Choosing a Contract Manufacturer in Costa Rica

The Central American Group: Welcome to another installation of the Central American Group’s continuing series informational of podcasts. In these conversations, we talk with experts that are both internal and external to our organization that have a high degree of experience and expertise in business issues that have to do with Central America. Today, we are going to talk about choosing a contract manufacturer in Costa Rica.  Bernal Rodriguez with us. He is the president of a Costa Rican company called ITEK.

Hello, Bernal.  Could you please tell us a little bit about yourself and about your company?

Bernal Rodriguez: Hi, Steve. It’s a pleasure to be here. Thank you for having me. Yes, definitely. I have been involved in manufacturing for pretty much my whole career of almost 30 years. In that time, I have worked in different industries, from electronics to automotive electronics to high tech electronics and medical device manufacturing. I spent about eight years at Intel in the plant. They used to have a facility in Costa Rica for the assembly and testing of microprocessors. As of late, however, I have been involved mostly as a contract manufacturing in Costa Rica doing medical devices.

Over the last four years, we started our company, ITEK, to provide manufacturing services in the context of the free trade zone regime in Costa Rica. Basically, what we want to address in our conversation today are some guidelines to inform people that are thinking of engaging with a contract manufacturer in Costa Rica.  We will consider the questions and the type of things that companies should keep in mind when they are doing their research.  I guess that we will start in general terms at first.

The Central American Group: What industries drive demand for contract manufacturers in Costa Rica?

Bernal Rodriguez: Definitely the first area is in the medical device sector. The country has been extremely successful at attracting foreign direct investment in the medical device industry for about 30 years. The industry has gone from producing quite simple devices to manufacturing Class IV medical products. Now Costa Rican companies are producing complex devices for neurovascular and cardiovascular applications.

The Costa Rican electronics industry is also especially important. As I mentioned earlier in this conversation, Intel used to be here in the country manufacturing their microprocessors. Now there are several companies providing electronic manufacturing services (EMS). In third place, there is a booming aerospace cluster.   There are a number of companies that manufacture components used in this industry. There is a pretty wide range of availability of products that can be found when working with a contract manufacturer in Costa Rica.

The Central American Group: Given the fact that, when compared to other countries, what kind of competitive advantages are in Costa Rica that contract manufacturers are able to offer their clients?

Bernal Rodriguez: Costa Rica is widely known to be a very stable country, both politically and economically. Also, it is very progressive socially.  Additionally, it is a very calm and stable place to do business. These things are not going to change overnight. There will not be unrest, turmoil, strikes, or anything of that sort. Stability has been extremely important to the country and its citizens for almost 100 years. For decades, Costa Rica has invested heavily in health and education for its population and is extremely interested in maintaining the well-being of its citizens.

These circumstances have resulted in the creation of an exceptionally talented and educated workforce. This is another key competitive advantage of the country offers to companies that are seeking a contract manufacturer in Costa Rica.  From the line operator to the managerial staff of a facility, you can find very educated and talented individuals.  

Location is also important. We are within a couple of hours to three hours from major U.S. transportation hubs by airplane.  We also have ports both on the Caribbean Sea and on the Pacific Ocean. Additionally, we have shipping lines from Costa Rica that access the West Coast and the East

Coast of the U.S. Location is particularly important when seeking to work with a contract manufacturer in Costa Rica.

Our geographic location is also important in terms of time zones. We are in a very business-friendly time zone. We are permanently in Central Standard Time.   This is very convenient for communication and meetings.  It is easy to hold discussions about processes and products between a company in Costa Rica and the customer in the US.

Central American Group:  We know, as you just explained, that there is a wide range of contract manufacturers in Costa Rica.  But can you tell us about specific capabilities that can be found there?

Bernal Rodriguez: The important medical device cluster has created demand and availability for products and services that are key to that industry. Plastics molding extrusion is available in the sector. Light metal manufacturing is as well. This consists of thin wires and small components. The majority of the medical devices being manufactured in Costa Rica are endovascular or cardiac devices or even neurovascular.

As I said, it is possible to find a contract manufacturer in Cosa Rica that is also capable of doing plastic molding and extrusion.  They are also capable of doing the ultrasonic welding of plastic components and grinding, as well as the welding of thin and light metals.  Companies that are involved in the assembly, the packaging, the sterilization, and the finishing of the medical devices are very, very easily found among contract manufacturers in Costa Rica. in Costa Rica,

If your contract manufacturer of choice in Costa Rica does not have a specific capability, it’s relatively easy to fill your needs by looking for talent that has experience from previous jobs with the other clusters like electronics and aerospace.

