Assessing the Benefits and Risks of Contract Manufacturing
- Several leading pharma companies have adopted contract manufacturing.
- This helps to leverage the services of a specialized third-party manufacturer.
- Companies must assess the capabilities and regulatory compliance to shortlist a contract manufacturer.
January 30, 2023 | Procurement Strategy
The adoption of contract manufacturing has grown at a rapid pace in the last decade.
Pharma and biotechnology companies, in particular, rely increasingly on contract manufacturing. In these industries, contract manufacturing organizations (CMOs) are now considered an integral part of the supply chain.
A huge increase in the demand for active pharmaceutical ingredients from 2011 to 2017 has contributed to the growth of contract manufacturing in these industries.
In this article, we explore the benefits and risks of contract manufacturing. We will also learn how to identify the right contract manufacturing organization for your business.
What is Contract Manufacturing?
Contract manufacturing is the process of outsourcing the production of goods to a third-party manufacturer. It is a cost-effective way for a company to produce products quickly and efficiently.
The objective of contract manufacturing is to leverage the expertise and resources of a third-party manufacturer. This allows the company to focus on other areas of the business such as marketing and innovation.
The contract manufacturer typically provides the parts and materials needed to produce the product, as well as the equipment and tools needed to assemble and package the product.
Benefits of Contract Manufacturing
One of the most significant benefits of contract manufacturing is cost savings. By outsourcing production to a contract manufacturer, a company can reduce overhead and labor costs. This allows the company to invest more in other areas of the business, such as research and development.
Contract manufacturing allows for a faster turnaround time. In most cases, the contract manufacturer is responsible for the entire production process, from design and engineering to production and quality control. This allows for a faster production cycle, which can lead to quicker product launch times and higher customer satisfaction.
Contract manufacturing also offers flexibility. The contract manufacturer can work with the company to develop customized solutions that meet the company's needs. This can include customizing the product design, engineering, or manufacturing process to meet the company's specific requirements.
Finally, contract manufacturers can typically produce higher quality products than the company could produce on its own. This is because the contract manufacturer has access to specialized tools and equipment, as well as experienced personnel who are familiar with the production process.
How to Find the Right Contract Manufacturing Organization
Finding the right contract manufacturing organization is vital for successful production. Here are some steps to follow when selecting a contract manufacturer:
- Research different contract manufacturers. Check the manufacturer’s background and experience in the industry. Does the manufacturer have the capability and experience in the type of product you are manufacturing?
- Ask for references and testimonials. Speak to other companies who have worked with the contract manufacturer to get an idea of the quality of their services.
- Get quotes from different contract manufacturers. Compare the quotes and ask questions about the production process, pricing, and delivery schedule.
- Evaluate the contract manufacturer's capabilities. Check whether the contract manufacturer can meet the company's needs and has necessary tools and equipment.
- Review the contract manufacturer's quality control and regulatory compliance processes. Does the manufacturer have a quality control system in place and is compliant with all relevant regulations?
- Consider the location of the contract manufacturer. If you are outsourcing to an international contract manufacturer, consider the additional costs of shipping and import taxes.
Quality Control and Regulatory Compliance
In the pharma industry, it is important to consider regulatory requirements when selecting a contract manufacturer. Contract manufacturers must comply with industry regulations and standards such as Good Manufacturing Practices and Quality Management Systems. These regulations are designed to ensure the safety and quality of the products.
The contract manufacturer should have a quality control system in place to ensure that the product meets the company's specifications and is compliant with all relevant regulations. The contract manufacturer should be able to track quality control and regulatory compliance throughout the production process. This includes processes such as inspection, testing, and certification.
Contract manufacturers must also be aware of the regulations governing the export and import of pharmaceutical products. As these regulations vary from country to country, it is important to understand the regulations in the countries where the products will be sold.
Finally, it is important to ensure that the contract manufacturer has appropriate insurance coverage. This can protect from any liabilities arising from the contract manufacturing process.
Risks of Contract Manufacturing
While contract manufacturing offers many benefits, there are also some risks associated with it. One of the most significant risks is the risk of intellectual property theft. By outsourcing production to a third-party manufacturer, the company is essentially handing over control of its intellectual property. This means that the contract manufacturer could potentially copy or modify the company's designs without the company's knowledge.
In addition, the quality of the product produced by the contract manufacturer may not be at par with the company's original design. This is because the contract manufacturer may not have the same level of expertise or access to the same tools and equipment as the company. This could lead to product defects or subpar performance.
Finally, the contract manufacturer may not be able to meet the company's delivery schedule and timelines. This could lead to delays in production and a decrease in customer satisfaction.
The Future of Contract Manufacturing
As the industry continues to evolve, contract manufacturing is set to become increasingly popular. Pharma and biotechnology companies will continue to outsource production to contract manufacturers to reduce costs and increase efficiency.
The use of technology in contract manufacturing is also likely to increase. This includes the use of automated machines, 3D printing, and advanced analytics. The use of technology will allow contract manufacturers to produce high-quality products quickly and more efficiently.
