In the medical plastics industry, outsourcing is not always a dirty word.
Sometimes it means production shifting to low-cost locations, the topic that became the hobgoblin of the U.S. presidential campaign.
But other times it means opportunity, as medical-device manufacturers increasingly look to shift manufacturing to their subcontractors, including injection molders and other processors. Many of them, in turn, are beefing up capabilities.
Medical molder Classic Industries Inc., for example, has doubled its engineering and product development employees in the past two years to 35 people, and its staff working with the Food and Drug Administration to 10.
Smaller plastics processors focused on medical are taking similar steps. Innovend LLC in Leominster, Mass., is adding engineering staff, spent $3 million to automate and snared its first government grant, for $100,000, for training to make its workforce more competitive.
The push is coming from the medical-device industry.
``Every single one of our customers and key prospects is telling us the same thing: They've all created departments that have something to do with strategic outsourcing,'' said Bill Partridge, health-care business unit manager at Nypro Inc. in Clinton, Mass. ``The net result of that has been more outsourcing than before. It also means more globalization.''
The medical-device contract manufacturing market is growing about 12-15 percent a year, much faster than the 8-9 percent growth in overall medical manufacturing, said Greg Audu, spokesman for Accellent in Newton, Mass. Accellent was created last year when UTI Corp. bought Medsource Technologies Inc.
Another large contract manufacturer, Avail Medical Products in Fort Worth, Texas, has a similar projection - that overall medical manufacturing will grow 7 percent a year through 2010, but outsourcing will grow more than twice that.
``I think there's a trend for medical [original equipment manufacturers] to become virtual companies in many cases,'' said Innovend President Roger Fluet. ``They will continue to do the things they are best at, developing products and taking care of their customers.''
Those changes are prompting U.S.-based plastics firms to make investments to handle medical work within the United States.
Molder United Plastics Group Inc. is investing in a clean room at its Anaheim, Calif., plant. Fluoroplastic tubing maker TexLoc Ltd. is adding a clean room at its Fort Worth headquarters and plans to build an adjacent, 20,000-square-foot factory there to handle medical and semiconductor work, said General Manager Dan Rodriguez.
During the past five years, the 100-person firm has tried to broaden beyond industrial tubing into medical and semiconductor applications. Today, medical is 20 percent of its business and its fastest-growing market, Rodriguez said.
``If we look at all the industries, it is one of the most stable,'' he said. ``It still yields reasonable margins and it is still considered an engineered product.''
While medical-device makers are pushing more manufacturing to U.S. subcontractors, they also are starting to head toward lower-cost sites. Several firms announced investments in developing countries during Medical Design and Manufacturing West, held Jan. 10-12 in Anaheim, Calif.
Plastikon Industries Inc. said it is building a medical molding plant in China, and Avail is building a plant in Shenzhen, China, to make single-use devices.
Not all overseas investment is for export. Nypro Inc. President Brian Jones said the firm has seen a significant rise in medical manufacturing contracts in China in recent months, with much of that demand from multinational medical-device firms that want to sell to the Chinese market.
Other executives said many medical parts that have migrated to Asia are closer to consumer products, such as in-home blood-testing equipment, and some said protecting proprietary products remains a big concern.
``Our customers are telling us that although it is very enticing, with the low labor rate, there is still deep concern about intellectual property,'' said Gil Reich, vice president of sales and marketing for South Plainfield, N.J.-based MedTech Group Inc., which in June announced plans for a facility in Costa Rica.
While it all adds up to a growing sector, the market remains competitive. Still, several executives talked about declining margins, even as sales increased.
``We're seeing some increased opportunities for sales, but the margins are not keeping up,'' said Joseph Policastro, president of Classic Industries Inc. in Latrobe, Pa.
