With investments of close to €47 million in India over two years, global pharmaceutical glass manufacturer SCHOTT AG clearly sees the country as a vital cog in its global strategy. Georg Sparschuh, MD, SCHOTT Glass India and Dr Patrick Markschläger, Executive VP, SCHOTT AG, Business Unit Tubing reveal the company’s strategy to build India into an Asian hub for SCHOTT pharma tubing, their endeavours to be as sustainable as posssible and how investing in the futures of the communities in which their manufacturing plants are based is simply good business practice By Viveka Roychowdhury
Twenty one years after it bought over a company producing pharmaceutical tubing in Jambusar district in Gujarat state, SCHOTT AG has earmarked the plant as a production hub not just for the country, but for SCHOTT pharma tubing in Asia. The plant is an ideal example of Prime Minister Modi’s campaign to “Make in India, for the world.” According to Georg Sparschuh, MD, SCHOTT Glass India, the Jambusar plant had reached up to 40 per cent export rate, in addition to the rapidly growing domestic demand. While domestic demands have been their main focus, the increased capacity with two new tanks, is expected to cater to the exports, which may even cross 40 per cent.
Solely owned by the Carl Zeiss Foundation, the parent company SCHOTT AG is present across many sectors besides pharma and life sciences, including home appliances, electronics, optics, automotive and aviation industries. The company has production sites and sales offices in 34 countries. In fiscal year 2017/2018 (October 1, 2017 to September 30, 2018), the Mainz, Germany headquartered company clocked global sales of Euro 2.08 billion in 34 countries, with Europe’s share the highest (46 per cent, Euro 963 million; 9,450 employees).
The Asia and South Pacific region made up 25 per cent of sales (Euro 517 million; 2,800 employees) with North America in the third place, with 23 per cent sales (Euro 475 million; 2,050 employees). The annual report does not provide a break out of sales per segment, but Dr Patrick Markschläger, Executive VP, SCHOTT AG, Business Unit Tubing indicated that pharmaceuticals – Pharmaceutical Tubing and Packaging – is the biggest business for SCHOTT Glass.
As both domestic and global demand for pharmaceuticals rises, so will the demand for high quality packaging material. This explains why the company pumped in €21 million last year in the first phase of its expansion of the pharma tubing plant in Jambusar, which culminated in the inauguration of a new tank facility this November. (See report: https://www.expresspharma.in/latest-updates/schott-inaugurates-new-production-facility-at-gujarat-plant/) A further €26 million investment is planned for the second tank facility in 2020. The second investment is larger than the first as it includes expansion of support facilities as well as building a new chimney for the new plant.
Pivot to exports
Sparschuh says that over the decades, he has seen a shift in focus of Indian pharma companies from the domestic market to exports. All of SCHOTT Glass India’s products and the factory itself are fully globally certified, making them the ideal choice for companies making this transition.
“We are the first ones to follow the market trend,” said Sparschuh, explaining the year-on-year expansion plans. “While this first phase expands capacity by 50 per cent, the second step will add another 50 per cent. So we will double our capacity.”
Building on their experience of the first phase, construction work on the second phase has already started. The first phase was completed in a year’s time, even though this year’s unusually prolonged monsoon delayed construction. Learning from this experience, Sparschuh is targeting to have the second tank ready before the 2020 monsoons. The tentative date for the completion of this expansion is August 2020.
The cumulative investment of €47 million in India over two years is logical as growth shifts from the more mature markets to emerging ones. “Asia has driven the market growth over the last few years, not so much Europe or the Americas,” said Markschläger. Besides India, the company’s global production footprint includes facilities in Germany and South America. The company will soon be starting a greenfield manufacturing facility in China as well.
Adding to Sparschuh’s point that the (pharma manufacturing) market is shifting volume-wise to India, he points out that many global companies are also moving to India, looking to make India their production hub.
The expansion of the Jambusar facility is part of a $1 billion investment over the next six years in the global expansion of the pharma business as the world prepares for more biological medicines requiring glass ampoules, vials, etc.
Green initiatives
The Jambusar facility has an almost 100 per cent recycling policy, with no wastage of glass. According to Sparschuh, low cost transport and labour charges in India allow their pharma clients to also send their glass wastage back to the Jambusar facility for re-use, which is then added to the glass melt after appropriate quality checks.
Other green initiatives include a zero-discharge policy when it comes to water used. The plant also has a rain harvesting system. Since glass making is an energy intensive process, requiring continuous power supply, Sparschuh said the plant has installed more than 7000 solar panels to meet the energy requirements and improve the green footprint of the facility. He claims that these measures make it one of the leading factories in Gujarat in terms of sustainability initiatives.
Skilling India
SCHOTT Glass’ Jambusar facility is a major employment provider in the area. Before the first phase of expansion, the staff strength was 300 employees on payroll and 150 on contract. Approximately, another 100 payroll and 150 contract employees will be added for the facility after the November expansion. Sparschuh estimated that the second phase might add another 70 payroll and 50-80 contract staff. The current site has enough free land here for future projects, he said.
There is another reason for not looking to expand to a new location: the availability of skilled manpower in Gujarat. Sparschuh pointed out that the current plant is fully automated, built on the latest Industry 4.0 principles. This requires workers with high technical skills, who are available in the state.
The branded FIOLAX® pharma tubing produced in Jambusar, and indeed at all SCHOTT Glass sites across the world, follows SCHOTT’s perfeXion® process since 2017, where the system has transitioned from statistical quality control to 100 per cent automated inspection of each individual FIOLAX® tube – based on big data. Hence, it is introducing Germany’s Industry 4.0 to its Indian factory in the most effective manner.
The use of such systems requires skilled rather than unskilled labour, which might be difficult to find, especially in rural areas like Jambusar and the like. Which is why over the past many years, SCHOTT Glass has supported their current employees to educate their children as well as given inputs to local schools and initiatives, where trainers go to rural schools to prepare students to take on such roles.
Markschläger also informed that SCHOTT had been collaborating with Indian universities and training institutes to focus on skilling, preparing trainees to match the demands of future Industry 4.0 requirements. As a result, “all SCHOTT products have the same quality, irrespective of which geography they have been produced,” he said.
In addition to investing in the futures of the communities in which their manufacturing plants are based, SCHOTT AG also encourages their suppliers to upgrade their systems to meet the global standards. Sparschuh mentioned a recent supplier meet where rather than discussing rates and prices, the discussion was about aspiring towards international quality standards right from the raw materials like sand, sodium nitrate, packing material etc as well as equipment required for their machinery.
SCHOTT Glass’ expansion at Jambusar is thus a logical reflection of their pharma clients’ strategy to move to more cost effective manufacturing locations. The company will no doubt be a vital part of pharma supply chains as they evolve to cope with new business realities.