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Pharmaceutical Manufacturing and Packing Sourcer

Lifting the Lid

The impact and influence of the manufacturing sector continues to be extremely important to the stabilisation of the UK economy. With a widespread consensus that a revitalised manufacturing base is essential for a more balanced and successful economic future for the UK, assessing company outlook, sentiment, behaviours and decision-making in critical areas, such as investment confidence and routes to growth, are important factors to examine if progress continues to be made.

To help assist in such an assessment, Siemens Industry conducted research to examine the views of UK manufacturing companies on key areas such as general trading confidence, government support for the manufacturing sector and current and future investment strategies. We talked to a range of pharmaceutical manufacturing organisations to unearth what, in particular, companies have been experiencing to help drive a robust growth agenda.

Business Confidence

It appears that despite the challenges presented by the worldwide economic issues, the general contraction following the 2008 crash and the current ongoing Eurozone situation, almost half (48 per cent) of pharmaceutical organisations feel optimistic about the future performance of their business over the coming 12 months. This contrasts with the 13 per cent who stated that they were pessimistic, with about a third undecided either way. Indeed, more than 70 per cent agreed or strongly agreed with the statement that as a business they have turned a corner and are now in growth mode. A meagre eight per cent stated that this was not the case for them.

However, according to those questioned, such growth had to be actively supported by government. Some 42 per cent strongly advocated that only with such concerted and strategic support could UK manufacturing continue to grow. The critical role of the government in helping to lead a manufacturing revival in the UK was further highlighted by the fact that recent initiatives such as ‘Make it in Great Britain’ and the launch of the Manufacturing Advisory Service had, in fact, helped boost company morale in many cases. Nearly half of pharmaceutical companies said that this was indeed the case for them, outweighing the businesses that took the opposite view.

In the background, growing sector confidence is also reflected by influential ratings agency Moody’s revision of the pharmaceutical sector’s rating from ‘negative’ five years ago to its current status of ‘stable’ – which supports expectations that the worst of the downturn is over and that earnings are expected to rebound during 2013. According to commentators, drug approvals and growth in emerging markets are also contributing to a more optimistic outlook.

Investment Sentiment

For the majority of pharmaceutical businesses, the confidence to invest remained high during the downturn – 57 per cent said they continued to invest all available capital budgets. Just 34 per cent said they had not felt able to invest at this level, and some eight per cent admitted to investing at about the same level, despite the difficult trading conditions. On the back of this situation, however, the vast majority of those businesses (81 per cent) admitted this has now led to a business-critical need for them to invest further, in order to offset the effects on their business and their outlook.

When it came to testing the actual reality of spend, and when asked to characterise their company’s true investment levels over the past 12 months, many said that it had been about the same level as invested in previous years. About 24 per cent admitted to spending lower levels when compared to previous years, while nearly five per cent stressed that, in fact, their investment levels over the past year had exceeded previous levels. About 10 per cent acknowledged that investment had stalled and that no investment had been made over the past 12 months.

For those that did invest, when asked about their focus of investment in recent times, the pharmaceutical sector highlighted key areas such as vital new product development and R&D, followed by new IT, technology and building infrastructure. Middle ranking in terms of favoured investment areas are marketing spend, implementing energy-saving measures, and spending on renewable and self-generation technologies. Interestingly, one of the least favoured areas for investment was that of employees, with ‘people’ way down the list of critical business areas for investment focus across the pharmaceutical sector.

Looking ahead, more than 34 per cent of those involved in this research said they would be planning to actively increase investment levels in the future, perhaps underpinning a generally more optimistic outlook among the sector for those concerned. However, over half stated that their companies would not be increasing investment over the next 12 months – a tell-tale sign of remaining caution that is still strongly influencing business-critical decision-making. Primary areas of investment focus for the year ahead again echoed previous strategic decisions. New product development and R&D clearly lead the way – with more than 47 per cent saying this would be the primary area of investment focus for 2013. The next ranked areas were intentions to ramp up marketing spend, tackle infrastructure-related issues, and address requirements for new IT systems and technology.

Pharmaceutical companies were also asked about their views in terms of how they viewed manufacturing innovation around the globe. From an extensive list of options, encouragingly, the UK is perceived as one of the primary leaders in manufacturing innovation and was ranked highly alongside those emerging economic powerhouses of India and China. These were followed by the US and Japan. Other countries cited as good examples included France, Germany and Poland.

Growth and Volume

Companies were asked about what they considered to be the key barriers to growth for their businesses at present. A number of important reasons were expressed as influencing a propensity for growth. They were wide-ranging and included access to external finance to fund investment strategies, plant capacity to support production aims, and stronger competition from emerging markets. Higher energy costs, supply chain shortages, a lack of government support for manufacturing, exchange rates, labour costs and skills shortages also registered as issues businesses had concerns about, and which to some degree would impact upon growth targets and expectations.

In terms of where business volumes were coming from, and perhaps reflecting a slightly more optimistic outlook for the UK, more than 72 per cent of pharmaceutical organisations said they were being driven by an increasingly domestic-orientated demand; 16 per cent stated that they were experiencing a mixture of both domestic and overseas demand but with no change to the proportions; and just eight per cent said their volumes were being driven by clear, growing overseas demand.

Industry Image

With the widely acknowledged need to attract increasing numbers of young people to support any engineering and manufacturing turnaround proposed for the country, and to help recruit the engineers of the future, feelings about the image of manufacturing and any impact in terms of its attractiveness as a potential career choice were investigated.

Pharmaceutical companies on the whole did not subscribe to a consensus that manufacturing did, in fact, have an image problem that would impact on its attractiveness as a career choice. Some 63 per cent felt that no such image problem existed; just over a quarter (26 per cent) said the sector was, in their opinion, afflicted by a problematic image issue; and only a small minority – nine per cent – could not provide a view either way. This generally positive view is also echoed across all senior job levels within pharmaceutical manufacturing organisations, with broad agreement found across board directors, finance directors, senior managers and production directors who were questioned. This should bode well for the future in terms of attracting the brightest talent to what can be a rewarding and stimulating career within the pharmaceutical sector.

With the next generation of skilled personnel required to fuel growth and prosperity, the issue of skills availability in the sector and perceptions about skills shortages came under scrutiny. Pharmaceutical companies paint a generally positive picture in this regard. While 23 per cent of those questioned agreed with the statement that “there is a skills shortage in the manufacturing sector”, nearly 64 per cent disagreed with this belief and some 13 per cent were undecided. In terms of having a specific negative impact on business life, just 10 per cent said that skill shortages were a concern for them. The overwhelming majority – 73 per cent – did not. Asked about skilled job areas where they felt skill shortages were most pronounced, both production engineers and software engineers were cited heavily.

Others, such as electrical and chemical engineers, were also mentioned as important job functions that would require attention. From a job level perspective, while only a fifth thought that managerial level skill shortages were most pronounced, this figure leapt threefold when it came to skilled workers and technicians. Just seven per cent of pharmaceutical organisations mentioned skill shortages at junior or apprentice levels. 

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Alan Johnston is the Pharmaceutical and Life Sciences Business Manager for Siemens Industry Sector, a leading global supplier of industrial plant and software, manufacturing automation and drive technologies to industrial customers across the UK. His career began as an Instrument Artificer Apprentice with Imperial Chemicals Industries, before moving into process automation projects and solution delivery within the chemical, oil and gas, and pharmaceutical industries, latterly supporting HQ on global projects and initiatives. Subsequent roles have taken Alan into sales, key account management and consultative positions. He holds Chartered Engineering status and is a member of the Institution of Engineering and Technology.
Alan Johnston
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