Contract Manufacturing in the Pharmaceutical Industry Essay - 3

Contract Manufacturing in the Pharmaceutical Industry - Essay Example The basic principles of business economics demand that an entity tries to manufacture goods or provide services at the lowest possible cost to itself while benefitting from the gain in net revenue after sale or completion of service. For this reason alone, the concept of outsourcing is hard to concretely define (Goddard & Ajami, 2008). The skeptics of the process see it as a migration of tasks performed by the local workforce to a workforce in another country, where the tasks can be performed at a lower overall cost to the organization. But Scholte (2005) defines it as a process of international economic integration, where the strengths of two national economies combine to benefit each other. The reasoning that underlines this definition is that outsourcing allows an entity to place its focus on the things that it is stronger or better at while delegating the tasks and/or responsibilities that are costing it time and resources from the primary tasks to another entity that is stronger on those accounts. This means that each entity can now focus on the core tasks which come within their strengths, and thus, benefit the final outcome for both. Thus, to put it in economic terms, the process of outsourcing provides comparative advantage to each entity in some way or form.  The process of contract manufacturing is simi lar to that of outsourcing, in recent years is more associated with the pharmaceutical industry specifically (Gassman et al, 2008). It relates to a working agreement that is reached between two organizations, whereby one becomes the manufacturing arm of the complete process. This means that the client organization hands over the entire process of sourcing raw materials, hiring labor, producing the goods, as well as the ordering and shipment tasks, to the partner organization, allowing it to focus on other activities within its industry sector.