Since 2020, global supply chains have encountered significant disruptions driven by geopolitical conflicts, armed conflicts, climate change, and shifting demographics. These issues have been especially pronounced in the medical devices sector, where the need for resilient supply chains is crucial. The COVID-19 pandemic exposed the vulnerabilities in this sector, causing severe shortages of essential medical devices like ventilators, PPE, and diagnostic equipment. These shortages highlighted the urgent need for more robust and adaptable supply chains, says GlobalData.
In response to these disruptions, companies in the medical devices sector are strategically relocating their supply chains to mitigate risks and, in the long-term, to reduce production costs. Rising geopolitical tensions have prompted governments to introduce new support mechanisms for “reshoring,” “nearshoring,” and “friendshoring” specifically aimed at critical industries like healthcare.
Reshoring involves bringing parts of the supply chain back to the home country from overseas. Nearshoring moves business operations closer to consumer regions to decrease supply chain costs and increase efficiency. Friendshoring refers to relocating business operations to politically aligned allies to ensure more reliable and secure supply chains.
Thomas Fleming, Medical Analyst at GlobalData, comments, “In the US, measures such as the Chips Act and the Inflation Reduction Act are providing subsidies to vital sectors, such as semiconductors, which will impact the medical devices sector. Similarly, the UK government plans to invest billions in domestic manufacturing for life sciences, among other critical sectors. Despite slow economic growth making supply chain relocation expensive, companies are prioritising these steps to build resilient supply chains and avoid future shortages.”
GlobalData’s Thematic Intelligence report, “Supply Chain Disruption,” reveals that most manufacturers have already started reshoring their supply chains, with as many as 90 per cent reporting positive effects on their business for some industries (Censuswide survey).
Regions like Latin America and Mexico are emerging as attractive alternatives to previous manufacturing locations, offering large talent pools and highly educated workforces. Southeast Asian countries such as Malaysia, Vietnam, and Thailand are also becoming popular due to their lower labour costs and rapidly growing infrastructure.
“Overall, the trend towards reshoring, friendshoring, and nearshoring is reshaping the global supply chains of the medical devices sector. This strategic shift aims to enhance resilience and adaptability in the face of ongoing and future disruptions, ensuring that critical medical supplies remain available when needed most,” concludes Fleming.
Edits made by EH News Bureau