Which is the best location for a pharmaceutical plant serving the SE Asia market?
First define what is meant by best!.
Obviously capital and operating costs come into it, and then the available logistics for shipping goods, but there are also ‘soft issues’ such as the availability of staff & necessary skills, the language issues and the ease of doing business in the specific location. These factors all have different weightings depending on corporate circumstances.
Here is one we did earlier and to avoid looking at the detail Singapore came out most expensive but best in the soft factors, Bangladesh the reverse. Vietnam, not included in the study, is also a low cost region.
The hard edged factors capital costs and operating costs were considered separately from the soft costs.
Even with the same costs included for equipment the costs show a dramatic variation. Singapore’s land costs are a significant driver.
The range in operating costs was similar but not so extreme and probably there are big differences in how one would run a plant in Singapore compared to other locations (so automation, manning levels etc).
The evaluation of soft factors is pretty subjective and specific to a particular client. For example multinationals may have differing views over the ease of persuading executive to relocate to specific country.
For this client the ‘soft factors’ included:
Environmental: Risks of natural disaster, flood, cyclone, earthquake. Local pharmaceutical presence, and time zone relative to US offices [very client specific]
Logistics: In this case the product was shipped by sea and is bulky so ability to ship from a hub to the markets in one step was important. Access to the ports and port congestion, was also considered.
Services: Reliability of local utilities and their reliability and availability of the specialist support services for the plant.
HR: People, the availability of the staff and management, education and language and the potential turnover of staff.
Project Related: Specific factors that related to constructing a project such as permits availability of engineering and construction skills and ability to control the project from the US.
Government Related: The ease of dealing with the government, the clarity of processes and the speed for obtaining approvals