This is the second in a series of articles on “Outsourcing in the Life Sciences Sector”
Previously, we explored the advantages of outsourcing life science services to a knowledgeable third party logistics provider (3PL) such as Intercontinental Logistics Corp. Below, a closer look at four factors to help you decide whether, and to what extent, outsourcing makes sense for your company.
Have you considered the overall impact outsourcing can have on your company? For example, how would your company handle a service failure or other disruption, or a medicine stockout? What if cold storage is crucial to your product and you need to organize it at the correct hour? How would a 3PL handle these situations – from managing your inventory to handling last-mile distribution? And besides the financial impact, consider the effect on the patient and their well-being.
Outsourcing should be a cost reduction opportunity. Still, ensure you evaluate the transition costs for your company before you decide to outsource. While some fixed capital costs, such as warehousing, are high, you may decide to keep other departments such as IT in-house. Still, you may decide it would cost more to upgrade your IT systems and less to outsource it to a 3PL. Then there are costs such as labor, a highly variable and difficult to control cost, that you would rather outsource. You will find your own preferred degree of outsourcing after a proper cost study.
Quality of service is not limited to on-time delivery in the life sciences sector. Besides delivery excellence, patients also rate on empathy, bedside administration and explanation, response time to queries, trust in service and the ability to solve problems as they come up. A 3PL which measures and collects this data and has the knowledge to integrate it, can improve efficiencies as well as your brand recognition and loyalty.
What many companies ignore, because they are driven largely by cost savings, is that outsourcing is an organizational change. Besides processes, there is also knowledge and technology sharing and goal alignment between two companies – all important dimensions to be considered. There will be a change in culture and behavior, employees may be resistant to learning new ways of performing services and maintaining relationships between departments may require extra attention. Managing these changes needs to run parallel to the outsourcing project itself and a lack of understanding in this area from your 3PL can lead to strategic fallouts.
Outsourcing has continued to increase in importance across the life sciences industry as companies look to reduce overhead and improve operational efficiencies. While there is risk involved with outsourcing, strategizing with the right 3PL can make all the difference during the challenging transition.