As with many industries these days, pharmaceutical manufacturers are now reevaluating the structure of their manufacturing operations. A specific focus area is whether returning some or all production processes to American shores (inshoring) is a more practical and cost-effective alternative to the offshoring trend that’s been prevalent for several decades.
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Factors That Impact the Inshoring/Off-Shoring Decision
Examples of crucial considerations when in-shoring pharma include:
If yours is like many pharma operations, you chose to outsource due to the lower production and labor costs available overseas. If it’s been a while since you’ve compared manufacturing abroad vs. at home, consider conducting a comprehensive cost analysis. You might be surprised to learn that you can now produce a pharma product in the U.S. more cheaply than before. In some cases, the costs are now nearly as low as in China.
Suppose your manufacturing cost analysis yields favorable results and you determine to move forward with in-shoring. The next step is to decide the type of manufacturing facility that makes the most sense for your operation. Specifically, you should determine whether a brownfield (existing) or greenfield (brand-new) site is the better option.
If you’re evaluating an existing structure, take a look at the current equipment and technology. Are they compatible with your projects’ demands? If not, can you make cost-effective upgrades or modifications to bring them up to speed? If these hurdles are prohibitive, building a greenfield facility will likely provide a more practical and affordable long-term solution.
A greenfield site enables you to customize your manufacturing processes more effectively since you are building and equipping the facility from scratch. On the downside, the costs of a new building, compatible machinery, and hiring and training fresh personnel may not be affordable for some pharma operations. And constructing a new facility from the ground up takes time — a commodity that’s often in short supply in today’s ultra-competitive pharma industry.
Supply chain access is another vital factor when in-shoring pharma operations. Given that many of the raw materials and ingredients used to manufacture pharma products and medical devices come from outside the U.S., finding acceptable substitutes at home can pose a challenge. If you must import them, you’ll need to consider the added transportation and costs of these components.
You’ll also need to account for all applicable supply chain qualifications. For instance, if you’re partnering with new suppliers, you must ensure they meet your company’s unique qualification and quality criteria. Transportation concerns are another issue to evaluate. Will you be able to get the materials to your facility reliably on time to accommodate your production schedules? You’ll need to implement a qualified transportation system for certain essential ingredients and finished goods.
From a business/operational perspective, consider how in-shoring pharma will impact your personnel. For instance, if you decide to move into an existing facility, determine if there will be sufficient space for your workers and any new equipment you add. Also, can the facility accommodate essential areas such as clean rooms, warehousing, waste treatment systems, and cold storage spaces?
If you’re relying on outdated technology systems, you’ll likely need to make upgrades to meet the changes in demand. Examples of systems that require careful evaluation include ERP, CAPA management, and eDoc, to name a few.
Regulatory Compliance Associates® (RCA) provides healthcare consulting services to the following industries for resolution of compliance and regulatory challenges:
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