Phase 2 Case Study
Contract Manufacturer Expands Production Nearshore with New 30,000SF Facility
A conversation with Phase 2 Medical Manufacturing, featuring: Adam Prime, CEO and Ben Prime, Technical Manager OUS
WHY TIJUANA BESTS OFFSHORE MANUFACTURING
Nearshore Total Landed Cost Shows Offshore is More Expensive
We found that buildings were readily available, and business and labor costs were better than in Costa Rica. We [also] ruled out China because it was not a good fit. Beyond the political situation and rising labor and shipping costs, it was too far away for us to manage.
Customers began telling Phase 2 that the availability of low-cost labor outside the United States would be a criteria for vendor sourcing going forward. Phase 2 ruled out China due to rising labor costs, rising shipping costs and being too far away to manage. Costa Rica was also ruled out, largely because of the 18 days time on the water to the United States. With North America generating the most revenue for the medical device industry in 2013, and the US representing 38% of the global sector, manufacturers have lost their infatuation with offshore manufacturing.
ADVANTAGES OF MANUFACTURING IN TIJUANA
A Cost-Effective, Well-Established, and Mature Industry
The labor force appears to be abundant and capable. Being a finished goods contract manufacturer of medical devices, cost is a huge deal for us, as is proximity to the United States.
Just south of San Diego, California, Tijuana has an over 30-year history in medical device manufacturing and is highly regarded as a major global hub for medical device manufacturing. Boasting a 50,000 person-strong labor pool directly serving the 70 companies operating in the region, the medical device industry in Baja California represents the largest concentration of companies and of job creation in Mexico.
Mexico is also the fifth largest exporter of medical products in the world, with 50% of these exports coming out of Baja California.
ACCESS TO NEW MARKETS & CUSTOMERS
How Nearshoring Creates New Supply Chain Opportunites
Our customers are looking for more vertical integration. The new nearshore plant and our new capabilities in medical injection molding are significant milestones in Phase 2's growing abilities to meet and even exceed our client’s expectations; while also attracting new customers seeking high-quality contract medical manufacturing.
With global medical device outsourcing forecasted to reach more than $50 billion by 2020, there are no shortages of new markets and new customers to tap into. Strategic positioning and location are now just as crucial as your marketing and sales force. With an average of 15% production cost savings for OEMS who outsource to CMOs, Phase 2’s expansion in Tijuana has placed them at the center of the industry. With the trending best practice of the “One Stop Shop,” medical device OEMs are now seeking contract manufacturers with a global footprint and an increased breadth of services and capabilities.
GETTING SET-UP IN JUST A FEW MONTHS
Working with CPI is the Most Cost-Effective Way to Expand
Phase 2 was set up in Tijuana in months, and the only way it was possible was through the efforts of CPI. CPI visited our plant in New Hampshire to get an excellent understanding of what we do, how we do it, the space we needed, and the level of expertise required by our labor force. These details allowed them to search the available real estate, as well as calibrate themselves on what style of employee Phase 2 requires.