RCA Radio is a podcast bringing you the latest news and insights in regulatory, compliance, and quality assurance. A transcript for “Episode 008: Aging Facilities and In-Shoring Product to the US” follows. Listen to the episode here and on your favorite listening apps, including Apple Podcasts and Spotify.
Erika Porcelli: Hello, and welcome to RCA Radio, a podcast covering the latest news and challenges in regulatory compliance and quality assurance facing the life science industries. I’m your host Erika Porcelli. Today, we are covering episode four in our supply chain management series. Companies across America are not only evaluating their supply chains, they are also evaluating insourcing of manufacturing. In this episode, we will be discussing aging facilities and inshoring product to the US. Today, I’m joined by Brendan McCrea, who is RCA’s Director, Validation Program Management. Brendan, welcome.
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Brendan McCrea: Hello Erika. Nice to be here.
Erika Porcelli: Thank you for joining me. I know you’re taking time out of your busy schedule. So, I think the biggest thing is that we have seen, with the recent COVID pandemic, that there is a lot of discussion about returning manufacturing of critical medical devices and pharmaceutical products to American shores. What are some of the considerations manufacturers should take into account when evaluating these projects?
Brendan McCrea: Oh yes. Certainly, there’s been an awful lot of discussion in industry about being able to secure our source of supply for the American population. And I’m sure that there’s a number of different initiatives that are out there right now with companies taking a look at these projects to see what the feasibility is of moving offshore locations back into US territories. I think the first item that an organization should take into consideration is the facility that the production operations would be moved to. There are different options that are available and features and benefits between brownfield and greenfield facilities. Both have different types of advantages and challenges. A brownfield, meaning moving into an existing facility, where there may be some existing production occurring, generally has a faster startup because there is an existing, not only, physical infrastructure, but normally, there are quality systems and personnel in place that are familiar with those projects. And greenfield has a longer design time and construction time, but has the advantage of being able to be customized to the products that are going to be manufactured.
So depending on the type of commodity or pharmaceutical that’s going to be manufactured, the first step is to take a look at the type of facility that you’re going to be moving into. An assessment of the impact of the existing operations that are going on in a brownfield project should also be thought about. Whenever you’re moving in a new product line into an existing facility that’s going to use common infrastructure and common expert systems, you do need to take an evaluation of what the validation status of those existing operations are because the transfer of a new product in the facility can trigger a regulatory inspection, and also could invalidate some of the existing qualification and validation packages that may already exist in that location.
“Whenever you’re moving in a new product line into an existing facility that’s going to use common infrastructure and common expert systems, you do need to take an evaluation of what the validation status of those existing operations are because the transfer of a new product in the facility can trigger a regulatory inspection.”
In addition, I would say before the facility itself is considered, we should do a business case to take a look at the true costs of manufacturing. Generally speaking, a lot of these products have moved offshore to take advantage of the lower-cost labor environments, so you need to consider what technology transfers hurdles may need to be overcome, particularly when moving a mature manufacturing process to a new location. When you do a process transfer and the technology transfer, normally a lot of the items that perhaps have been stabilized in the existing location can bring up new challenges, both in terms of being able to establish a redundant process that produces the same product. You have to take into consideration whether you’re going to be duplicating or relocating equipment, because duplication sometimes does not necessarily produce the same exact process result that you’re expecting. There also is the consideration of all the supplier identification and management of sourcing that equipment as well.
You also need to make sure that you’re considering all of the supply chain qualifications for all your materials to be able to support that product, also including transport in some cases, because for some critical ingredients and finished products, you need to have a qualified transportation system as well. For pharmaceutical products, an evaluation of the supporting utilities systems qualification process, and equipment validations, and all the associated costs and durations will have impact on the feasibility of the project. So in general, you should put together a business case that takes into account what your project approach is going to look like, looking at the features and benefits of different approaches, whether you’re going to be insourcing and duplicating, or you’re going to be relocating an existing line that is currently in a low-cost market, and come to a decision as to what the regulatory impact could be on both of those approaches, and put that into a dollars and cents return on investment model that will help you justify the project and ensure that it’s actually feasible to do so.
“you should put together a business case that takes into account what your project approach is going to look like, looking at the features and benefits of different approaches.”