Nowadays, much is done in China. Companies that require PC boards would have to import them from the Far East.   Additionally, some electronic components that come from Asia for assembly are finished and assembled in Costa Rica. This is a fact of the way the world has evolved in the electronics industry over the last several decades. Something else that you cannot find in Costa Rica is, as you know, is heavy industry and heavy metal industry. We do not have production of steel or other metals.

The Central American Group: So, this is not that easy to find here. So that means maybe microstamping is available, but not stamping of bigger parts?

Rodriguez: Exactly. That is a very good example of what a contract manufacturer in Costa Rica can do. 

The Central American Group: OK, walking in to interview a contract manufacturer in Costa Rica, what should you ask them about regulatory compliance and things like quality systems? What kind of certificates would be good to look for in a Costa Rican environment?

Bernal Rodriguez: That’s a good question too, Steve.  Each industry has its own set of legal and regulatory requirements. In medical devices, the number one certification or quality system that people do and should look for is ISO 134845.  The 2016 version of this quality certification is especially important.

In spite of this, the industry is evolving towards integrated certification by companies that are marketing to a US customer. Also look for FDA registration, which is more product-based. It’s good to know that the FDA is familiar with contract manufacturers in Costa Rica. They have inspectors that come here regularly to do the audits of companies and manufacturers here for specific products. In medical devices, those are key certifications to look for.

On the site audits of a contract manufacturer in Costa Rica are done to determine if there is more than a skin-deep adherence to those to those quality standards. It is important to do this for electronics. The usual quality systems like ISO 9000 or the sort. Additionally, aerospace companies have to have AS9100 certification. That is the standard that companies usually look for in their contract manufacturers for the aerospace industry.

The Central American Group: All of these things without a doubt are extremely important to take into consideration when choosing a contract manufacturing company in Costa Rica. But arguably the most important thing that has to be looked at is the human resource capability of the company that is being considered. What would you recommend that manufacturers look at in this regard?

Bernal Rodriguez: Absolutely, Steve. That is an extremely good point. A company is only as good as the human resources that it has. As I mentioned earlier, Costa Rica has a very stable, talented, and educated workforce.

Our literacy rates are on par with the developed world and that that should translate to stability and the capability to manufacture your product consistently over time.   When looking for a contract manufacturer in Costa Rica, you should definitely look at hiring practices, pay and benefits, work environment, and the general care of the worker. Costa Rica, as I said, is very stable. The workforce is very educated, but people only stay where they feel at home. Good employees must be treated and paid well.

If turnover is important to you, you should definitely look beyond the facade of the company that you’re looking at. You should ask about how they hired the people, how they trained them, and how they retain them. How are their pay and benefits practices compared to the other companies in their vicinity? You do not want a company that prices itself at the bottom of the pay scale and people basically come in and out of the door every few months.  Reduced turnover is critical to companies that manufacture quality sensitive products.

You want people to be stable. You want to do business with a contract manufacturer in Costa Rica that has an extremely low rate of turnover so that preferably the same people will be making your product year after year. This is very important.

The Central American Group: Beyond manufacturing. Are there other types of assistance that people that are choosing a contract manufacturer in Costa Rica sometimes look for? What might those things be? One that comes to mind immediately is post-manufacturing, handling of the product. In other words, the logistics part of an operation.

Bernal Rodriguez:  If your contract manufacturer in Costa Rica is manufacturing your product,  you should ask where does it go next? Is it going back to the U.S.? Is it being redirected to the final customer elsewhere or our distribution center in a different geography?

Companies should look for a contract manufacturer that has experience dealing with freight forwarders and logistics companies that could help coordinate that transportation on your behalf.

The Central American Group: I think that we are just about out of time here today. One thing I always make it a point to do is, at the end of our conversations, I like to ask how listeners with questions can get into contact with you?  Can we have your contact information?

Bernal Rodriguez: I do not have a problem with that. OK, that is a very good point.

So if you’re interested in speaking with me, whether you have a question related to the discussion on choosing a contract manufacturer in Costa Rica or you want to know about high tech capabilities that can be found in Costa Rica, you can do so by emailing me at bernal@itek.cr.  We’ll also include links to the ITEK website and my LinkedIn profile.

The Central American Group: Bernal, I want to thank you for joining us today. This has been very instructive.

Bernal Rodriguez: Thank you for having me, Steve.  I look forward to answering any questions that your listeners may have for me.