Wednesday, September 25, 2013
Pharmaceutical Supply Chain Network with Outsourcing
Pharma industry is certainly going through the big trend of outsourcing. Considering the pharmaceutical companies have to determine the optimal flows balancing its supply chain network activities with manufacturing activities and distribution channels. The pharmaceutical companies are seeking for minimum costs from different business models and outsourcing with contractors is one way to balance meeting the multimarket demand satisfaction and minimizing costs. However, there are other issues regarding outsourcing like compliance and quality control. Since pharma industry is facing strict regulations from health care authorities (FDA/CMS), manufacturing plants have to follow certain laws to be considered a qualified manufacturing plant. Outsourcing lowered the operation costs, however, higher the risk of losing control over quality control.
There are certainly advantages for pharma companies to consider outsourcing. Lower operational and labor costs is the primary reason for companies to choose outsourcing. Outsourcing also enable pharma companies be flexible about their manufacturing plant location based upon the disease demography. Outsourcing also increase pharma companies’ open partnering with other companies, hence driving the VIPCO model, which is “Virtually Integrated Pharmaceutical Companies”. The VIPCO is the future trend of pharmaceutical companies, which means pharma companies don’t have to develop vertically along their value chain like in the past. Instead, pharma companies will increase open partnering with any companies for any services at any point in their value chain, meanwhile utilize and leverage the resources outside of the company.
The main question regarding pharmaceutical outsourcing is that the pharma companies can’t control the quality, hence facing the risk during quality control point and compliance issues. Hence companies need to balance this risk with the advantages.