Meeting the demands of business and marketplace growth or complexity can stress a company’s infrastructure and employees. This stress identifies that the company lacks flexibility, and this lack of flexibility can impact inventory, customer support and fiscal controls. Inventory constraints can have a direct impact on development or marketing strategies and cash flow. The response often is to increase output through overtime or equipment scheduling. This can offer short-term relief, but then identifies the hidden problems of inflexibility. The impact on total output and human resources, and their costs, soon become evident.

Some companies attempt to alleviate this stress by using a contract manufacturing organization (CMO) to overcome internal capacity constraints or produce a specialized product. This is a direct but limited response to the stresses associated with growth or complexity. CMOs can help with the immediate inventory condition, but the product transfer and regulatory timing can push out the implementation time lines, all of which can increase internal stresses, not decrease them.

Addressing the lack of infrastructure flexibility, and providing resources to help people succeed, provides longer structural solutions. This article discusses that view and how to include CMOs as an option to improve overall flexibility. Like most stressors in life, making decisions in the middle of the stress comes at a cost and doesn’t address the contributing factors. Identifying what it means to be flexible and how to achieve flexibility provides a company with the structure and tools to address business and market changes. This becomes more critical, given the rapidity that these changes are occurring.

Flexibility is more than a production or operational response. All areas of a company should be structurally flexible. Planning for flexibility means providing resources for the various organizational demands. These resources do not all need to be internal, and use of external resources can improve flexibility without the constraints of internal complexity. Equipment, space, time and knowledge are external resources that support flexibility. Knowledge of their availability and use can reduce inevitable organizational stressors.

CMO support
Establishing relationships with CMOs outside of the classic use models can provide the needed equipment, space, time and knowledge supports.

• Process and product development activities. This includes developing alternate processes, changing batch sizes, trying out new material suppliers, or changing procedures. The CMO can also provide equipment at a different scale than is available in internal development areas, and do not disrupt internal production equipment, time, or space. Schedule flexibility is another positive outcome.
• Location for producing atypical inventory—seasonal, promotional, training items, etc. This serves to control mix-up or contamination concerns, or disruption to typical product inventory planning. Moving small volume or multiple SKU products offsite can reduce internal complexity, freeing up people, space, and equipment. It also offloads the impact of market uncertainty that some products or their individual SKUs have.
• Limit or control the rate of internal capital acquisition costs or spending. The limit may be due to immediate financial constraints or available physical space. Or it may avoid internal construction or equipment purchases that have a shorter use projection than can be justified. Expanding in response to growth is difficult if the rate or terminus of growth can’t be predicted, so accessing external support can offer a solution as the growth becomes better understood.
• Reduce supply risk associated with single source producers—internal or external. These risks may be logistic, financial, or compliance-based. 
• Available resources for specific needs. A CMO can support development or commercial projects, processes, or products. The supports can be varied, including analytical, promotional configurations, or process investigations.
• Resources that are geographically close to core company teams. This improves timing and reduces costs, and provides structural confidentiality and security to strategic efforts.

The addition of CMO support is intended to provide management increased flexibility and reduce the business stressors. Becoming aware of the vast array of CMO capabilities helps in identifying their use for increasing business flexibility needs. Even in the midst of a stressor event, having their capabilities available can provide immediate relief. For example, if an internal laboratory is overwhelmed due to production demands or development support, qualified external testing support can improve production throughput that has been slowed due to lab constraints. Most CMOs have laboratory capacity and capability to provide this relief.
Assessing CMO capabilities

Users of CMOs range from virtual companies to large traditional companies. They attempt to match capabilities and capacities to their business needs. Most product types—injectable, solid oral dosage form, etc.—have formulas and equipment that are similar, while still having unique configuration and processing requirements. CMOs operating within a product type have equipment configurations based on contract demands and/or their targeted customer base.

There are a number of CMOs providing services to pharmaceutical and medical device companies. They range from small operations that provide targeted services for products at the development stage, to large operations that support large volume commercial products.

Smaller CMOs may be subsets of clinical research organizations (CRO) that provide multi-level support to the development and clinical phases of a drug product. Larger operations can be subsidiaries of multinational corporations, with large facilities in the U.S. and European regions as part of traditional manufacturing operations, or Asia/India as part of the low labor cost manufacturing movements.

Equipment 
It is not expected that any individual CMO company will have a best match for all equipment or process needs. Some may offer greater flexibility and capacity, while others offer better matches to current equipment or processes, influencing regulatory filing timing. Determining the fitness of the match of capabilities is part of an assessment process. Initial assessments can be performed using publically available information such as the internet and publications. Most CMOs have representatives available to discuss their capabilities and capacity, or the types of equipment they use. These conversations can be held without introducing confidentiality concerns.