Not only do you have to take into account the business costs of the project to relocate back into the US, you need to compare that against the strategic value of relocating that source of supply back into the United States. Companies may also be looking to expand capacity and have duplicate operations in two locations. That can be a very beneficial business model, because that way, you can keep your existing operation running in the location where it currently is and gives you more time to be able to establish the operation in the United States. You also have the ability to do comparative studies to demonstrate that the product that you’re manufacturing is actually still within the regulatory and design requirements that you originally have filings and approvals for.
Supply chain for raw materials should be very carefully looked at. Are these materials actually going to be available from US sources? A lot of the reason for globalization that we experience now is that a lot of our APIs, and ingredients, and raw materials for medical devices are coming from offshore suppliers. In some cases, those materials are not going to be readily available, and particularly, in quantity available within the United States. So you should really take a very serious look at what your supply chain is going to look like. The location of the manufacturing may not be the most critical point in terms of being able to assemble the finished product. You may have to take a look first at where all your materials are coming from, and the manufacturing location may become a secondary consideration. With the insourcing of the manufacturing continue to have to provide to the same global suppliers, which may negate the benefits of relocation.
“the reason for globalization that we experience now is that a lot of our APIs, and ingredients, and raw materials for medical devices are coming from offshore suppliers.”
Many of the mature products that have been moved to low-cost labor markets to drive costs out of the system, particularly for low margin, low complexity medical devices, these products have opportunities for automation that can reduce costs and improve product quality if you’re considering a relocation. This would apply to products like masks, and gowns, and surgical supplies that are obviously in high demand due to the COVID pandemic. And these are currently in low-cost markets to drive labor cost out. So a lot of successful projects are looking at not only moving the actual existing manufacturing operation, as it is currently designed, where it’s highly labor-intensive, but looking at supply chain automation opportunities in there that not only can increase product quality, but also increase capacity.
Another thing you need to be considering, particularly from brownfield facilities, is inspectional readiness. As I mentioned earlier, new registrations of products at a particular site can trigger a regulatory review or FDA inspection, so companies not only need to evaluate the current status of the product that they’re moving in, but also the overall inspectional readiness of the facility in general, with the products that they’re currently manufacturing there. In general, a lot of mature facilities that are making low-risk products are not high on the inspectional radar screen for the Food and Drug Administration. When a lot of products are moved back in and new registrations are put in place, that is a point that can trigger an inspection, so you have to make sure the entire facility is ready to have those investigators come in and take a look at your operation.
“When a lot of products are moved back in and new registrations are put in place, that is a point that can trigger an inspection, so you have to make sure the entire facility is ready to have those investigators come in and take a look at your operation.”
Erika Porcelli: So you touched on, quite a few times throughout this conversation, about an inspection potentially being triggered. Do you think that it is imminent that that might happen, or is the FDA really taking a risk-based approach in performing these, just given the climate and some of the challenges that are being faced with performing inspections?
Brendan McCrea: There’s no question that they take a risk-based approach. The risk is, what is the overall population harm that that product has? For instance, if you’re looking at a relatively simple medical device, such as a gown or a mask, that’s not going to come up on criticalities list in their algorithm for determining which facilities require inspections. However, if you’re moving a generic pharmaceutical product that’s been well established in the manufacturing site for a number of years, that has a high potential for public risk, and that will definitely trigger a shorter inspection timeframe that could bring the agency on site. So if you’re looking at bringing a product into an existing pharmaceutical facility and adding a new drug there, that has potential inspection risk that should be taken very seriously. You should really do a thorough evaluation of your systems to make sure that that drug, when introduced, is going to be ready to pass muster and is meeting all the requirements of the regulation.
Erika Porcelli: What business and quality system areas should companies be aware of that an insourcing project will impact?
Brendan McCrea: Well, from a business point of view, supporting personnel, warehousing, and office space should also be considered, as well as your enterprise systems, such as ERP, the electronic document control, CAPA management systems, PM management systems, et cetera. The benefit of a brownfield organization is that you have an existing staff there. But whenever you’re moving a new product in, it’s not only the manufacturing space that you need to take into consideration. Clean rooms, and clean media, and warehousing is one aspect of it, but you will require additional staff and you need to have adequate workspace for them to be able to successfully operate. The other thing is, these legacy systems that I’m talking about from an enterprise system point of view, such as ERP, and eDoc, and CAPA management systems, they may be at their capacity and you need to take into consideration the volume of products that you’re going to be moving into that facility and making sure that those systems are robust enough to be able to handle that on-loading.
