The Preferred Solution

Pharmaceutical Technology, Pharmaceutical Technology-08-01-2005, Volume 2005 Supplement, Issue 5

More and more often, manufacturers in need of outside services are turning to preferred providers.

I woke up this morning with a hankering for a big plate of outsourcing.

Douglas McCormick

No, wait. That's not how it works. I'm always puzzled at the way we sometimes say outsourcing as though it refers to a product. Imagine the shopping list: "Two HPLC instruments. One V-bin blender. One spray coater. 1000 kg microcrystalline cellulose. Two carboys outsourcing."

Outsourcing isn't a product, of course; it's an approach, an answer to a series of questions: "Outsource what?" followed closely by "Outsource why?" and finally "Outsource where?"

So nobody walks out of the house, enviously eyes the sleek, shining new 2006 Chrysler Outsourcing in his neighbor's driveway, and thinks, "Boy, I gotta get me one of those."

I imagine the process depends more on a sleepless night trying to figure out how we're going to get those two big incoming campaigns of different products tableted, packaged, and out the door simultaneously, when we've only got one line available. Is it finally time to buy more equipment? If we do buy, is there enough time to get it commissioned? Of course not, but we should look at starting the procurement process. In the meantime, do we bump another product from the low-speed press and hope that inventory will hold? Or do we send production out? It might be worth spending a little more to keep the product on pharmacy shelves, but maybe outsourcing will cost less than in-house production and I'll look like a hero, cutting costs, overheads, and holding time. I hate giving up control, but . . .

Okay. This one goes outside.

So that takes care of the what and the why, which leaves the where.

More and more often these days, the where is decided in advance. Preferred-provider relationships appear to account for (very roughly) 40% of the pharmaceutical industry's spending on contract services, according to this year's PharmSource–Pharmaceutical Technology outsourcing survey (see Jim Miller's analysis).

In my experience, the in-house-versus-out-of-house decision oscillates. We send stuff out to take advantage of technology or person-power we don't have. We learn from the relationship. We get to know and trust a particular vendor, whose shop becomes an extension of our own. Later, we may bring some or all of the function back inside (by acquiring the vendor or hiring the person who has contributed most to our business, or because the cost of technology has come down and we're now comfortable with making it work).

Then times change. New technology or new internal priorities force us to re-evaluate our resources. We research, outline, and invest a couple of restless nights, and we outsource all over again.

The process is sometimes turbulent, and stable relationships with preferred vendors can do a lot to smooth the waters. Establishing economical and productive communications—beginning with basic expectations and continuing to find the right volume and vocabulary for ongoing exchange—can be surprisingly time-consuming and fraught with error. It's good to deal with someone who already understands you. And once that investment is made, considerations other than money and performance enter the relationship. Ideally, trust and a certain mutual protectiveness grow: I won't leave you in the lurch for a fraction-of-a-percent price advantage, and you'll make sure that my job gets done right and on time even if it costs you a little extra.

That's the preferred solution.

Douglas McCormick, Editor in Chief

dmccormick@advanstar.com