Two strategies that help lower total cost

27 November 2009

Susan Mucha

One positive trend I’ve seen driven by the recession is that there are far more conversations taking place relative to the role of manufacturing in global competitiveness.

In the US, economists and policy makers finally appear to understand that manufacturing can create better middle class jobs than the service sector. Original equipment manufacturers (OEMs) are also focusing more on the true total cost of manufacturing strategies rather than just following a migration path to the lowest cost labour market. Hopefully, both these realisations will contribute to a stronger domestic manufacturing base and more competitive globalisation strategies.

I continue to be impressed with the public-private partnerships I see in Singapore.

Singapore has also seen maturation in its manufacturing sector, but the response of its government and manufacturers has been to continually focus on ways to both maintain domestic competitiveness and leverage the resources of developing labour markets within the region. In this column, I’ll focus on two examples of positive public-private partnerships worth more scrutiny.

The first involves strengthening of manufacturing supply base capabilities in the medtech sector. The Singapore Institute of Manufacturing Technology (SIMTech) www.SIMTECh.a-star.edu.sg, a research institute of the Agency for Science, Technology and Research (A*STAR) www.a-star.edu.sg, launched the Medtech Manufacturing Consortium in October 2009. The 26-member consortium reinforces local industry capabilities and establishes medical technology R&D platforms for technology and knowledge transfer by exploiting the results of R&D collaboration with the research institutes, value chain partners and MNCs.

Focused areas of R&D collaboration will include:
• Forming technology for precision forming of medical devices and medical equipment components of polymeric, metallic and ceramics materials for use in safety needles, lenses, polymer-based microfluidic chips for DNA analysis and medical diagnostic applications
• Surface finishing to anodise and polish surgical materials for good corrosion protection, bio-inertness, anti-sticking and durability
• Carbon coatings surface finishing for implantable parts to increase biocompatibility and mechanical performance of metal parts used as implants
• Flexible and Conformal Technologies for wearable medical electronics and sensors
• Micro-laser welding to join dissimilar materials where heat sensitivity can be a problem
• Mass finishing of small medical components by abrasive flow machining where processing of complex internal passage is inaccessible by conventional methods.

Training has also been addressed. The Workforce Skills Qualifications (WSQ) Graduate Diploma in MedTech Manufacturing is a training program developed by the Singapore Workforce Development Agency (WDA), www.wda.gov.sg, in collaboration with SIMTech. This programme aims to equip existing engineers and technical specialists with the requisite knowledge and skills in the latest medical device regulations and manufacturing technology to support the emerging medical technology manufacturing sector in Singapore, as well as to facilitate the entry of new talents into the industry.

This type of public-private partnership is good for two reasons. First, it provides a path for manufacturers to enhance internal capabilities and staff without substantially increasing overhead costs. This is good for long-term competitiveness of both individual suppliers and the region as a whole.

Secondly, it benefits multinational companies (MNCs) sourcing in the region because it enhances the capabilities of suppliers supporting a sector. One challenge for companies sourcing in sectors with specialised quality requirements can be finding niche suppliers with the appropriate internal systems and capabilities. The consortium’s focus on a wide range of manufacturing technologies and the MedTech Manufacturing training component help ensure that even niche suppliers will have a path for capabilities improvements.

This leads to a related discussion: efficiently finding niche suppliers. It is easy to find high quality electronics manufacturing services (EMS) and popular custom component suppliers in virtually any part of the world. However, finding component or subassembly suppliers with ISO 13485 certification, the ability to work with high mix, variable demand projects, or the ability to procure and work with specialised, medical grade materials can be a challenge in many lower cost labour markets.

Singapore also excels in this area. International Enterprise (IE) Singapore, www.iesingapore.com, is an agency under the Ministry of Trade and Industry. IE Singapore assists Singapore-based suppliers wishing to expand to new markets and foreign MNCs wishing to find new suppliers. What I think helps differentiate its approach from other trade promotion agencies is the fact that IE Singapore’s staff includes engineers, which helps ensure that the agency’s supplier recommendations are in line with the MNC’s specific technical capability requirements. MNCs can submit their specifications for supplier capabilities to an IE Singapore representative and they will develop a list of compatible suppliers, even in hard-to-find commodities. In some cases, arranged visits may include side trips to satellite facilities in other lower cost labour markets such as Indonesia, Malaysia, Vietnam or China. This makes it easy for MNCs to consolidate regional site visits/audits to multiple suppliers in a single trip.

The agency has offices in over 30 cities worldwide including London, Frankfurt, New York and Los Angeles, and also organises trade missions of suppliers to various countries which can provide a localised “first look” to sourcing teams wishing to explore options prior to travelling to a supplier facility.

Finally, IE Singapore teams with other trade promotion agencies and associations to create focused supply base matchmaking events and conferences to allow MNCs to schedule trips which combine relevant educational opportunities with pre-arranged supplier tours. The next event of this nature is the Global-Asia Trade Exchange (GATE) 2010 Medical Technology, scheduled for 18-19 March 2010 at the Suntec Singapore International Convention & Exhibition Centre. This business matching event seeks to initiate successful partnerships by short-listing the most suitable regional suppliers in the electronics and precision industries for medical technology buyers through a process of pre-qualification based on each MNC’s specific supply base identification specifications. As my previous columns related to trade shows have indicated, in today’s economy trade show attendees need to be able to cost justify the benefits of their trips. The ability to multi-task pre-arranged supplier visits with conference attendance and a regional networking opportunity supports that requirement nicely. Detailed information on the Medtech GATE event is available from Ryan Ong at: ryan_ong@iesingapore.gov.sg.

Ultimately, these types of public/private partnerships benefit both the home country’s manufacturing base and MNCs wishing to source in the area by leveraging regional infrastructure synergies and minimising cost. In the case of supplier matchmaking activities, non-value added “search learning curve” costs are eliminated from both the supply side and sourcing side of the equation. The examples discussed above represent not only opportunities for companies who choose to utilise them, but also are examples worth emulating in other regional manufacturing stimulus initiatives.


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