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The Value of OutsourcingThe purpose of manufacturing strategy is to reduce manufacturing risk and at the same time maximize business value. Manufacturing strategy must be developed in the context of the entire corporate strategy. In the broad context the question to ask is how can manufacturing provide competitive advantage to the corporation. In business in general, competitive advantage usually arises through superiority in price, quality, dependability or flexibility. In the biotechnology industry few firms compete directly on price. However, dependability of supply and quality of product are strong selling points for the corporation. Thus, early inclusion of manufacturing operations into the overall corporate strategy may result in tangible contributions to the bottom line. For biotechnology companies that are still on the path to a fully integrated organization, manufacturing strategy in large part consists of a sourcing strategy. The appropriate source of production will depend on the stage of the company and the available alternatives. The biggest question to address is whether to build capacity inside or to rely on contract production with outside vendors. The main reason companies go outside is to avoid expense, both of capital construction and of building expertise internally by addiing and training staff. Some companies choose to develop internal capabilities at an early stage to provide control over schedule and quality or because their product requires specialized equipment or techniques that either are not available on the outside or need to be kept secret. In some cases, a part of the operation may be contracted out, such as the final fill, which requires a more expensive facility with higher environmental control requirements, but which may be more readily available. Because the existing alternatives are often mutually exclusive, an initial evaluation of the alternatives, with a particular look at the potential pitfalls, is worth conducting early in the company's existence. Today there are multiple vendors available who can provide external capabilities for manufacturing, process development and testing. See also Hayes, R.H. et al., Operations, Strategy, and Technology: Pursuing the Competitive Edge, John Wiley & Sons, New York (2005). Let SMW help you Let Strategic Manufacturing Worldwide help you address these issues.
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