In the model adopted by Endo, every link on the value-added chain can be open to the outside world (see Figure 1). The company
determined early on that to be successful in the tough world of lower-cost marketing and sales programs in the smaller markets
that are treated by narrow specialties of physicians, it would have to employ a full-time, dedicated sales force as a core
capability. But in all other areas, Endo's employees would become project management specialists, managing the drug development,
manufacturing, and distribution process through the use of multiple, specialized outsourcing service providers.
Figure 1. In the virtual-company model every link on the value-added chain can be open to the outside world. Adapted from
Dr. Gene Slowinskis book, Reinventing Corporate Growth, 2005.
Building Your Own Specialized Outsource Partner
For distribution, Endo doesn't own a single warehouse or shipping pallet, or employ any customer service telephone representatives.
It relies completely on UPS Supply Chain Solutions to distribute its new and existing products to market. Unfortunately for
Endo, it wasn't able to just step into a smoothly running turnkey operation. In 1997, few specialized outsourcing service
providers in the distribution area were equipped to grow the shipment volume of highly regulated opioid pain therapies that
the company began operations with after its management buyout.
Daniel J. Carbery, an executive who came on board at Endo in its early days and who is now the senior VP of operations, stepped
up to the challenge. He developed a supply chain that had incredible restrictions because of its special governmental requirements
for close monitoring of narcotic drugs all along the supply chain. At the same time, Carbery had to figure out a way for Endo
not to stray from its semi-virtual model. The new company needed a way to track orders, monitor outgoing shipments, and get
paid for its products. It also needed real-time contact with its customers in the retail pharmacy, wholesaler, and physician
market spaces. For some of its products, Endo needed a flexible storage and transportation system that could house and ship
injectables in a cold chain environment. "We knew what we wanted, but there were no companies with both full-service systems
and adequate flexibility available," says Carbery. "So, we worked with UPS Supply Chain Solutions to create a flexible, scalable,
and highly integrated distribution system," recalls Carbery. "We couldn't afford to internalize or recreate such an operation
on our own. And the reality is that we didn't want to."
Everything in a semi-virtual company is tied to flexibility—the ability to rapidly scale up and down in response to changing
business circumstances. Endo's complex supply chain is designed to suit its need to retain maximum scalability in the event
of serendipitous in-licensing deals, which can suddenly drop the company into new markets with new product introductions.
Carbery describes his semi-fixed system arrangement with UPS that assures scalability, "You've heard of playing in the same
sandbox as someone else? We rent our own 'sandbox' from UPS. It's a dedicated space where our product orders are fulfilled,
products are picked, packed, and labeled, and all documents are recorded."
To make it all work, Carbery says he consciously has brought in a very different kind of operations employee group into Endo.
He screened his hires to have an alliance-engaged mindset about making little differentiation between own-company employees
(very few) and extended partner virtual employees (hundreds). His group speaks with UPS employees frequently and involves
UPS in its preparations for new product introductions.