Third Party Manufacturing Business Step by Step Guide

Third Party Manufacturing Business Step by Step Guide – Third Party Manufacturing is turning out to be a great way to start a successful Pharmaceutical Business. This allows a person to reduce the cost and to manage the production process. If you are also interested in starting a Pharma business, then choosing a third party manufacturing business is surely going to be beneficial for you. Below we have mentioned Third Party Manufacturing Business Step by Step Guide. 

Overview

Third party Manufacturing Business or Contract Manufacturing Business is an Outsourcing arrangement where a company hires an external manufacturer to produce their products. This arrangement frees the first party or original company from worrying about the manufacturing process and helps them to focus on their core competency, sales, marketing and distribution. 

In the pharmaceutical sector, Third Party Manufacturing is used by individuals who do not own manufacturing units and equipment in order to start their Pharmacy business. Here the hired Third Party Manufacturers produce the drugs, medicine and related products. This arrangement provides the first party with many benefits like cost-effectiveness, increased flexibility, increased efficiency and reduced risks.  

The Advantages of Third-Party Manufacturing

Third Party Manufacturing is a contract arrangement that benefits both parties. The original company can reduce the cost and risk whereas the manufacturing company can use their expertise And capacity to manufacture at a bigger scale. Let’s discuss some of the benefits that the first party receives from this arrangement.  

• Reduce cost– By outsourcing manufacturing, a company can reduce the cost required for establishing and maintaining the manufacturing unit. This lowers the chances of financial risks.
• Flexibility– This arrangement allows the manufacturers to handle the fluctuation in the market demand and allows the company to ramp up or down the product production as per need.  
• Focus on Core competency– Contact manufacturing also enables the company to focus more on R&D, marketing and promotion.
• Easy access to expertise– One more great thing about third party manufacturing is that they often have a specialized expertise in production processes to improve the efficiency and quality. 
• Efficiency– This arrangement undergoes rigorous quality control to ensure that the optimum quality is maintained, and all the products meet the necessary requirements.

List of the Documents Required for Third Party Manufacturing Business

Maintaining documents is one of the most important steps in Third Party Manufacturing Business as it helps to ensure that all the legalities and regulatory compliances mentioned in the agreement are being followed by both companies. Now, let’s discuss the documents required for investing in Third Party Manufacturing Business.

• Signed and verified Contract Manufacturing Agreement filled with Complete Details
• Non-resemblance Company biography with directors signatures
• Partners papers Certificate 
• Corporate Office Address 
• ID proofs such as Aadhar Card and PAN Card
• Authorized Signatory for dealing with Drug License Sales Tax/TIN 
• GST Registration Certificates
• Drug Licenses
• Manufacturing Agreement 

Third Party Manufacturing Business Step by Step Guide

The outsourcing of the drug production is carried out in the following manner.

1.Market Research –

Before entering any new venture, it is important to do detailed research of the product list, competitors and market demand. This will help you to select the correct products and will help you to make strategic plans in order to fill the empty gaps.

2.Select the Products –

This process covers the selecting of the products to wish to manufacture. Choose the products that are highly demanded in the market to ensure future profits. Also consider the therapeutic areas you want to cover like diabetes, hypertension or cardiology while selecting the products. 

3.Choosing the Right Third-Party Manufacturer –

While selecting the third-party manufacturer considers factors such as cost-effectiveness, efficiency, flexibility, compliance and expertise. 

4.Finalize Contract Agreement –

During this a legal agreement is signed by the two parties. This legal agreement covers all the terms and conditions. Both the companies have to make sure that the legalities and regulatory compliances mentioned in the agreement are followed. 

5.Arranging the Required Funds –

Without funds there is no business. So, it is important to arrange the funds for investments. This could involve different ways Including savings, Loans, or Venture Capital Depending on Your Needs. 

6.Raw Material –

This involves the collection of the raw material required for manufacturing.

7.Manufacturing –

this step involves the production and manufacturing of the pharmaceutical and related products according to the specification provided by the pharmaceutical company. 

8.Quality Assurance –

Quality is non-negotiable in the pharmaceutical industry as life of many people depends upon that. Ensuring that the quality is maintained at every step of manufacturing is a very important protocol. You can have an independent quality assurance team to monitor all this. 

9.Sales and Marketing –

Make a strong promotional and marketing strategy by understanding the target market and customers need in order to build a name in the industry. Reach more and more Doctors, Pharmacists and other health care professionals to build a strong distribution channel. 

Conclusion

To conclude, Third Party Manufacturing Business is outsourcing the manufacturing of pharmaceutical products to a separate company. In simple language a pharmaceutical company makes an agreement with Third Party Manufacturers to produce their products rather than producing them in-house. This agreement allows the original company to not worry about the manufacturing process so that they can focus on marketing and sales. 

FAQS on Third Party Manufacturing Business Step by Step Guide

Question 1. What are the cost factors that affect Third Party Manufacturing Business?

Answer 1. Understanding the cost factors helps to incorporate optimal pricing strategies to lower the financial risks and earn more profit. 

• Material Cost depends on the raw material prices and supplier negotiation.
• Labour Cost depends on regional labor rates, skill level and labor efficiency. 
• Overhead Costs depend on the factory maintenance, energy expenses and administrative functions. 
• Production efficiency depends upon the scale of production and technology used. 

Question 2. What is the cost expenditure required in the Third-Party Manufacturing Business? 

Answer 2.  The cost of Third-Party Manufacturing can range between 50,000 rupees to 60,000 rupees depending upon the company you are partnering with. 

Question 3. How to ensure long term profits in the Third -Party Manufacturing Business?

Answer 3. Third party manufacturing business is profitable to both manufacturer and the pharma company. In order to maintain the long term profitability, the manufacturer should highly focus on quality control to gain the trust of the pharma companies. Another factor upon which the profits depend are the expertise in the manufacturing, packaging, designing, and labeling services. Both the parties should make sure to comply with the international regulatory standards for the production of pharmaceutical goods.