Achieving High Performance in Life Science Distribution through Outsourcing

The complexity of the distribution challenges facing the life sciences industries offers an exciting opportunity: by leveraging the experience and expertise built up by masters in other industries, life sciences companies that engage seriously with the challenges can make a quantum leap in cost effectiveness and customer service, and position themselves to thrive, not just survive, in the highly competitive global marketplace.

Our experience helping companies globally assess new distribution models that often involve a third-party logistics provider and outsourcing tells us that companies do not always get the anticipated benefits from outsourcing. There are generally four areas of value leakage:

• Companies suboptimize benefits by limiting scope.
• Companies do not remove internal costs adequately once they outsource.
• Companies underestimate or face unexpected transition costs.
• Companies let costs creep back up as time progresses.
  
  

The keys to success:

• First, understand the scope—the product/patient mix, service levels, and channels in play—then get alignment from internal stakeholders.
  
  
• Second, make sure that your own house is in order before outsourcing, particularly from an IT and business process perspective.
  
  
• Third, once the relationship with the third-party logistics provider is in motion with a partner you trust, move quickly to eliminate redundant activities internally.
  
  
• Finally, make sure that good supplier management practices are in place and keep oversight of the relationship separate from day-to-day operations.