Strong Demand versus Strained Capacity - Pharmaceutical Technology

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Strong Demand versus Strained Capacity
A booming market may be stressing the service-delivery system.


Pharmaceutical Technology



How do you expect your contract services revenue to change this year versus last year? (Figure 4)
It comes as a corollary to the search for new providers that efforts to consolidate the vendor base have slowed somewhat, especially among smaller companies. Nonetheless, among the largest biopharmaceutical and pharmaceutical company respondents, 37% report that they have already reduced the number of providers they work with, and another 20% indicate they plan to do so during the next two years. The influence of procurement professionals also is greater at the major pharmaceutical companies, but even smaller companies report that procurement staff are gaining more influence over sourcing decisions.


What is your company's stance regarding new vendors? (Figure 5)
Interest in sourcing from service providers in India and China continues to grow, although it is hardly at an enormous scale. In 2007, 27% of respondents report that their company is already sourcing from India and/or China, up from 20% in 2006 (see Figure 6). Another 30% is figuring out how to source from those countries, but more than 40% continue to say they have no interest in offshoring. Not surprisingly, the greatest interest is among the largest biopharmaceutical and pharmaceutical companies, many of which have established R&D hubs in India and China.

Bumping against constraints


What is the status of your company's sourcing activities in India and/or China? (Figure 6)
Our 2007 survey results suggest that the big jump in customer demand is really straining contractor capacity. This is especially true for basic infrastructure capabilities such as customer service and project management. Service providers themselves admit that rapid growth is causing strains. More than 50% indicate that a lack of capacity is constraining their ability to take on new business. Many of their customers have noticed that as well: 30% say that contractors appear to have all the work they can handle.


If your business were to grow 20% or more this year, how prepared are your company's management and systems for that growth? (Figure 7)
The biggest single constraint cited by service providers is organizational processes, with inadequate capital to fund growth a close second. We explored this issue further by asking service providers whether their management and systems were adequate to handle growth of 20% or more (see Figure 7). Only one-third believe that their systems and management are up to the task: a quarter of contractor respondents indicate that neither systems nor management is adequate, and the rest that one or the other is lacking.


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