, competition with peers will drive this outsourcing market in Medical devices. Increasingly OEMs would seek partners who can manage an array of their needs for which the CMOs need to evolve and offer their presence across therapeutic segments by actively joining with peers via mergers and acquisitions and associations. The whole point of raising this correlation is to understand what strategies should an OEM take to partner with CMO for their outsourcing needs. One buzzword that captured category manager's attention across the domains across industries is KPI. It's the array of parameters that decision makers keep in mind while outsourcing products or services. Medical device manufacturers need to look beyond traditional KPI as low cost sourcing, YoY sales, years of experience in order to mitigate risks associated with outsourcing of the products. Introduction Medical devices contract manufacturing sector is highly fragment with over 4000+ CMOs. This implies that an OEM has to establish strings with multiple vendors across different product types, thereby making their supply chain highly complex. Consider the case of a medical device OEM who is a 2 billion dollar enterprise and spends close to 30 million dollars per annum purchasing products from almost 300 suppliers for numerous products. This sort of arrangement might lead to inefficiencies in supply chain and procurement practices. Fragmented nature of medical tech CMOs is expected to move towards consolidation, and provide buyers with an option to have simplified supply chain in coming days. Author: Satish Tiwari

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