Supporting value and reducing costs: a de-risked approach
The COVID-19 pandemic has shifted the way companies operate, with many businesses having to reassess established processes in order to stay competitive for the long-term. Deloitte’s 2020 Global Outsourcing Survey reported that, “COVID-19 is signalling a return to basics: shoring up value and driving down costs, with a renewed focus on risk management”. 1
Since the beginning of the pandemic, the lateral flow industry has experienced rapid growth, becoming increasingly competitive: these changes are likely to remain in place well after the pandemic is over.2 As a result of this transformation, rapid test companies or low volume in-house manufacturers will need to chase opportunities while remaining competitive by pursuing de-risked routes to market.
In this blog we discuss why outsourcing lateral flow production to a trusted, high-volume manufacturer can improve output and rationalise costs, allowing businesses to grow while focusing on core activities.
Why outsource your lateral flow manufacturing?
The pandemic has also proved that, in many sectors, people do not have to be in the same physical location to work together efficiently. In other words, businesses can be and need to be agile to operate in a post-pandemic world. As reported by Deloitte, “COVID-19 has banished the idea that physical colocation of resources is necessary to develop a trusting relationship…This will likely lead to an increase in outsourcing.”3
This trend applies to the diagnostics sector and, particularly, to rapid test manufacturers. With the public becoming increasingly familiar with different types of diagnostic tests, a growing demand for convenience and rapid solutions has emerged.
With a growing demand for rapid tests and an increasingly competitive landscape, diagnostic companies need to adopt agile approaches. Outsourcing the manufacturing of their rapid tests can therefore be a good option, with the likely payoff being less overheads and capital expenditure, and a better COGS (cost of goods) to Sales ratio.
Driving down costs, securing supply chains and agility
Deloitte’s 2020 Global Outsourcing Survey outlined cost reduction, underpowered in-house supplier management and a need to be agile as key drivers for pursuing an outsourcing strategy.
Outsourcing enables a stable fixed cost per test by removing overheads or variable costs or reducing the need to continually invest in equipment and resources. This straightforward cost structure enables greater control of cashflow while maximising revenues and minimising risks.
Such costs include:
- Leasing machinery and buildings
- Staff training and recruitment costs
- Offsetting quality control issues
- Fluctuation in material prices
- Supply chain glitches
Dedicated rapid test manufacturers, like Abingdon Health, invest in the latest technology and adopt continual improvement processes to maintain the production of high-quality rapid tests, leaving clients to focus on growth strategies or research into their next product.
Solid supplier management
It can take years to establish a solid network of suppliers, requiring dedicated expertise to plan and maintain procurement processes. Low resources coupled with other operational distractions hinder the ability to manage inventories effectively. With a dedicated lateral flow manufacturer, roles are defined by expertise allowing buyers, manufacturing leads and project managers to plan and bring in materials in-line with production schedules. When demand increases, these specialist roles can adapt supply and stock control models to suit demand.
By working with contact manufacturers with strong supply chain relationships and processes, the delivery of an assay is de-risked, limiting disruptions in manufacturing schedules and delivery times.
Throughout the pandemic, businesses had to become more agile, rethinking their operational processes and expenditure to secure long-term survival. When the world moves out of restrictions, COVID has set a path focused on being agile while looking to reduce costs and risk.
For organisations where lateral flow manufacturing is low-volume or non-core, meeting demand is going to become challenging with constant commercial distractions or no room to adapt or grow. Moving all or part of lateral flow manufacturing to a new partner can either support current manufacturing or significantly increase output and reach.
Where meeting demand is hindered by inadequate capabilities or capacity, companies have to seek alternative options to embrace new business opportunities.
Meeting the increasing demand for lateral flow
As demand for lateral flow tests grows, companies will need to work hard to gain market share in an increasingly competitive space. Relying on non-core in-house capabilities or low-volume capacity is likely to limit profit and prevent businesses from being competitive.
If your company is at a critical point where current solutions are hindering market share or growth, switching to a new lateral flow manufacturer or using a second manufacturer alongside primary solutions can be an option.
Speak with Abingdon Health* and see why using our experience, high-volume automation and established supply chains is a de-risked approach for accelerating your lateral flow assay ambitions.
*Abingdon Health offers no obligation lateral flow project consultations under a non-disclosure agreement.