Ongoing supply chain challenges and an uncertain geopolitical landscape is prompting major pharmaceutical companies to further shorten their value chains by pumping cash into reshoring and nearshoring efforts.
Global biopharma company GSK has announced it is planning to invest £200m in its UK manufacturing operations over the next two years.
The pharma giant is undertaking a £67m upgrade of its Montrose site in Scotland. It will include a new facility slated for completion by the end of the year.
The plant manufactures active pharmaceutical ingredients for medicines including treatments for HIV and respiratory illnesses.
Regis Simard, GSK President of Global Supply Chain, said: “Our six UK manufacturing sites, including Montrose, are an important part of our global manufacturing network and we’re continuously investing in science, technology and skills to deliver medicines faster and more efficiently, making a difference for patients.”
Another biopharmaceutical multinational, Germany-based Boehringer Ingelheim, has also announced expansion plans, for its plant in Koropi, Greece. The company is sinking 120mn euros toincrease the manufacturing capacity for new and existing medications.
“This expansion investment will bring some of our most innovative therapies to an increasing number of patients globally,” said Hubertus von Baumbach, Chairman of the Board of Managing Directors at Boehringer Ingelheim.
In 2020, at the height of the pandemic, the company announced multi-year investments to expand the site and its production capacity.
The expansions are a key marker that the pharma industry is joining retail, automakers and chip companies in shortening their supply chain by nearshoring and reshoring their manufacturing operations.
GSK & Boehringer Ingelheim reshoring and nearshoring
Due to the escalating Red Sea crisis, US-China tensions, the war in Ukraine and the upcoming US election, manufacturers are moving away global supply chains based on affordable labour, often in Southeast Asia.
A recent Capgemini report bears out this trend showing how consumer and retail businesses are turning to a mix of nearshoring and domestic sourcing as they seek to strike a balance between cost and resilience.
It shows most (79%) of consumer products and retail (CPR) companies are diversifying their supplier base, with 71% actively investing in regionalising and localising.
A total of 83% of organisations, meanwhile, are investing in friendshoring – an increasingly common trade practice to reduce risk exposure, by focusing supply chain networks on countries regarded as political and economic allies.
A Gartner report, meanwhile, suggests small-to-medium-sized businesses are shifting to nearby suppliers in the face of ongoing economic and operational problems.
Its findings show that 88% of SMEs have switched, or plan to switch, at least some of their suppliers to ones closer to home.
The study was published by Gartner-owned Capterra, a platform that connects businesses to the right technology.
It surveyed 300 supply chain SME professionals in the US.
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