Potential Pitfalls of Outsourcing
Arthur C. Solomon, N/A
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Although outsourcing to a contract manufacturer is a rapidly growing trend in the pharmaceutical industry, it is still a relatively new concept for many companies. Contract manufacturers are quick to point out the advantages such as ready-to-use facilities, faster time-to-market, and lower costs.
These are all good points and true, but they don't always address the deeper concerns of the customer, who rightly has to focus on the potential disadvantages of outsourcing. These pitfalls also need to be discussed if a strong relationship is to be built. Pharmaceutical company executives may fear a loss of control, for example, when they outsource. This is understandable. The issue, however, is really one of communication: timely, accurate information is vital to good decision-making, which is vital to profitable business. When operations go outside the customer's facility, the customer needs to know good news and bad news, all the time, and quickly, when it counts. The contract manufacturer has to be aware of their role as a full-fledged member of a project team, and of their responsibility to stay in constant touch. The contractor must believe in communication as a philosophy that translates into practice, to the point where keeping customers well-informed becomes a top priority.
Client companies are also concerned with confidentiality. Successful outsourcing is based on trust. When a company, whether it is a small biotech firm or a well-known pharmaceutical giant, chooses a contract manufacturer and developer they entrust them with nothing less than their futures. Living up to that trust has to affect every area of the contractor's operation. It requires state-of-the-art technology and the knowledge to use it well. It requires a commitment to excellence and performance from every manager and employee in the company. It requires great services, high levels of quality and regulatory compliance, excellent manufacturing practices, and competitive prices. It also requires integrity and commitment to confidentiality.
Timing is another concern. Will the contract manufacturer be able to make delivery deadlines? Will they be as dedicated to timelines as the company itself would be? Do they have the capacity to handle the project? A good indication is the contractor's commitment to growing production capacity. For example, SP Pharmaceuticals is currently working with a major engineering company to increase its production capacity to meet increased customer needs. A major capacity expansion, scheduled for completion in 2001, will cost more than $20 million. Projects of this magnitude require that contractors' growth plans dovetail with planned capacity expansions and customer recruitment.
Companies are also concerned that they are putting product quality at risk when they outsource. In a tightly regulated industry like pharmaceuticals, evaluations are a regular fact of life. Ideally evaluations must take place on a project-by-project and customer-by-customer basis. Many evaluations focus largely on the physical aspects of the operation, such as regulatory compliance and development and manufacturing efficiency. However, we encourage our customers to evaluate product quality on an ongoing basis. Contractors must take evaluations seriously and take corrective action for deficiencies, with the goal of improving on their already excellent record.
N/A is a private contract manufacturer specializing in small-volume, liquid and lyophilized parenterals. SP offers a complete range of manufacturing services under one roof, including formulation and development, regulatory assistance, and production of large or small commercial batches. SP Pharmaceuticals came into existence from the management buyout of Pharmacia & Upjohn's small-volume sterile injectables division.
For more information:
Arthur C. Solomon
Vice President, Business Development
SP Pharmaceuticals
4272 Balloon Park Road NE
Albuquerque, NM 87109
505-761-9230
505-761-9229 fax
asolomon@sppharma.com