Formulation of operating budget and a system for analysis of variances for critical care division; VP Finance, Core healthcare limited, Ahmedabad

Abstract

Core Healthcare Limited is Asia's largest manufacturer of IV fluids. IV fluid is a pharmaceutical product which is generic, patentless, difficult to make, low margin, high risk and capital intensive. This ensures high entry barriers and therefore reduces the threat of emergence of new competition. Core has invested in the world class FFS (Form Fill Seal) technology. This technology involves forming (bottle from plastic), filling, sealing and coding of the IV fluids in one single stage, automatic operation within a closed sterile environment, absolutely free from human or atmospheric contamination. The sterile Core product is not only of international standards but also 35-50% cheaper than the glass version. Since the initial investment is very large (4 to 5 times as compared to the glass bottle pant), depreciation and interest from a major portion of the fixed overhead. Capacity utilization of the plant, therefore assumes great importance. The factory of Core at Mehsana district in Gujarat runs for 24 hr a day, 363 days a year, thus accomplishing a near 100% utilization. The product being of generic nature, sales and marketing are of utmost importance. Core has maintained a very strong salesforce with about 1700 Sales Representatives out of a total manpower of 3000. Also the company has a 6000 strong distributor network. The result is that Core has 35% share in the 250 million bottle domestic market. Core exports 50% of the company sales and 90% of the India’s IV exports, to more than 50 countries. The FV fluids are manufactured by FTD (Fluid Therapy Division), Recently Core has launched on a hectic expansion and diversification plan. Medical Devices Division will be making disposable syringes, needles, IV sets (the tube that connects IV bottle to the patient) and other disposables. The Pharmaceutical Division will be making formulations, Small Volume Parenteral and other generic drugs. The Critical Care Division will be making Plasma Volume Expanders: the blood substitutes given in emergency, Total Parenteral Nutrition: given when patient unable to take food through oral route, and Renal Care Products: liquids used by patients with kidney failure. The diversification plans are in line with the Core philosophy of making the products which are generic, non-patentable, low margin, and capital intensive.