For pharmaceutical products, you really do need to make an assessment of supporting utilities, which are essentially part of the manufacturing process. Are you going to have enough clean media to support the additional manufacturing? That can be water, gasses, waste treatment systems, et cetera. Is there sufficient cleanroom space and in the right classifications? Will you need do additional cleanroom classification and qualification as part of the move? Do you have adequate warehousing and appropriate cold storage for biological products? Do you have a plan for your working and master cell banks, and how is that going to be handled? Is that going to be internal to the organization, or is that going to be done by a CMO organization? All these points need to be considered when you’re evaluating doing a relocation. Obviously, medical devices typically have fewer hurdles to entry, and fewer hurdles to start up, and are generally easier and shorter-term projects to execute.
“For pharmaceutical products, you really do need to make an assessment of supporting utilities, which are essentially part of the manufacturing process … Medical devices typically have fewer hurdles to entry, and fewer hurdles to start up, and are generally easier and shorter-term projects to execute.”
But a lot of the supply issues that you see as a result of COVID is going to be focusing on our pharmaceutical manufacturing capabilities, the ability to manufacture our own drugs and our own vaccines and not being reliant on third party countries that could have political ramifications. So it’s likely that these projects are also going to be examined. So from a quality system point of view, changes can be required in almost all areas. You’re going to have to take a look at quality control methods of validation and transfer because obviously, those methods that are supporting the drug in its existing manufacturing location need to be replicated in the new location in the United States. You have to make sure that you have the adequate quality for batch or lot release, whether that’s a pharmaceutical product, or a medical device, or a combination product. You’ll need to look at the robustness and effectiveness of your CAPA systems, your deviation and complaint handling and nonconforming systems that are in place there.
You should do an evaluation upfront, to make sure that those systems are under control. It’s an area of a high focus for the FDA. So when you’re considering moving into a brownfield facility, the first thing, just like in any other inspection, you should take a look at the CAPA system and see how effective that already is. You don’t want to be adding an additional burden to a system that may already be overwhelmed. And I think that’s one of the critical points that you need to make when evaluating the quality system assessment of the facility that you may be moving into. For process validations and qualifications as well, has the facility been keeping up with our revalidation schedule? That tends to slip over time, as it becomes less and less important as products become more mature. So that’s an area where your periodic qualifications may be delayed or may not be fully adequate. But again, tracing back to the inspectional readiness issue, if you’re evaluating moving a new product into an existing facility, these are areas that you really need to take focus on.
“You should do an evaluation up front, to make sure that those systems are under control. It’s an area of a high focus for the FDA.”
If these are new facilities, on the same point, you need to make sure that you have plans to be able to put these systems in place. There’s the physical construction of an aging facility and assessing what the adequacy of their clean rooms are, adequacies of their supporting utility systems, adequacies of warehousing, adequacies of office space, but you also need to make sure that the quality systems are going to be planned for, and you’re going to have adequate staffing to be able to put all the necessary elements of a quality system in place from scratch. And that can require a fair amount of organizational development that would have to go out of hiring. You would have to be doing a tremendous amount of training of your production staff. It’s a fairly large hurdle if you’re going to be doing a greenfield facility.
Erika Porcelli: What stage-gates or project planning pathways should companies consider when they’re evaluating the ROI or feasibility of insourcing to an existing aging facility?
Brendan McCrea: Well, my recommendation is that you start with a thorough examination of the design specifications of the product in question. What tends to happen is, is that once you have a mature product, you either have a drug master file or a design history file that is quite mature. That product, at one point, was innovative and reached the point where it had maturity, not only in the marketplace, but also in its operations, and that product was transferred to a low-cost environment. Typically speaking, updates to the design specifications as a result of engineering and processing changes that have occurred over the years may not have fed back into that design history file or that drug master file. Do these documents actually reflect the current design and manufacturing conditions and requirements for the product? A lot of times, that information is now buried in process and production specifications that don’t necessarily make it back to the design history file.
