Felix Faupel, head of contract manufacturing at Acino talks to EPM about the biggest challenges of being a contract manufacturer.
Leading the way
As a leader in advanced drug delivery technologies, specifically oral modified release and dispersible forms what are the current challenges for contract manufacturers?
I strongly believe that it is a question in which field you are working in. Things are going great for companies that produce or process biologics. The more complex it gets, the more power technology driven contract manufacturing organisations (CMOs) have in negotiations, which directly translates into revenue and profitability. In this field I sometimes have the feeling that it is maybe more challenging for a pharmaceutical company to find a reliable partner.
For oral solid dosage forms it is a completely different picture. We see worldwide overcapacities and very strong international competition, even though European manufacturers can still profit from high market entry barriers, good quality systems and more reliable supply chains. Especially for products with higher margins in the market, e.g. specialty pharmaceuticals, European manufacturers are still the best choice for pharmaceutical companies. But these products are often smaller in volumes and difficult to handle. As a manufacturer, this needs to be addressed with a flexible contract manufacturing offer.
So how does Acino’s offering set it apart from other manufacturers in such a highly competitive field?
Even though we see ourselves as a best-in-class manufacturer of oral solid dosage forms, we know that the technology we offer has existed for many years or even decades. There are few companies in Europe that can offer the technologies we have. So, when we started to think about what we can do differently, we quickly came to the point where we realised that we have to adjust our offering towards the actual market demand and as I already mentioned, for me this is flexibility.
Flexibility is a word that might be very vague, but it gives us guidance on how we must operate in our daily business. It means we need to show flexibility in our technology set-up, e.g. to be able to offer all kind of different oral dosage forms in different scale and our equipment allows us to do exactly that, it also means that we must be able to adjust to the market conditions of our customers, because if they are not able to sell their products in their markets, we wouldn’t participate as well.
There are many other things that CMOs must show flexibility on, e.g. how you handle unusual customer requests or when you work out transfer projects with customers, but it shall be an overall and integrated way of flexible working. I have seen many customers complaining about feeling unimportant with larger CMOs, but with our company size, I think we can work for all kind of differently sized customers, with different demands and desires, care about each single customer as well as possible and still be flexible in our daily work. The only things that must not be flexible is your quality, your word and your integrity and with that approach. I firmly believe that we can make a difference for our customers and set ourselves apart. In the end CMO business is always a partnership and not a classical provider/customer relationship and both partners must realise that in the first place and live up to it.
Top 5 Benefits
- Supply risk mitigation
- Product cost savings
- Access to (niche) technology
- Access to free capacity
- Avoiding major investments
What are the benefits and challenges to outsourcing partnerships and how can we overcome the challenges?
I think the benefits and challenges are well known to all players in the outsourcing world for quite a long time and therefore I find it utterly surprising that the challenges were not yet fully removed upon today, after decades of out-sourcing activities and the rising of the CMO industry. Of course, we see real ambitions to overcome the existing challenges, like the current supplier consolidation activities at almost every major pharmaceutical company to reduce complexity and costs in external manufacturing, but for me this is not enough and pharmaceutical companies and manufacturer could do more.
In which way?
Supplier consolidation is often a one-sided approach that does not work without integration of the manufacturer in business processes. It requires a lot transparency and trust, but I believe integrating your CMOs into your business process earlier and better can only help to improve the supply of the goods. After risk sharing and commercial agreements, both partners need to work as if they are one company without any prejudice and reservations towards each other and this can only function in an open and transparent environment. For me, establishing such an environment is the most difficult task of our entire industry. Everybody can request quotations and construct a profitable business case around consolidation, but only the daily work with your partner defines if your ambitions will pay off, because it’s a relationship driven by humans and not machines.
So integration of both partners is key?
Yes, it can start with sharing folders between both parties and an end with CMOs managing the customer’s demand planning. In addition, our industry will be heavily influenced by the digitalisation and the newest developments of service providers like SAP, Microsoft and Google. These developments will also help partners to facilitate their relationships in manifold ways, we will have endless opportunities and it will be a challenge to choose the right among them.
Top 5 Challenges
- Communication & cultural hurdles
- Mismatch of expectations
- Increasing dependency with increasing complexity
- Pricing for commoditised products
- Missing CMO market transparency
With regards to digitalisation, how do you integrate Industry 4.0 into your operations?
From our daily business as a commercial role we are well equipped with the above-mentioned tools to integrate ourselves, but to be very honest, Acino started to look into digitalisation of our technical operations just recently. But we are now really accelerating our digitalisation activities also within our facilities. We started with our QC department, which will become paperless in the future and for which we implemented a digital planning schedule that is connected to SAP. We will use RPA (robotic process automation) to reduce process times for different processes from several hours to a few seconds, which will clearly give us an advantage in the market. But we also have identified areas in our production that can be digitalised or integrated and we will be working on them in the near future. The interesting thing is, our entire industry just accomplished a huge step that I would consider as a digitalisation & integration project: Serialisation. We have seen our and our partner’s engineers and project managers working together very closely to meet the deadline earlier this year and they succeeded. So almost everybody has made experiences now and I hope we can take this a good example on how digitalisation and integration can work out properly, if our data is well maintained and everybody works together. We would all benefit from that.