Offshoring Vs. Nearshoring: Making Informed API Sourcing Decisions in the Pharmaceutical Industry

The decision to offshore or nearshore API sourcing in the pharmaceutical industry is not only about managing costs but also about ensuring a stable and reliable supply of lifesaving medications.

Over 60% of APIs used in the United States are sourced from just two countries—India and China—with India alone accounting for 48% and China 13%. 

In this article, Ash Gude shares key considerations for weighing the benefits of offshoring and nearshoring in the pharmaceutical industry. Nearshoring helps manufacturers make strategic decisions that balance cost-efficiency with the need for a stable, responsive, and compliant supply chain, ensuring the consistent availability of high-quality APIs:

• Reducing Total Cost of Ownership (TCO)
• Speed and Time-to-Market
• Inventory Optimization
• Regulatory Compliance
• Customer Proximity and Satisfaction

He also talks about why while there are clear benefits to both offshoring and nearshoring API sourcing, companies must also carefully consider the associated risks:

• Political Risks
• Economic Risks
• Freight and Logistics Risks
• Technological Risks

The decision to offshore or nearshore API sourcing involves balancing cost, quality, and supply chain risks. Offshoring can reduce costs but adds risks like supply disruptions and regulatory challenges, while nearshoring offers more control but higher costs. The choice depends on a company’s strategy, regulatory needs, and risk tolerance. A well-informed, risk-based approach is key to ensuring a reliable supply of medications and long-term success in the pharmaceutical industry.

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