So taking a look at that from a remediation standpoint is probably step one in terms of the stage-gate. Are you ready, in essence, to be able to put together another regulatory file to rerelease that product? That’s the criteria that I would be using if I was evaluating moving a mature product back to our shores. In many cases, the immature products may have design remediation requirements that need to be addressed first, before you initiate the transfer project. Once you have these design requirements, we can step back into discussing what the supply chain requirements are. Are you going to be able to source all the raw materials for this product in a way that is actually going to make it effective to move it back to our shores? In some cases, as I mentioned before, these materials may not be available from US sources, which may negate the advantages of the insourcing efforts.
“Are you ready, in essence, to be able to put together another regulatory file to rerelease that product? That’s the criteria that I would be using if I was evaluating moving a mature product back to our shores”
You may find that a particular API, or a particular polymer, or a particular packaging component, we may not have a company here in the United States that is actually manufacturing that for us. So you may still have the transport issues and the sourcing issues that you are experiencing in your current location, where that product exists. So after you’ve got the design requirements and taken a look at your supply chain, the next thing is to do a detailed and formal risk assessment at the project level. You really need to identify areas that are going to require mitigation, so the supply chain systems, the utilities that you may have in place in a brownfield facility, do you have adequate workspace?
What are the regulatory inspection risks as we talked about before? There’s high and low-risk products that are out there. Commodity items, just to repeat myself, are probably going to be relatively low risk, and I think that there’s a lot of opportunity there, due to the COVID pandemic, to bring in products such as masks, and gowns, and isolation materials, perhaps even ventilators. High-risk products are going to be pharmaceuticals, vaccines. This type of manufacturing, that’s going to highlight a lot of regulatory scrutiny and really needs to be executed in a way that is near perfection. So that step of doing a risk assessment is probably the most critical, in terms of being able to make the business decision as to whether it’s viable to bring this product back into US shores.
Be careful to also consider how existing production operations are going to be impacted. Just moving a new product in is going to have an impact on existing operations. You may not have sufficient utilities capacity. You may not have sufficient cleanroom space. You may not have sufficient regulatory, and quality, and production professionals to be able to support the product. All of that needs to be put together in a risk management document. The tools and ISO 14971 and Q9 can be very useful for putting this together, and then building that up so that you can identify what actions are going to necessarily be taken before you go into formal project planning.
The next step after you have a viable risk assessment that’s been reviewed by professionals who are familiar with the product and are familiar with the industry in the US is to develop a transfer plan. What facility build-outs or modifications are going to be required? What’s the construction timeframe for doing that? Is that going to impact your existing ability to continue to supply existing products? Will the equipment be relocated or purchased new? That is also going to have an impact, in terms of doing inventory builds to make sure that you’re not depriving the marketplace of existing products, which requires very careful planning if that’s going to be the case. When you’re purchasing new equipment, you also need to make sure that it’s going to be able to replicate the exact operations that are currently occurring in the environment where it is now. In a lot of cases, there are no such thing as duplicates. Everything always has some slight changes that is going to necessitate doing a lot of engineering studies to be able to make sure you’re going to be able to replicate the product in the new location.
“after you have a viable risk assessment that’s been reviewed by professionals who are familiar with the product and are familiar with the industry in the US is to develop a transfer plan.”
Do the utilities in the facility require an expansion of capacity, as we mentioned before? For pharmaceuticals, clean media is going to be very critical. These are very expensive waters. Are you going to have enough WFI? Are you going to have enough PFPW? And again, don’t forget to consider looking at your waste management capacity as well, particularly in an older facility that is a multiproduct facility now. You also need to take into consideration how long it’s going to be able to qualify suppliers and also your internal processes. If you’re developing a new supplier base and you have the materials that are going to be available in the US, that’s going to require a significant effort of doing supplier audits, and supplier qualifications, and also actually qualifying the materials, so all the chemistry and engineering that needs to go in to demonstrate that the material is suitable for producing the product that you’re making.
