Outsourcing: Offshoring to China: What Should Your Model Be? - - BioPharm International

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Outsourcing: Offshoring to China: What Should Your Model Be?


BioPharm International
Volume 19, Issue 12

To provide an additional level of IP protection for the diagnostic instruments, Adaltis keeps a final step of the manufacturing process to itself, by installing and testing the software in the component. Without the software, the instruments produced in China are unusable.

As we can see, Adaltis has chosen to build its own facility in China to ensure compliance with European standards. In the process, it is developing local expertise, which it expects to conserve. It has moved its most stable product lines in China, and keeps the final step of production to itself to protect its intellectual property.

DISCUSSION OF CASE STUDIES

The growth of the Chinese market is leading to a more competitive environment in production processes. As the examples show, some of the first life sciences companies to produce products in China are involved in diagnostic equipment and reagents. Although there are particular factors that drove each company to certain strategies, there are common lessons that can be taken from these examples.

First, the human side of relationships is the key to a successful partnership in China. Logistical considerations and expertise might be important factors when choosing a partner, but never as important as the relationship, which includes the network of contacts the local partner will bring to the project. In all three of our case studies, the trust that was developed between partners was directly tied to the success of the Western companies' business in China.

Second, companies should evaluate carefully which product to offshore. As we discovered, most Western companies opt to offshore simple products, to take advantage of cost savings. For complex products or devices, a cautious approach is the norm; in all our case studies, companies kept some operations in their local facilities, and none talked of total production offshoring.

Finally, even though IP enforcement in China has improved, careful planning is still necessary to avoid losses related to infringement. Recent court cases have shown that there is a willingness to protect intellectual property in China far more aggressively than in the past, but this does not mean that companies can enter China without a careful IP protection strategy.

China's unprecedented growth has led many to take a closer look, and to take advantage to its success. With the proper model and a good local partner, the question asked shouldn't be "Should I go?" but rather, "When?"

Jean-Francois Denault is consultant at Impacts Solutions, Montreal, Canada 514.978.2676,

REFERENCES

1. Miller J. All eyes on Asia: Manufacturing in Asia, China and India. BioPharm Int. 2005 18(9); 28–30.

2. Jones Lang Lasalle. Offshoring market in China expected to grow further. 2004. Chicago: Jones Lang Lasalle. Available from: http://www.joneslanglasalle.com.cn/en-gb/news/2004/9_September_2004.htm

3. Dowd Greene C. India and China: Emerging generic strategies. GPHA API 2006 Meeting; 2006 Mar 21; New York, NY.

4. Goodall S, Janssens B, Wagner K, Wong J, Woods W, Yeh M. The promise of the East: India and China as R&D options, BIOEntrepreneur. Published online at http://www.nature.com/bioent. 2006 Jul; doi:10.1038/bioent910.

5. Boston Consulting Group. A game plan for China. Rising to the productivity challenge in biopharma R&D. 2005 Dec.


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