Subjects - Business

Outsourcing offshore to China works for Printronix, a company that for over 30 years has designed and manufactured a broad range of line matrix printers, ultra high frequency radio frequency identification (UHF-RFID) printers, thermal bar

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

code label printers, and continuous forms laser printers. A market leader in the printing business, outsourcing allows Printronix a competitive cost advantage but also creates challenges in communication, lead times, and forecasting.

Th

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

e company has been outsourcing since its inception, but they hadn’t done it heavily until 10 years ago. The increase in outsourcing is a direct result of market circumstances, since their competitors also outsource. They chose China as

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

the main destination for their supplier base because cheap labor and supplies are readily available and because many of their suppliers have moved there. New suppliers are chosen via quality supplier surveys and pre-production pilot batch

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

es. ISO certification is preferred, but not required. China has been a fast growing market with “centers for excellence” offering abundant resources and skilled workers at the same place. Ultimately, outsourcing to China allows for an opp

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ortunity to penetrate into one of the world’s largest markets (I.E. China itself).

Major substitutes for Printronix’s products are laser printers and inkjet printers. The company considers that the propriety ribbons for its impact print

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ers are a core competency that gives the company its competitive edge. The quality of the ribbon is essential for Printronix to compete head on with laser printers.

At first they had outsourced the manufacturing of ribbons to China. How

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

ever, design and quality issues and the long supply chain of these important products made Printronix choose to move it to Mexico to be closer to the Irvine headquarters, as well as the Americas market. The quality issues, both in produc

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

t design and process quality, could be given more focus in Mexico and are now solved. Ribbon products can be produced directly to customer orders and shipped in a day or two instead of weeks.

Financially, the company faces tough challeng

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

es due to their heavy investment in RFID technologies. Printronix operates in many different countries and will hedge against currency fluctuations where appropriate. Furthermore, the bulk of their outsourcing is in China, and since Chin

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

a’s currency is pegged to the US dollar, they do not feel threatened by the currency fluctuations between the US dollar and Chinese Yuan.

Printronix faces a number of outsourcing challenges including lead times, forecasting, and communic

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

ation. Shipments from China and other Asian countries are brought to Singapore for printer assembly. Shipments from Singapore to Irvine and Holland are then made via cargo ships which typically take 3-5 weeks to arrive. If there is a pr

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

oblem with the product when the container is opened, additional time is required to repair the items on the spot. Rarely would the company fly the container back and have the item repaired in Singapore or China because of the time and ex

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

pense involved. If the product is highly defective then the shipment is discarded, and a new shipment must be sent via airplane at higher transportation cost.

Forecasting of demand is crucial because of the long lead times, and a change

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

in demand could result in the company dealing with too much or too little inventory. Too much inventory means high storage costs, and too little inventory results in an increased wait time and decreased customer satisfaction.

Finally, a

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

problem when outsourcing is communication for several reasons including language barriers, time zone differences, and Cultural differences. Communication between the headquarters and the satellite locations worldwide is done via teleconf

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

erencing and videoconferencing. Even this is hard to plan considering the huge time difference of 15-16 hours. The language barrier is addressed by managing Asian suppliers using Singaporean management who speak the language and understan

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

d the cultures. The cultural differences such as holidays, beliefs, and traditions also affect operations.

As stated before, outsourcing is an essential component to Printronix’s business model, and it directly affects their bottom line.

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

The key question that they face is how extensive should they outsource and where is the stopping point? By managing cost considerations along with quality issues, Printronix has shown an ability to effectively outsource given the curre

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

nt global conditions. With China’s economy growing and developing, the company may have to evaluate future outsourcing targets such as Vietnam, Thailand, Eastern Europe and Africa in order to maintain their cost structure.

Dr. Joe Greco

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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