India can attract global contract manufacturing orders with its technically qualified workforce, internationally audited production plants and adherence to delivery timelines, said Suresh Khanna, designated partner, Dossier Solutions LLP.
The western world will prefer India over other South East Asian countries for contract manufacture. Even during this COVID-19 pandemic, India is unlikely to lose its orders although there would be a delay in signing agreements. This is because the current lockdown is not just restricted to India, as a similar situation prevails world over. Hence customers are aware of the delays coming about from transport-logistic issues and absence of workforce at production plants, he added.
There are challenges like access to raw materials and higher cost of production adding to the woes of the contact manufacturing sector. Although these issues are largely restored, yet there are interruptions as consignments are yet to reach destinations. There is a cash flow crisis, migrant labour migration and rise in cost of production ensuing from higher prices of freight and other input costs. Added to this is the capital investment in safety protocols during COVID-19 at production plants where sanitising, social distancing and employee transportation have further escalated expenses for contract manufacturers. However the cost impact also depends on the size of the company, he said.
This scenario, however, does not call for a need to tweak the business model, because contract manufacturing companies are hoping that the situation would normalise at least by early October. While this is with reference to Karnataka, states like Maharashtra, Gujarat, Tamil Nadu have production units struggling to stabilise operations with a rise in COVID-19 cases being reported. Hence there cannot be one solution for all. Now if companies are looking to automate operations totally, investments at this point of time are difficult with revenue generation impacted. Much of the automatic machines are capital intensive and this is not the time to be stressed out financially, said Khanna.
This sector is now getting used to this ‘abnormal’ to be the new ‘normal’. The overall demand is muted. The decline is largely from the domestic market. From the global quarters, the peak time is 3-4 months. So in another month or two the actual situation will come to the fore, he stated.
Globally, there is a move to reduce dependency on China, despite the dragon land’s capability for huge production capacities at competitive costs. Here the government of India’s efforts to announce API and Pharma Parks to manufacture from basic raw materials to finished product is to be appreciated as down the line, the western world will line-up for contract manufacture from India. The high skilled-technical manpower and qualified workforce generated from the country’s pharmacy colleges will give India the edge to bag contract manufacture orders supported by its global audited plants and delivery timelines adherence, said Khanna.