You also need to make sure that you’re going to be able to have time to be able to do all the qualification and stabilization of your internal processes. Whenever you’re setting up a new manufacturing line, nothing ever goes as planned. It’s always something that is going to crop itself up and present a technological challenge, so there needs to be time plans for prototyping and engineering runs before you go into a formal qualification. You’re also going to need to identify your equipment suppliers and your utility and cleaner and suppliers, and make sure that they’re on board with being able to provide their services in conjunction with your timeline.
“Whenever you’re setting up a new manufacturing line, nothing ever goes as planned. It’s always something that is going to crop itself up and present a technological challenge, so there needs to be time plans for prototyping and engineering runs before you go into a formal qualification.”
And once again, I need to stress, don’t forget to include an assessment of inspectional readiness. As these products are transferred into the facility, facility and utility modifications are also going to need to be qualified. And this may lead to remediation or requalification of legacy systems in an existing plant. Whenever you’re touching an existing water system, whenever you’re touching an existing air handling unit and trying to increase capacity, that’s going to trigger a requalification effort. And that shouldn’t be ignored in your project planning, as those are time-consuming activities that are facing a lot more regulatory scrutiny now from the Food and Drug Administration.
Erika Porcelli: Yeah. You bring up a really good point with regard to planning and the level of planning that’s required. What are the risks and benefits that you see for companies that are looking to provide more security for their supply chains by insourcing operations to the US?
Brendan McCrea: Well, I think what most companies do in a lot of projects that I’ve worked on, is you have set up parallel manufacturing at both existing and proposed sites. That, by far, is the best way to minimize risk. You still have a continuing source of supply while you are getting the new operation implemented, and stabilized, and qualified. It also makes sure that you are ready to address and still have the existing staff from the sending site to the receiving site to be able to provide you with technical regulatory and quality support. Generally speaking, that’s probably the least risky approach. It maintains the operations at the existing facility until the new location is shown to be successful at producing the same product. This is, by far, the most secure way of assuring continued supply.
“what most companies do in a lot of projects that I’ve worked on, is you have set up parallel manufacturing at both existing and proposed sites. That, by far, is the best way to minimize risk.”
For mature medical products, the risk and relocation is usually pretty low. You have a very well known, and established, and characterized manufacturing process. You know what the utility requirements are. You have a longterm relationship with your supplier base. These products usually do not require extensive investment in facilities and supporting systems. I would call these a commodity product. They have known and tangible technologies and are commonly moved and duplicated in low-cost regions. You may find that, over the years, that same product has been moved from Mexico to Central America, to Central Europe, to Asia, producing the exact same product against the exact same specifications. For higher technology products, the risk is a little bit more significant because of the capital costs involved. You’re making a significant investment in equipment and facilities. These are, generally speaking, much more expensive and technologically challenging products to manufacture, whether they’re small molecule or large molecule, and duplicating those operations and meeting the requirements of the regulatory approvals is quite challenging.
You have to demonstrate that you’re manufacturing the exact same product, and that is a very significant technological hurdle. And you should plan to have this take several years. Three to four years is probably a realistic timeline for relocating a pharmaceutical product back into the United States. I think it’s something that we definitely need to do and have that capability. There is very much a known infrastructure here in the US, with CMOs as another option that a company may take into consideration if they have a wholly-owned site overseas. It’s possible that a CMO that is a professional at being able to insource and manufacture drug to specification, that that may be an interim solution while you’re stepping up and building your own CAPA facility.
Erika Porcelli: Yeah. That’s a really interesting perspective. What would you say to organizations that have existing US under-utilized facilities and want to restart operations? I mean, would you look at this from a, maybe you begin with a CMO until the site is ready, or what would you… What are your thoughts?
Brendan McCrea: Well, I would definitely start with a CMO and get them doing the initial work. If you don’t have an existing facility here in the US, you’re going to be having to do a lot of transfer studies, method validation, small-scale batches. A CMO can certainly assist with doing that. They also have the ability for biological products to be able to put together your master and working cell banks and get that in place and stabilized. And they can continue to be your supplier as you move into your own pilot and production operations, as your facility is built out. It can certainly shorten the timeline and reduce the risk. Once again, I’m just going to reiterate that they are professionals at doing this. They are commonly taking in products from a number of different sources, and are able to do the scale of operations, in a way that’s geared for a multiproduct facility. So I would definitely partner with a CMO as a means of being able to mitigate risks, for sure.
