The last year has been a difficult time for the medical sector, facing unprecedented strain and major shortages of key medical equipment and personal protective equipment (PPE). Although some areas saw a rapid spike in demand, the medical device sector as a whole faced a slump in revenue last year due to the pause of elective/non-essential surgeries, experiencing an 85% drop in revenue between April and June. This drop in sales, alongside the ongoing Brexit implications, means medical device manufacturers need to diversify their strategies to ensure a strong rebound.
Localisation to globalisation
The crisis created a shockwave through the supply chain and caused vulnerability when countries were unable to access goods or experienced major delays. This ripple effect led the UK to localise more and look for resources and goods in the UK. A key example would be Rolls Royce’s pivot away from aerospace to produce ventilators for the NHS.
However, now that we are soon to enter a recovery period and borders begin to open up again, businesses will be looking to drive sales and expanding into new territories could offer greater opportunities.
The growing demand for medical devices in emerging economies like China, India, Mexico, Brazil and Saudi Arabia could present more lucrative potential than that of Western Europe, which is only achieving a 4% growth rate. These emerging economies have contributed to more than 80% global growth since the 2008 financial crash and have a combined population of 4.37 billion. Demand for better and price sensitive healthcare is on the rise and is being driven by an aging population, the need for cost-effective healthcare and high patient volumes.
These emerging markets are particularly underserved at the minute when it comes to healthcare, so unlike Europe where there are around 27,000 medical device manufacturers, operating in growing regions will allow companies to compete in a less saturated market.
From Paris to Bahrain
Intensifying cost and service pressures are causing medical device manufacturers to re-think their European distribution strategies. Brexit, the move towards value-based care, tightening cost margins and changing regulatory compliance are all making medical manufacturers reconsider their target markets.
The EU is the UK’s largest export market, every year the UK exports around £2 billion worth of medical device products to the region. Whilst the UK will remain to have a free trade agreement with the EU, there are significant border delays at the minute which makes it the prime time to investigate new markets. Regulatory changes have always presented challenges and in the EU, medical technologies are tightly regulated by laws that govern safety and performance, both pre- and post-market. The UK’s stringent regulations mean products produced in the UK and primed to be accepted by governments in various regions with minimal variations, Asia and Middle East included.
Supply chain considerations
Whilst the products are ready, the location provides amazing growth opportunities and less competition, how are the devices going to reach these markets?
For those who have predominately worked with Europe beforehand, the logistics process is no longer a trip across the pond, the journey is now thousands of miles across to the other side of the globe and when dealing with such sensitive products, this is no small feat.
As around 80% of the medical manufacturers in the UK are SME’s, they will typically work with a third logistics provider who will manage that aspect of the supply chain. Global supply chains are always becoming more complex, and if they are not managed correctly, they can become a barrier to market entry. It’s no longer the movement of goods from one location to another, it involves border controls, local legislation and regulations and time-sensitive deliveries. Medical device products can’t afford to be diverted or held up at local borders; they require a quick, safe delivery.
With Aramex as the logistics partner, these small to medium-sized businesses can leverage our expertise and seamlessly break into new markets, due to our local knowledge and regional infrastructure, something an SME can’t do in-house. As our headquarters is based in Dubai, we have both strong local knowledge of this emerging market and distribution centres based across the region. We also have expert custom team members at each prominent border to ensure a swift and easy transition through customs, to prevent these vital medical products being delayed on their way to their destination.
Overall, there is a huge potential for established companies to capitalise on these developing markets. This past year has taught the medical sector to be agile and whilst we can hope for a strong recovery period, it does not mean the sector has to go back to its old ways, there is a lot of untapped potential in the global medical market and logistics providers can help them bridge the gap.