In pharmaceutical contract manufacturing, when a price request is made, it’s not enough for the client to simply send technical data with information about the production process and formulation.
Sharing background details about the business rationale, pain points and supplier selection criteria allows the contract manufacturing organisation (CMO) to be more specific and propose a tailor-made solution.
There are three main situations when pharmaceutical companies reach out to CMOs: when launching a product, externalising in-house manufacturing or moving production from one CMO to another.
One might ask why it’s important for a CMO to know the client’s motivation. When externalising a product manufactured in-house, for example, it’s essential for the CMO to understand whether the client is trying to urgently free up capacity, to offload complexity, to lower manufacturing costs or simply to change strategy.
By knowing this, the CMO can provide specific solutions and respond accordingly by prioritising and transferring early, harmonising manufacturing and packaging, optimising the manufacturing costs as well as operating more independently to ensure that the client can focus on their prioritised projects.
Transparency is not only important to understand a project’s background, but to also set expectations and define clear goals. Sometimes, customers are hesitant to openly admit that they are only asking for a quote to compare prices.
This is an acceptable reason, but it should be clearly stated. However, even though the quote is exploratory and may not lead to a collaboration, it opens the door for further discussions and potential projects.
If a client has a specific target price in mind, it is helpful if they share that information at the very start of the conversation. I often witness people being hesitant to talk about numbers.
Yet, by not sharing this information, they prevent the CMO from quickly assessing whether these targets are achievable. If what the client is looking for is beyond the possible price range, it would save a lot of time and effort on both sides.
Transparency is, of course, a two-way street. After the CMO confirms that a project is feasible and that an offer will follow, breaking down the overall price into distinct components might help the client to understand what the main cost drivers are; both sides can then look for opportunities to optimise them with solutions based on experience with the product.
Pharmaceutical manufacturing is a slower-paced business compared with most wholesale and retail environments. Finalising decisions on some projects can sometimes take years because of contract terms or patents.
And, even though a client might stipulate a deadline to receive an offer at an early stage — and expect the CMO to respect it — they should also provide a reasonable decision-making timeline and clarify the CMO selection criteria.
This would allow the supplier to set internal expectations and communicate with the client accordingly. Some clients do not incorporate time for revision rounds in their supplier selection processes.
This is important to know in advance … as the first offer will also be the last one. A CMO may well approach the analysis and offer creation process differently if and when they know that no further discussions and revisions will follow.
Transparency in terms of business rationale, price targets, the decision-making process and selection criteria are critical to managing expectations during an RFQ process.
Both partners benefit from having a better understanding about the project and the offer as it facilitates problem solving, flexibility and prioritisation. These are key factors when it comes to developing a trustful and long-term partnership.
