Outsourcing and Building in the Asia-Pacific Region
From a TCO standpoint, the outsourcing model is an attractive strategy for the long term given Genentech's forecast ex-US
clinical trial (shipment) volumes. Qualitatively, long-term outsourcing has benefits similar to those for short-term outsourcing.
Based on the decision-criteria matrix, the outsourcing model does not enable the company to build international distribution
know-how as specified in the strategy criterion, nor does it deliver the control described in the regulatory and quality criterion.
The build model, however, is an ideal way to satisfy these two criteria. Genentech will consider the option to build and direct
ship where possible in Asia, because this model's TCO for Asia is comparable to the TCO of outsourcing in Asia. The hybrid
approach satisfies all the criteria that Genentech feels are important in developing an international clinical trial distribution
To implement the build aspect of the long-term strategy in Asia, the company will consider building a regional depot in Singapore
because this would be co-located with its commercial distribution center, allowing Genetech to leverage resources (thus reducing
costs) with regional logistics and distribution knowledge. The company will continue to outsource the country-depot function
until sufficient clinical trial volumes financially justify building Genentech's own country depots. Figure 3 depicts a long-term
hybrid combining the outsource, build, and direct ship models.
Figure 3. A long-term hybrid model for regional and local distribution, combining the outsource, build, and direct ship models.
Genentech will periodically reevaluate its assumptions to ensure that the assumptions driving the strategic decision have
not substantially changed. The project team has built a business process and set volume trigger points by which the strategy
being followed will be reevaluated. Genentech's clinical trial distribution strategy is set up to leverage increased knowledge
of the following: global medical markets, global manufacturing and distribution networks, and significant expertise in working
with outside contractors and partners. This leveraging will ensure that Genentech continues to focus on innovative medicines
to solve difficult and serious health conditions.
The authors wish to thank Franco Pasquale, Joy Guidi, Ed Cox, Melody Spradlin, Frank Hathaway, Lisa Arjes, Robert Larson,
Susanne Somerville, Michelle Polowski, Colleen Griffith, and Aslam Galia.
Joe Jovero is a global supply chain senior manager and Sue Steven, PhD, is a senior director, process research and development, both at Genentech, Inc., South San Francisco, CA, 650.467.9816,