“Siloed procurement is a big problem. We’ve recently worked with a client where a CDMO was selected simply because it could start two weeks before another. Ultimately, that led to about an 18-month delay in the project altogether.”
Matthew Holt, Co-founder and Managing Director at Collaborative Sourcing, brings extensive pharmaceutical procurement expertise, from supply planning operations to managing large CMO networks. His consultancy now supports pharmaceutical companies ranging from biotech startups to established pharma giants.
In the latest PharmaSource podcast episode, Matthew explains why getting CDMO selection right is crucial for project success and how a collaborative approach can prevent costly mistakes that derail timelines and budgets.
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The Dangers of Siloed Supply Selection
Siloed procurement approaches create significant risks in pharmaceutical outsourcing. When selection decisions rest with single departments, organisations often optimise for narrow objectives whilst creating broader problems.
“A siloed approach often focuses by its nature on trying to solve one very specific objective or problem. By doing that, what often happens is you invariably create more problems further down the line,” Matthew explains.
The consequences can be severe. Matthew shares a case study where speed became the only selection criterion: “The team were targeted on how many projects they could initiate and get started at CDMOs. Time was the main factor and it led to selection being determined by simply who could start the soonest. In one case, a CDMO was selected because it could start two weeks before another. Ultimately, it led to a lack of due diligence and that CDMO couldn’t support one of the key markets that product was destined for.”
Building Cross-Functional Core Teams
Successful pharmaceutical outsourcing requires diverse perspectives from day one. Matthew recommends assembling core teams before contacting potential partners.
“Collaborative planning means assembling a cross-functional core team. In an ideal world, you would have someone from procurement who can lead the process and bring market knowledge and negotiation expertise,” he notes.
Essential team members include:
- Procurement professionals for market knowledge and negotiation
- Quality and regulatory experts for compliance credentials
- Technical specialists for scientific evaluation
- Supply chain teams for demand forecasting and logistics
- Legal advisors for intellectual property protection
- Finance representatives for cost analysis and partner financial health
“Even if you’re a startup with a small team, have a conversation with somebody else who brings a different perspective or even a friend outside of the industry who can bring another viewpoint,” Matthew suggests.
Creating Your Strategic North Star
Before evaluating suppliers, organisations must define their strategic objectives clearly. Matthew calls this the “North Star” – a crystal-clear understanding of what the project aims to achieve.
“When you’ve got that core team assembled, the first objective is to develop a really clear understanding of what it is you want to achieve and what that supplier needs to deliver,” he explains.
Strategic objectives might include launching new products, optimising processes, reducing costs, or increasing capacity. Matthew emphasises ranking multiple objectives: “Sometimes you might have multiple objectives but try to rank them so you have a clear understanding of your primary goal.”
This clarity prevents scope creep during selection. Matthew warns: “Projects grow and morph by having additional things thrown at them. It’s important you don’t add things that aren’t essential to achieving your objective. What starts as an achievable objective might become mission impossible.”
The Five Cs Supplier Evaluation Framework
Matthew’s consultancy developed the Five Cs methodology to ensure comprehensive supplier evaluation beyond single metrics like cost or speed.
“Instead of focusing purely on one metric to evaluate a supplier, the Five Cs are: capability, capacity, cost, compliance, and collaboration,” he outlines.
Capability examines whether suppliers can deliver required services with appropriate equipment, expertise, and track records.
Capacity considers both human resources and infrastructure: “Can they start your project when you want them to? Do they have the ability to flex and adapt as timelines evolve? Can they make the right batch size and grow with you if your product succeeds?”
Cost extends beyond initial pricing: “We don’t want to think just about initial price. We want total cost and total impact. It should include upfront costs, milestone payments, payment terms, and cash flow management.”
Compliance covers quality, regulatory, and ESG requirements: “Think about ESG compliance, safety, and treatment of workers. Companies are looking beyond standard compliance metrics.”
Collaboration assesses cultural fit: “How well will this partner integrate with your team? How do they communicate? Do you see them as a long-term partner? Does their company culture align with your own?”
Strategic Site Visits and Due Diligence
Once candidates are shortlisted, site visits become crucial for validation and relationship building.
“When I was a buyer, I made a specific point of never entering into a new agreement before I’d visited at least once. Bring as many of your team as possible because they’re your additional eyes and ears,” Matthew advises.
Site visits serve multiple purposes beyond verifying capabilities: “You’re looking for signs of how busy or quiet operations appear. How do people treat each other? Are people engaged in their work? How good do facilities look, tidy and well-maintained or old and shabby?”
Matthew shares a practical tip: “One of my go-tos is always visiting the warehouse. You see what’s going in and out. You might spot customer labels showing which other partners trust them. You might see goods coming in from companies you recognise. How full is the warehouse? How old is stock? These give you a greater sense of actual operations than company presentations.”
Evolving Procurement Priorities
Pharmaceutical procurement has transformed significantly over recent years, moving beyond pure cost focus.
“When I first started, the sole objective was cost. Procurement teams were measured purely on savings. If you weren’t reducing costs every year, you weren’t doing your job,” Matthew reflects.
Two major shifts have occurred: increased focus on sustainability and ESG, and emphasis on supply chain resilience following COVID-19 disruptions.
“Both sustainability and COVID impact have empowered procurement teams to dig much deeper into supply chains. It’s now expected that suppliers provide detailed information about their suppliers and their supplier’s suppliers. This tier one to tier three mapping enables organisations to calculate climate impacts accurately and understand risk levels.”
Win-Win Contract Negotiations
Matthew advocates treating contract negotiation as part of the broader partnership strategy rather than an endpoint.
“Think of contract negotiation as means to an end, not the end itself. In pharma where relationships tend to be very long, it’s essential that you think about partnership as an objective in itself,” he explains.
The key is developing a shared vision: “Just like developing your North Star, your shared vision is done with your partner to create a vision of what that partnership will look like in the future. It might be ‘our shared vision is to co-develop and commercialise this product’ or ‘build a resilient and cost-effective supply chain.'”
This approach transforms negotiations: “When you have that buy-in and shared vision, negotiating clauses becomes smoother because you take it back to: does this help develop and grow that partnership to meet our shared vision?”
Final Advice for CDMO Selection
For executives embarking on their first major CDMO selection, Matthew offers clear guidance.
“Have that vision of finding a strategic partner that you trust and have honest, transparent conversations with. If you can imagine having a long-term, five to ten-year business relationship with that party as you go through the process, that’s a really good sign.”
However, he warns against ignoring concerns: “If you have doubt or distrust you can’t shake off, rely on the data from your evaluation, but don’t ignore your gut instinct. Talk it through with your team.”
The stakes make thorough selection critical: “CDMOs are often selected for incredibly important strategic projects. Sometimes these are the foundation of companies. It’s worse to pick the wrong partner than pick nobody at all. You can always start again if needed.”
