Kurt Nielsen, Ph.D. shares his strategies for sponsors to extract maximum value from contract service providers, the overlooked benefits of AI, and the shifting dynamics of the global supply chain.
Kurt has an extensive background in contract development and manufacturing, having previously held senior leadership roles such as CEO at Pharmaceuticals International, Inc. (PII), President of Lupin, VP at Sandoz, SVP at Catalent, and EVP at Teva. His consultancy, Longview Leader, assists life sciences clients with continuous improvement and asset management.
“The work we do every day truly makes a difference in people’s lives,” says Kurt. “Putting aside the politics and profit debates, at its heart, the pharmaceutical industry’s mission is to improve health, cure diseases, and enhance quality of life makes it an amazing place to work.”
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Global outsourcing in the ‘new normal’
“With legislation like the Biosecure Act coming into play, I foresee us settling into a new balance and a ‘new normal’ in the next three to five years,” he says.
Globalised supply chains became highly efficient in times of low inflation and minimal cost of money. The pandemic, however, has laid bare that lower costs come at the expense of security compared to local or regional service provision and manufacturing.
“I anticipate the pendulum swinging back from the highly globalized supply chains we’ve seen over the last two decades or so, towards a more nuanced mix of local, regional, and global,” he says.
“Many countries have long been offering tax incentives to stimulate capital investments in domestic facilities for sophisticated manufacturing capabilities, aiming to avoid being at the mercy of pandemics or geopolitical fluctuations.”
“While not all globalized supply chains can transition to regional models, those that can will. This will become the new status quo over the next three to five years.”
Building Economic Incentives into Contracts
Kurt shares his advice on how to make contract service providers more engaged with your business.
“Economic incentives are often undervalued. Readers of ‘Freakonomics’ by Stephen J. Dubner and Steven Levitt will appreciate that humans are motivated by economic incentives—a fact we cannot afford to ignore.”
“It might come off as cold or harsh, but setting up contracts with incentives for punctual performance—tied to on-time delivery and quality—is essential. These are basic expectations in our industry; you must meet them whether you’re internal or partnering with a service provider.”
“Having worked with service providers, I’ve noticed such contracts are treated with more seriousness—which is exactly what clients should want.”
Equally important is establishing social operating mechanisms that promote open, honest, transparent dialogue, says Kurt.
“Building sufficient trust is crucial so that when challenges arise, communication flows freely. It’s not about assigning blame; it’s about concentrating on the task and delivering results.”
“Not enough effort is made to ensure that relationships are strong enough to support ongoing communication outside formal meetings. Prompt and effective communication is vital so that if things don’t go as planned, your service provider reaches out—and vice versa.”
Shared Liability Models
The way liability is shared between parties can be beneficial to strengthening partnerships.
“Striking a good balance can be tricky, but when it’s found, it encourages quicker movement and some risk-taking on both sides.
“Usually, it’s a zero-sum game—the provider avoids risk, as does the buyer. But once there’s a foundational relationship built on trust and proper metrics are in place, shared liability becomes another form of financial incentive. It gives each party some operational freedom without fearing drastic economic repercussions.”
Change Orders and Escalation
“Change orders happen.” says Kurt, explaining that open conversations are necessary along with contractual provisions for such events.
Effective resolution requires a clear process for escalation or information sharing.
“Contracts often emphasize work scope but pay less attention to resolving disagreements or misunderstandings. Part of fostering an open and transparent relationship is addressing these issues head-on.”
Scoping out complexities before project commencement helps clarify potential issues into tiers of change orders and establishes an authority matrix for those involved in discussions.
Investing time upfront provides insights into your partner’s business practices. “Unwillingness to engage in these discussions or inflexibility can be warning signs indicative of future behaviour” says Kurt.
AI-driven innovation
“The industry has been conservative when it comes to ground-breaking innovation; there’s a lot of untapped potential out there,” Kurt notes.
He defines innovation as bringing something new into existence that benefits society, whether that is a new drug product, software or process.
“No discussion on innovation and untapped potential would be complete without mentioning AI and machine learning’s capabilities to manage data sets beyond human analytical tools,” he asserts.
“We’re just beginning to explore robust applications of generative AI models or even basic efficiency tools.”
“Insights from large data sets is key because those insights are crucial for product development and investor relations.” says Kurt.
“Early adopters will stay ahead in the game. If you lack AI and machine learning capabilities in-house, it’s wise to utilize what’s available externally—it’s a force multiplier.”
“Until now, pharma has taken a cautious ‘wait-and-see’ approach. But COVID-19 has demonstrated that when we focus collectively on an issue, we can achieve great things.”
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