Let’s Talk About Pharma | CMO: Successful Outsourcing, KPIs & Supplier Relationship

Why long-term strategy is so important for successful outsourcing of clinical and commercial activity?

Outsourcing clinical and commercial activity is a key strategic decision for an organisation. For outsourcing to be successful, there needs to be a long-term strategy, which is underpinned by a contract which covers activities from onboarding to exit, minimising risk for the parties. Implementation of the strategy requires an oversight model that is fit for purpose, with appropriate key performance indicators (KPIs) and an agreed mechanism to optimise value in the partnership. It is critical to understand that good clinical suppliers do not necessarily make good commercial suppliers. Selecting a supplier in haste can have adverse consequences for commercialization, with potentially expensive (and unnecessary) technical transfers between suppliers and delays in getting the asset to market, which can be commercially fatal.

Drafting a contract is an important step for both parties. What should be included to minimise the risk for both parties?

The contract is an agreement between the parties, creating mutual obligations enforceable by law. Whilst the parties should aim proactively not to get to that stage, it serves as a methodology to frame key customer requirements. In this regard, they should be carefully thought out, especially in the area of risk. This is especially important when the supplier is managing expensive active ingredients. In situations like these, including appropriate insurance and liability, as well as business continuity, clauses are vital to assure against product loss.

The Virtual Plant Team (VPT) manages the operational and commercial relationships with the supplier(s). How can this team help us drive business performance?

The VPT describes the cross-functional team that is tasked with delivering a quality, reliable and cost-effective supply of product(s), through outstanding collaboration and innovation. This team drives business performance through a standardised operating model, focusing on business continuity, risk, KPI trends and value. A key element is having an appropriate level of oversight, remembering that external supply is different to internal supply. Use the supplier resources, you are paying for them! A fundamental requirement of the VPT is knowledge and implementation of the supplier contract.

KPIs can help us sustainably improve performance. Can you provide one or two examples of how?

An appropriately small number of well-defined KPIs are critical to manage risk and sustainably improve supplier performance. Both leading and lagging KPIs should be used to monitor the value chain. Leading KPIs are less intuitive, but more impactful, as they allow the VPT to influence future performance. As an example, focusing on the KPIs‘ batches started on time is a strong predictor of the lagging KPIs‘ on time on time in full delivery’. It is recommended to only include KPIs that will be reviewed, and have targets and action plans to address performance gaps.

In the CMO partnership, we should optimise the value to the fullest. There are several ways to do it. Can you give one example?

There are many potential aspects to value; speed to market, quality, cost, technical know-how, vertical integration and business continuity being some drivers. In terms of quick wins, implement what is already agreed upon, such as yield targets, especially where you are tolling high-value active pharmaceutical ingredients or drug product for final labelling and packaging. A powerful methodology to optimise value is value stream mapping. Led by an experienced practitioner, this can be used to reveal waste in all its forms to drive improvements in cost, leadtime, right first time, amongst other KPIs.

A strong relationship with your suppliers is significant as it can create value. Have to achieve such a relationship?

Supplier relationship management is a critical enabler of performance and value delivery. It is often not clearly understood by customers and not delivered effectively by VPTs. At its essence is supplier segmentation, strategy development and strategy execution. A strong supplier relationship is enabled through the standard VPT operating model, with regular communication and timely feedback (both areas for improvement and recognition of strong performance). Effective business and operations reviews are critical framework elements, which are most effective when leadership are consistently engaged.

This topic is broad and complex with plenty more aspects to explore. What can participants expect from the next CMO Contracting, Oversight and Value Optimisation online training course?

The approach is practical and interactive, with networking opportunities enhanced through breakout sessions.

Participants can expect to understand key elements of a category strategy and how to develop a value proposition for their organisation. There is an enhanced focus on contracting elements, to ensure that it enables your strategy, based on feedback from previous training. You will be brought through a best-practice VPT structure and roll-out plan. This then leads to performance management and the use of appropriate leading and lagging KPIs to achieve business goals. A focused and structured approach to deliver value in the supplier partnership is outlined. Finally, you will see how and why supplier relationship matters and how it underpins the achievement of strategy, contracting, oversight and value optimisation.

Where to go from here?