“If you don’t have an existing facility here in the US, you’re going to be having to do a lot of transfer studies, method validation, small-scale batches. A CMO can certainly assist with doing that”
Erika Porcelli: Right. Because even if they have an existing under-utilized facility, there’s still going to be ramp-up time that they’re going to need before they can transition the product in. Right?
Brendan McCrea: Absolutely. I mean, as we talked about, you’re going to have to make sure all your supporting systems, clean spaces, and production equipment is going to be available. Those are fairly long lead times, particularly when you’re doing duplication instead of relocation. So, as an example, if it’s going to take you two to three years to source all of your necessary mixing, blending, sealing equipment, your CMO can shorten that timeline to market by being able to do a lot of those small scale pilot studies while you’re sourcing your capital equipment.
The CMO option also gives you a great advantage if the facility is currently shut down and you’re looking to restart. In a shutdown facility, the project is much more complex. The systems have to be evaluated to determine if they can be brought back online to be compliant with current CGMP requirements. This would include identifying the necessary supporting staff, doing technical assessments of all the systems to understand their current status, understanding what the quality system requirements are going to be, and as we mentioned before, all the logistics and the supply chains, not only for the product, but for the operation of the plant need to be restarted. It’s going to be a multiple-year, large investment project. If an organization already owns an aging facility that’s still on its books, it is viable, but you need to take into account the timelines and bring those operations and facilities back up into compliance before you could even consider doing manufacturing there.
Erika Porcelli: What technical considerations do you see for pharmaceutical insourcing at an aging facility?
Brendan McCrea: I think in my experience, for a pharmaceutical product, is to consider the status of the clean media technical systems and controlled environmental spaces. These are areas that are considered to be part and parcel of the product. The process is the product in these cases. Are they properly qualified and validated according to current standards and specifications? It can be a large effort to bring these systems up to standard for production. And again, as we talked about, facilities that are mature and have existing legacy products, they may not have had a recent inspection. There may be issues in terms of their requalification of their technical systems. There may be some aging issues on their technical systems, and that should really be very carefully considered if you’re moving into an aging, but still producing, facility.
As processing equipment ages, qualification status needs to be thought out. Are some of the existing operations reaching the end of their useful life? Are you using the state-of-the-art equipment, and is it necessary? Is it even possible to source some of the older equipment that may be currently used for manufacturing products in that facility? Duplicating the processing conditions to produce a drug product without impacting quality of the final form is quite a challenge. As anyone in the industry knows, as you’re moving simply from a laboratory to a pilot, to a commercial operation, transfer studies and transfer protocols can be quite complex. Here, have you met the exact processing conditions as the sending facility, and have these assessments and studies been planned for the overall project approach? In some cases, a greenfield facility may be a better option for a complex drug product, and you should very carefully consider whether an aging facility, a brownfield facility, versus a greenfield facility is the best solution.
“In some cases, a greenfield facility may be a better option for a complex drug product, and you should very carefully consider whether an aging facility, a brownfield facility, versus a greenfield facility is the best solution.”
Erika Porcelli: Given all of the technical complexity and risk, do you think that insourcing is a good approach?
Brendan McCrea: Absolutely. I think that having duplicate sources of supply, or supply that is exclusively to US shores, is going to be a benefit for our country in the long run. I think it can be made to be economically viable as well. I think that there has been a rush to move products to low-cost environments. I don’t think we’re ever going to be able to fully get away from globalization, but having the technology and the information and knowledge transferred back into our shores, I think gives us a competitive advantage. Even though these projects are sounding complex from all of the issues that I’ve brought up, it is really the same approach that all manufacturers face when releasing a new product or transferring to an existing low-cost environment. If you think about the complexities that you have to have if you’re moving a product from the United States to Central Europe, for example, you’re facing the same challenges, just in reverse when moving that back from Central Europe, back into the United States.
We all have a globalized regulatory environment. We’re all interdependent on all the different agencies that are present throughout the world. So wherever you’re selling your product, which are typically worldwide, we have to meet those requirements regardless of what the site of manufacture is. But I think having a native capability in the United States, to be the technological leaders in this area, is a great advantage for us in the long term. I think there’s always going to be an opportunity for low-cost manufacturing on offshore locations. I don’t think that’s going to change in the industry.