The need for capital investment to improve the fitness of a match can be determined during the assessment. Equipment needs may be a single major purchase, or multiple minor purchases to improve the match of existing CMO equipment. The total capital investment at any CMO may be similar even if dissimilar equipment needs to be purchased—one major item purchase, or multiple minor item purchases.

The timing of acquisition may be as important as cost. The type of equipment influences the timing of acquisition, due to shelf availability and vendor lead times. A company and the CMO may be able to avoid significant upfront capital investment through utilization of available and flexible internal personnel resources to perform manual activities. Many CMOs maintain a highly flexible workforce allowing assignment to variable manual demands. This can improve the project timing and product filing, and allow for proper planning for automation.

An additional aspect of the capital equipment demand is the batch size potential of the available equipment. There are two primary drivers to the batch size. The first is equipment size and capacity, measured as volume or count against time. Adding used or new equipment supports, such as conveyors or feeders, can improve available capacity and be relatively inexpensive. Off the shelf or used equipment are readily available, so the lack of equipment should not be seen as a constraint. The second driver is the run rate for equipment as matched to the process run times. The run rates can be improved through supplemental equipment, and run times can be defined through process validation.

There are different options for pursuing capital investments with a CMO. There can be up front fees to cover the cost of acquisition and qualification. Or the costs could be integrated into the batch cost, or a combination of both. It is important to define the acquired equipment ownership—CMO or client—for financial and long-term planning purposes. Most CMOs are open to equipment acquisition since it improves their relationship link with a new client, and expands their experience offering to other clients.

Space
The lack of space can prevent a company from expanding its internal operations. The use of a CMO can directly offset that impact. In addition to equipment, the CMO assessment needs to consider space implications. The type of space and the availability of space are direct flexibility concerns, and poor assumptions can quickly impact intended flexibility gains. The assessment should clearly identify how much space is available—square footage, and room or rack height—and the type of space based on environment and controls. Security of a building or designated space should also be defined. 

The type of space impacts how a CMO can be used. It could be space for production planning inventory of materials and components, or space for items pending shipping such as drug products and promotional materials. It can also be specialized space like stability storage or secured storage for controlled drugs. Space types are formally defined and controlled and not just a matter of square footage.

Space availability is impacted by type and timing. Configuration of space impacts its use. For example, rack configuration as matched against pallet heights. A CMO may have considerable space during an assessment, but will that change if they acquire additional customers? Does occasional demands by other customer’s impact their overall available space? Knowing this allows for proper planning and ensures flexibility. Assess the decisions against the impact of available internal space, especially if the CMO is holding finished goods inventory. 

Time and knowledge
The availability of time in a company may be the ultimate measure of flexibility. Assessing internal time availability is difficult. “People time” may be the most critical, but other time measurements are important, such as throughput, down time, etc. Reducing complexity improves available internal time. Consider the use of a CMO in regards to reducing complexity. Determine if the CMO has available time to support your flexibility needs. The customer support structure impacts the time availability of the CMO. That includes the many levels of supports—development, analytical, planning, production, warehouse—not just the representative available to accept phone calls.

Knowledge also supports flexibility, since experience allows a company to quickly identify and pursue best-fit alternatives. Include a knowledge assessment of the CMO, to identify their experience base. That can be based on the products they make, the processes they perform, or the type and level of experience of their management, technical, and operational staff.

Experienced-based knowledge includes processes, volumes, schedules, and mechanical skills that directly impact the capability and capacity of facilities and equipment. Compliance, laboratory, formulations, and logistics experiences influence the levels of support actions. The experience and skill base of the labor support in a CMO can impact their rate of implementation of new projects, products, or processes. Personnel experience can be broad based or specific and deep. Determine the personnel structure and if their knowledge and experience is broad and deep. Just as freeing up time is important, having access to knowledge and experience can identify countless flexibility options.

Stressors in a business call for flexibility in the organization to respond to the stress. Providing the organization access to equipment, space, time and knowledge can alleviate or help respond to this stress. CMOs offer the flexibility response option that may not be possible internally, or provide supports until it can be implemented internally. Knowing about and preparing for those needs in advance accelerates their use. Recognizing the multiple contributors to flexibility, and making them available to the entire organization can result in a highly flexible company that can respond to business and market conditions. 

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Phil Burns has worked in the Pharma industry over 30 years, with technical and senior management roles in quality and operations. He has served as the head of quality, technical support, quality control/regulatory, and production at multiple companies. He is the co-founder of CRO-Consulting, providing compliance, regulatory and operations consulting to the pharmaceutical and medical device industry. He can be reached at phil@cro-consulting.net.