What are your new year’s resolutions for supply outsourcing?
The month of January, its name derived from the roman god Janus of beginnings and endings, is a great time to look back at what’s happened over the past 12 months and consider how you want the next 12 months to unfold. If your company is outsourcing manufacturing and/or supply of healthcare products, year-beginning is a great time to take a pause and look at how your CDMO relationships have developed in 2024, and what you can do to make them more mutually productive and profitable over the coming 12 months. At Impact Supply Chain Partners, we think there are a number of key areas that should absolutely be considered for every company’s 2025 priority list – here’s our top three.
Strategy
It’s perhaps fitting that Janus’ godly responsibilities extend to those of duality and choices and for most strategy teams, “make versus buy” (or indeed where to buy) will be at the core of strategic planning activities. In our experience, many outsourcing strategies suffer from two common problems. Firstly, many have been exclusively driven by cost saving targets and are largely the result of spreadsheet-projected P&L benefits with insufficient consideration of whether they will deliver the “right product in the right place” at a portfolio level, based on the resources and capabilities of external partners. The second common issue we come across is one of incrementality, whereby a new strategic analysis is conceived as a “bolt-on” to the last strategic analysis and essentially ignores the robustness of any foundational decisions. While declaring a strategic analysis “bolt-on” probably reduces the effort and time required to get to a decision, you have to ask yourself, is it the best decision?
Is 2025 is a good time to take a holistic look at your overall network design, either in its entirety or where possible by category or geography? Should cost be the primary focus of your strategy decisions, or would your business be better served by a greater emphasis on agility, growth and/or customer service?
Fitness
The month of January always sees a peak in sales of fitness equipment and gym memberships as for many it marks the need to take a fresh look at their personal healthcare regimen. If you are outsourcing healthcare product manufacturing, there’s no reason why you shouldn’t take the same approach! Are all your products in robust health or are some less fit, more fragile couch potatoes hiding in the portfolio? The fittest products will ultimately be manufactured in the most efficient way and will be capable of delivering the best cost, compliance and highest level of customer service. We have found that many contract manufacturing organisations are now getting much more savvy about the real cost of servicing high-maintenance relationships and are building the projected cost of troubleshooting, changes, excess inventories and meeting times into their margins. If you want to source your products at the best price, a key element is ensuring you have the fittest products!
We know all too well the pain that most teams face fire-fighting production issues, but perhaps a resolution for 2025 is to find a way to develop a formal “product health-check” approach so in the first instance, you can establish where the supply risks and associated opportunities lie. As we previously discussed, there are now some fantastic AI-powered digital technologies emerging which could automate the assessment of product health – is it time to look at deploying one of these systems?
Process
A common pet peeve is that companies will frequently throw the words “end-to-end” into a management presentation and voila – believe they have now upgraded their supply chain to state-of-the-art 2025 standards. All supply chains are by definition end-to-end, so the key question is whether you have the process and practices in place to make your supply chain in its entirety work efficiently in the interest of customers, consumers and patients. For instance, there’s nothing more efficient at destroying trust than an NPI process which ultimately delivers a fraction of the volumes that your supply chain partner had expected and planned for.
One great place to start looking is whether your business processes are fit for purpose. Is January 2025 the time to look at whether you can implement processes or digital solutions to enhance end-to-end visibility, productivity and ultimately grow trust and mutually beneficial relationships all the way from your up-stream suppliers through to your down-stream customers?
Ultimately, every company is different and although we frequently see sub-optimal strategy, fragile products, and inefficient processes as indicators of healthcare product outsourcing underperformance, your supply chains will undoubtedly have nuances specific to your business. Impact Supply Chain Partners has a wealth of global, cross-category experience improving product sourcing and if you would like some inspiration or assistance developing and executing your 2025 New Year’s resolutions, please contact us at contact@impactsupplychainpartners.com or visit www.impactsupplychainpartners.com
