A Global Approach to Site Location John F. Ginascol, vice president of nutrition supply chain for Abbott Nutrition.

A Global Approach to Site Location

Future customers determine Abbott Nutrition’s location decisions.

If you didn’t know which country you were in, walking the floor at a new Abbott Nutrition plant won’t clue you in.  While Abbott Nutrition’s future plants in Ohio, China and India are standardized, location still matters.  “For several years we have been working on the plant of the future design.  We are incorporating lean design as well as streamlined processes our new plants in Ohio, China and China. They will be very standardized, “ explained John F. Ginascol, vice president of nutrition supply chain for Abbott Nutrition.

However choosing where to locate these plants is not a standardized process.

Abbott Nutrition, which is the second largest division of Abbott Laboratories (IW 1000/110), chose each new plant location based on forecasts of strong growth.  This business unit currently has sales of $6 billion and is expecting $10 billion by 2015.

For a mature market like North American, demand for the company’s adult liquid nutrition products comes from aging Baby Boomers who “understand that nutrition is a key element in promoting good health,” explains Ginasol.

In March of this year the company broke ground in Tipp City, Ohio which is located about 75 miles from the company’s U.S. headquarters in Columbus. However the company considered a number of locations in the U.S. before deciding on Tipp City as a base to serve the U.S. market.

The investment of $270 million to produce two of the company’s fastest-growing adult brands, Ensure and Glucerna - will support the hiring of 240 people over the next several years. 

“Tipp City offered the necessary essential elements.  From this location you can reach every major urban port, so distribution is easy.  Not only was the site “shovel ready”, but our quick 18-month construction schedule was possible due to a team effort with government officials. Ohio has a high-quality workforce with a lot of experience in manufacturing and we saw this as an excellent fit into the Abbott culture, “said Ginasol.

The plant, which will specialize in aseptic packaging technology – the process by which a sterile liquid is packaged in a sterile container- will be operational in late 2013. The facility will cover about 250,000 square feet and will be easily expandable, due to its modular design which will be necessary as the brands produced here have grown 20% since 2009.

From an environmental standpoint the Tipp City plant will utilize 10-12% less energy than similar liquid plants. This is in line with the unit’s sustainability goals which include a 20% reduction in energy use by 2015 as well as a 20% reduction in water use by 2015. Other goals are a 20% reduction in CO2 and 10% waste generation reduction by 2015. 

China is Largest Single Market for Global Nutrition

The decision to locate a plant in Jiaxing, China was not difficult as forecasted sales are expected to surpass $1 billion by the end of 2014, up from more than $350 million last year. "China represents the largest single-market growth opportunity in global nutrition," the company has said.

More than 17 million infants are born each year in China and rising incomes have created increased demand for high-quality nutrition products, Abbott said.

“We need to be in China and we need to manufacture there,” says Ginasol.  One reason the company chose this particular location was the ease in which the workforce could get to the plant as well as the talent of the workforce. “Whenever we can we hire local and we have been able to find high-quality people.  Many have worked at other multi-nationals and this is a key element of rapid start up,” says Ginasol.

As the factory will employ lean techniques, the philosophy is built into the hiring process.  Finding employees and leadership that understand and embrace lean is a much easier starting point that retraining a plant workforce.  However the company does work with local educational organizations to provide training.

The $230 million factory, the company’s largest investment in China to date, will manufacture powdered milk products for infants and children.  The company anticipates launching a number of new product innovations over the next three years across the pediatric nutrition category in China.

The plant, when operational in 2013, will employ approximately 300 people. When completed, the plant will become Abbott's first fully integrated spray drying, blending and packaging facility in China. The company's new facility will be located in the Jiaxing Economic and Technological Development Zone, which is located mid-way between Shanghai and Hangzhou.

With the Jiaxing plant, Abbott said it will have opened six manufacturing and research facilities in its nutrition and pharmaceuticals businesses in the Asia-Pacific region in the past three years, including three in China.

India – Top 3 Market of Future

In India, Abbott is opening a R&D Center as the nutrition market is relatively new. The major issues are under-nutrition and diabete. An expanding middle class and aging population driving demand for affordable nutrition products.

An estimated 50% of Indians (570 million people) have adequate calorie intake but are not consuming a sufficient level of essential nutrients. India also has the world's largest diabetes population, with an estimated 51 million people living with diabetes.

Abbott selected Syngene – a subsidiary of Biocon, the largest biotech company in India – to provide a research and innovation team to work closely with Abbott researchers. The new Center is scheduled to open in June 2012, with more than 50 researchers and scientists. It will be located at Biocon Park in Bangalore.

Within the next five years, India is expected to be one of Abbott Nutrition's top three markets.

The nutrition business is one of the cornerstones of Abbott's diversified portfolio. In its latest earnings report released on July 18, worldwide nutritionals sales increased 8.3%.  And at the end of the day future growth is the determining factor  for site location. “ Wherever we build a plant, we are in it for the long haul,“ explains Ginasol.

 

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