Outsourcing and Contract Manufacturing

With respect to the pharmaceutical industry, outsourcing and contract manufacture probably got its start with APIs, final and key intermediates, and other steps... 

Do not oppose outsourcing and contract manufacturing strategies. Point out to corporate management, however, that the ultimate responsibility for API manufacture rests with the internal operational functions of your company and not with those of the vendor or supplier. 

The manufacture of the respective test articles used in the studies would be outsourced to contract manufacturing organizations (CMOs) and sequential use of research-grade/non-GMP and GMP material would be allowed, if appropriate. 

Cisco Systems outsources all of its manufacturing. It has its suppliers post their quotes and forecasts on Cisco s Website each quarter. Then Cisco selects its suppliers and contract manufacturers Economist, June 26,1999). 

The outsourcing industry has also spawned a new type of company, the virtual company. The concept of a virtual company is based entirely on the use of contract manufacturers, laboratories, and other providers of services to take a product from concept to market. Such a company is truly horizontally integrated. Furthermore, it has the advantage of requiring only a few managers to coordinate the activities of various contractors as it conducts its business. 

The last type is comprised of academic institutions that provide assistance with custom synthesis, dosage form development, pilot-scale production, and production of clinical supplies in order to obtain additional income to support their academic programs. They have no interest in, nor are they equipped for, commercial production. Companies seeking outsourcing should be aware that students and faculty could form part or all of the staff of their operations this may be a disadvantage when considering using this type of contract manufacturer. 

But, a company seeking to outsource must also be familiar with negative aspects associated with working with a contract manufacturer. A major disadvantage to developing companies is that the client is entrusting to another entity its valuable intellectual property that before was a closely guarded secret. Clients also must consider that they are but one of the contractor s many clients. As a result, due to competition for the contractor s resources, projects may not move forward as fast as a client may desire. Finally, clients incur the costs of at least a portion of the salaries and overhead of the contract manufacturer. 

The building and operating costs can often be justified based on the direct costs of product development and clinical manufacture under contract. In addition, delays in clinical programs can cost the company millions of dollars in lost revenue. However, if building or operational costs carmot be justified, it may be more effective to outsource work to a This may... 

Projecting market demand for specific classes of therapeutics in development will remain a major planning issue for bio-pharmaceutical companies. The ability to meet the demand for biopharmaceutical production capacity, whether through in-house manufacturing or outsourced contract manufacturing, carries strategic and financial implications. Also, FDA approval policy and the development of the biogenerics market will have a major impact on future capacity requirements (see Part VII, Chapter 4). 

---