“We all have a globalized regulatory environment. We’re all interdependent on all the different agencies that are present throughout the world. So wherever you’re selling your product, which are typically worldwide, we have to meet those requirements regardless of what the site of manufacture is.”
But I think for critical products that have major public health implications, such as vaccines, and such as personal protective equipment, and such as basic surgical supplies, I think that it is best to be able to have those capabilities within our shores. It may not exclusively have to be sourced here in the United States, but we should have the capability to be able to ramp that up as we have been learning with COVID. And I want to be clear that I think that all of these challenges are solvable, and it just needs an organized risk-based approach to be able to assess the product and the project, not only from a business perspective, but also from a quality perspective. And I think if both of those things are done and you are doing good planning on the front end of the project, the answer will become clear as to whether it’s economically viable, and whether it’s viable from a strategic point of view for our country.
Brendan McCrea: Once the primary driver is in place, the other key consideration in making these projects successful is the secure source of supply. I do think that insourcing for critical items, such as reagents, or test kits, PPE, as we’ve mentioned numerous times in this call, the key to success is evaluating initial return on investment, making sure that that ROI is consistent with the strategic value of having that manufacturing capability within the United States, doing very careful risk management to identify the risks, and understanding what the expense of putting mitigations in place to overcome those risks are, and careful project planning to make sure there’s a contingency to manage those technologies. They can be anything from inspectional readiness of the facility, to processing risks, to supply chain risks. And I think that early identification of those items will make it clear to manufacturers as to whether it is viable or effective to insource to the US, or to continue to rely on third party and third-country suppliers to be able to provide those products to us.
Erika Porcelli: I know that we have covered a lot of ground today. Do you have any final thoughts or comments?
Brendan McCrea: Yeah. A lot of the challenge that I’ve seen in my career has been underestimating some of the technical complexities of bringing a new product to market. And I think that there’s been a lot of very optimistic scheduling to meet investors’ expectations. And I think that I’ve learned over the years that doing the planning piece first and making sure that you’re very carefully assessing risks can bring these projects into a place where they are going to be viable. I strongly feel that insourcing to the US is something that’s going to be critical to us, not only for public safety, but also for continued job growth and continuing to make sure that we maintain our technical knowledge and abilities in a worldwide marketplace.
We are great innovators here in the US, and I think that in the rush to globalization over the past 30 years, we’ve taken a lot of advantages of moving into low-cost environments. I think we’ve learned a lot from all the different countries that we have partnered with over the years, and we have improved our products. But we have a very complex supply chain. And when you have a complex public health issue like COVID, as you can see in the American experience here, we had states competing with each other to be able to source supplies. We had countries competing with each other to find their source of supplies. So it doesn’t necessarily mean that we have to have a full-scale production capacity here in the United States, but we have to have the technological capabilities to be able to ramp that up when the need arises. This may not happen for every hundred years, but we need to have that planning in place so that we can be prepared to respond more effectively the next time.
“it doesn’t necessarily mean that we have to have a full scale production capacity here in the United States, but we have to have the technological capabilities to be able to ramp that up when the need arises.”
I also think that there’s opportunities here, particularly for some of our lower technology, mature products, to take some opportunities for automation. And we’ve done a lot of successful projects where we have taken a lot of the costs and improved quality by implementing automation to products that have relatively low thresholds. Back when these products were originally released, the status of automation really wasn’t to the point where you could effectively fully automate a line. We’ve come a long way in the past 30 years, and in some cases, we’ve built some facilities and qualified some facilities that are producing hundreds of thousands of components and products every day, with minimal operational expense from labor. So I think that some of these projects could also be taken a look at it as a cost savings opportunity if the planning is done correctly.
Erika Porcelli: Brendan, thank you so much for taking the time to provide us with your insight today. It’s been a pleasure having you join us.
Brendan McCrea: Thank you very much, Erika. This is a subject that I love to talk about. It’s what I do every day, and that’s what RCA does every day, as well.
Erika Porcelli: Thank you, Brendan. And thank you to our listeners for tuning into this episode of RCA Radio. Be sure to subscribe to be the first to know when we upload the next episode in our series covering supply chain management.
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