Logistics outsourcing has come to biotech and pharma. Watson says businesses in those sectors are increasingly focusing on core competencies such as research and development. That leaves few resources available for managing supply-chain activities. At the same time, companies are determined to cut costs in that area. The ultimate goal, she says, is improving the drug pipeline.

In partnering with logistics service providers, companies can take advantage of the economies of multi-client facilities. "Why bear the burden of cost by the bus, when I can buy a seat on the bus?" asks Watson. In the process, they reduce unnecessary costs.

The medical sector has been slow in adopting outsourcing in part because of the industry's unique requirements for security and special handling. Companies have been reluctant to trust outside providers in a business where the price of non-compliance with strict government regulations is so high. That attitude changes when they are confronted with a choice between boosting revenues and cutting costs. With few drugs in the pipeline, their opportunities for higher revenues are constricted. The only option is to seek internal efficiencies - the kind that can emerge from well-managed outsourcing relationships.

To make it work, there must be buy-in from the most senior level of management, says Watson, in addition to a high level of commitment among all involved. One key is the presence of "a visionary who can look beyond short-term cost and savings to the long-term benefit for the organization."

Pain in the biotech and pharmaceutical supply chain comes from a variety of directions. Companies are under growing pressure to cut costs, even as they confront stricter regulations and the need to manage customer expectations for product quality, price and availability. In addition, the sensitivity of many products calls for a high level of expertise in cold-chain management, says Watson.

Some processes should probably never be outsourced, she says. They include core activities such as dealings with pharmacies and other customers. But all relationships with outside providers should be guided by one dictum: "Whatever company one decides to partner with," says Watson, "it has to be a seamless extension of [its] business."

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