Humanetics –The search for raw material supplier in Asia

The Assignment

Pharmaceutical manufacturer sources for lower-cost raw materials for in Asia-based production

  • Tractus was engaged by a U.S based manufacturer of generic medication to find commercially viable raw materials (plant sources) to produce an active pharmaceutical ingredient across Asia.
  • This request was made in reaction to robust year-on-year price increases in China, where the ingredient was primarily located.
  • Tractus was requested to identify either a more economic source for the ingredient or raw materials that could potentially be processed by the company’s present Chinese supplier.

Solution

Tractus leads extensive in-depth research across 8 countries for raw material supplier, identifies India as the most suitable candidate

  • The research encompassed the country of Vietnam which offers similar geography and climate conditions as China; India and Thailand, where there are strong herbal and general medicine pharmaceutical industries; Laos, Cambodia and Philippines which are in proximity to the aforementioned countries and are considered potential markets.
  • Tractus commenced its search efforts through channels such as raw material traders, pharmaceutical companies, industrial associations, academic organizations and desktop research to gain industrial background information, and to shortlist stake holders for interviews.
  • Tractus conducted phone interviews with relevant traders, plant-based drug suppliers, Government officers and researchers. Physical interviews were also set up.
  • The research and interview results excluded Laos, Cambodia and the Philippines as they lacked the capabilities to produce and supply the required medicinal plants. Vietnam also was a no-go since neither the raw material plants nor supplier were available on a commercial scale. Although Thailand was abundant in raw material, it lacked economic benefits over the current Chinese supplier. Therefore, India was confirmed as a potential source of raw materials from which the ingredient could be produced economically and on a sufficient scale.
  • In the next phase, Tractus identified a company in India with the know-how and capabilities to produce the ingredient. The company had previously manufactured this ingredient but competition from China and the lack of financial resources eventually halted business.

Result

Client cut costs by USD 2 million per annum, improves production facility

    • Tractus arranged visits for the American client and its Chinese partner to the Indian factory and was instrumental in reaching a cooperative agreement.
    • After tough negotiations, a contract was signed between the three parties to ramp up the facility, securing the raw materials, and introducing the latest production flow and quality control mechanisms.
    • Since the financial situation of the Indian company was not very strong, Tractus supported the clients in drafting an agreement where they could secure a long term supply with a minimum investment.
    • Due diligence by Tractus at the factory after six months of the contract execution showed that the US client had a renovated warehouse and production facility and the production was running smoothly.  The US client managed to save annually US$ 2 million.

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