Buckle Up. It's A Strategic Drive To Successful Sourcing

By Louis Garguilo, Chief Editor, Outsourced Pharma

We pass around the word “strategic” like a biopharma basketball. We even have our own league: It seems more professionals in our outsourcing industry include “strategic” in their titles.

Perhaps it's in yours. Whether it is or not, does the word often roll off your tongue?

I decided to investigate what this word means to us in the development and manufacturing outsourcing industry. 

"What does the ‘strategic’ in your title, Sr. Director Strategic Sourcing, delineate specifically?" I asked one representative professional.

Her reply was, well, longish. She first dove into the phrase “driving vendor relationships” to explain.

Naturally, I asked what that that meant.

Can’t You Do It Tactically?

Our experienced Strategic Sourcing professional joined an emerging biotech after years at various life-science procurement roles in other types of organizations.

That biotech was an RNA developer; from there she moved to her current role focused on medicines to modulate immunological signaling pathways. He's had "strategic" in most all of her titles.

Her current organization has no designated department – or even person – specifically responsible for "outsourcing, sourcing or procurement activities."

Nonetheless, she avers, “all operational activities are properly addressed.” That’s possible because "day-to-day, ongoing activities such as with invoices and work orders, are indeed operational in nature and transactional.”

What she brings to such a company “is the ability to look at procurement from a strategic point of view, including "recognizing opportunities for supplier consolidation, strengthening portfolio rationalization, and applying category analysis."

"Supplier consolidation especially," she says, "can lead to deepening relationships with certain important external partners.”

“Therefore, what I mean by driving vendor relationships is first to actively invest in key, strategic partnerships.”

Defining External Partners

The first step is defining and then identifying which external partners are most important to you.

That alone, she explains, can be a tall task. There can be multiple service organizations serving multiple areas of a biotech, often including non-GxP activities.

It’s critical for every company to understand “strategic vendor management in the end is always about people, and a heavy reliance on personal relationships.”

Objective measures and KPIs needs to be agreed and in place, and closely monitored via regular communications, and meetings to ensure any issues – existing or potential – are addressed immediately and accurately.

“What I've seen go wrong in companies is issues are not addressed accurately,” she says. “Issues and concomitant irritations build to a critical level when not adequately addressed.” 

At some point this situation becomes untenable, and stakeholders don’t feel confident about the vendor anymore. The common reflex? We need to change suppliers.

Enter the strategist.

“That’s when I say, ‘Hold on, we should first talk more about what is actually happening. We should understand the situation from start to end, from root cause to impact.'”

Solving issues, she says, starts with these open and transparent conversations internally, and with your vendor, and adds:

“It’s strategic to recognize the position the supplier has within our collaborations, revisit our understanding of each other’s operating processes, technical challenges, and business models, in order to improve situations and outcomes."

Ongoing dialogue is a strategic activity. Challenges grow in scope because issues aren't confronted systematically. Where it has been lacking, it should be re-implemented before placing blame on one side or the other over arising challenges.

Strategic Differences

We operate daily within a vernacular of “service providers,” “external partners,” “suppliers,” and “vendors.”

While these and other terms can be interchangeable, our professional differentiates among them.

Suppliers provide commodities and more commonly available services and goods (and example might be lab items or office supplies).

Vendors, on the other hand, provide dedicated and customer-made products.

“A spend analysis is likely to comply with the 80:20 rule,” she says, explaining that 20% of the suppliers and vendors are most often responsible for 80% of the total spend of a company.”

The top 20% are almost always the vendors. Within this group “the key vendors are those I'm interested in managing strategically," she says, "and the majority of that spend is with another subgroup typically related directly to CMC outsourcing – CDMOs.”

“The first challenge here always seems to be the difficulty finding the right partner for a new project,” she says in an all-too-familiar refrain.

"It can feel like a perpetual search for information about CDMOs capabilities and limitations, insights on their strengths and weaknesses.”

When members of a department in her company have "a great project – a specific asset – that needs just the right CDMO," she gets to work identifying which provider is in fact most suitable for that need, but as important also the best strategic fit for our company as a whole.”

“I don't explicitly advise on which CDMO is most capable, she clarifies, “but we consider which is most suitable. Multiple CDMOs may be capable, but each operates and interacts with a certain style.”

This, she says, is what's referred to as a CDMO's culture.

“You need a match on flexibility, operating cultural, the style of project management, geography, financials … all those elements can combine to form the right partner.”

This selection process is cross-functional and a combined effort.

“In my role, I support the search from a strategic business point of view,” she says, “and I work closely with our SMEs and business partners from selection through management for commercial services and supplies.”

She considers the internal stakeholder in need of the specific items of outsourcing as her customer; that person or group defines the criteria for the CDMO selection process.

“I lean heavily on the technical experts for what is needed, and work closely with our other functions, including legal, quality, and regulatory for essential inputs and support."

There are many times when stakeholders approach her with an external partner already in mind, perhaps one they’ve worked with previously.

In those cases, it’s her role to “open up the window to a broader viewpoint.”

“We might end up with the CDMO we initially considered,” she says, “but we don’t want to miss others who could be a better fit, perhaps some we are already working with, or might help with other upcoming initiatives.

The final word. All activities and decisions should be  strategic to drive the immediate and overall organizational goals of outsourcing, sourcing and procurement.