SummaryIn this segment, our experts welcome leaders from Jazz Pharmaceuticals and Coherus BioSciences to discuss the selection process and key learnings and considerations for working with a third-party logistics (3PL) company.
Kevin: Hello and welcome to another episode of Avalere Health Essential Voice. Our podcast covers a wide range of healthcare topics. My name is Kevin Kissling. I’m a Senior Consultant on the Market Access team here at Avalere. I’m joined today by Rich Prest, Senior Director on our Client Solutions team; Jon Postlethwaite, Vice President, Supply Chain at Coherus BioSciences; and Chad Pulliam, Executive Director Channel Distribution and Trade Relations for Jazz Pharmaceuticals.
Before we start the questions, let’s do a quick round of intros. Jon, why don’t we start with you?
Jon: Yeah, hi, thanks for having me on the podcast today. So, as you said, my name is Jon Postlethwaite. I’m currently the Vice President of Supply Chain at Coherus BioSciences. Prior to that, I had varying degrees of responsibility at Portola Pharmaceuticals where I was responsible for setting up the supply chain and launching both of our commercial products in the US and the EU. I have a PhD in Biochemical Engineering and somehow found my way into supply chain, but I’m loving it so far.
Kevin: Great. Thank you, Jon. Chad?
Chad: Sure. Thanks, Kevin. Hi, everybody. I’m Chad Pulliam, Executive Director at Jazz Pharmaceuticals, as Kevin mentioned. I’ve been with Jazz for a little over a decade and during that time, have had a lot of experience with new product launches in both the retail and specialty space, and a lot of different changes in models and evolution of models.
Prior to that time, I was at a large wholesaler for several years, and in large pharma prior to that. I’m happy to be here and looking forward to the discussion.
Kevin: Thank you, Chad. Rich, we’ll turn it over to you.
Rich: Thanks so much, Kevin. I’m excited to be on the podcast today. Jon and I actually met on a previous project when 3PL distribution was involved, so I’m excited to explore that past history. I have about 18 years in the industry focused on distribution, patient services, digital health, and data, and I’m excited to see what we discuss today.
Kevin: Thank you, Rich. Once again, my name is Kevin Kissling. Prior to joining Avalere, I spent about 15 years at McKesson. I held a variety of roles during my time there. The last role that I held was Vice President of 3PL services where I was responsible for the RxCrossroads 3PL business.
Today’s episode will focus on third-party logistics. For those of you who don’t know, third-party logistics is a biopharma company’s use of an external logistics company to outsource elements of its distribution, warehousing, and fulfillment services.
I’d like to get your opinions on the process of choosing a 3PL partner. To get us kicked off, I’m curious about timing. Chad, about how long before anticipated approval of your product did you start the process of finding a 3PL partner? In retrospect, do you think you started that process early enough?
Chad: Thanks, Kevin. It’s a great question and I actually have a variety of answers. I’d say the sweet spot is anywhere between 12 and 18 months, especially for a new launch to market or if it’s the only product that you’re launching. I’ve done it in six. I don’t recommend that. That timeline only really works if you have an existing structure set up.
So, I’d say 12 to 18 months. The longer the better to fully understand the needs of what the product is, as well as understand the capabilities of the partners that you’re looking at.
Kevin: Thank you, Chad. Jon, do you have anything to add?
Jon: I agree with Chad. I think that 12 to 18 months is about right. When I came at it, we were pre-commercial. I remember very clearly sitting down with an external consulting company and specifically asking them the question, what is a 3PL? That’s how much we knew about it.
I think we probably started 18 months ahead of time. Portola got a complete response letter for the product that we were hoping to launch first, so that bought us an extra six months. I think we got lucky. If we hadn’t gotten that complete response letter, I think it would have been a rush. So, if you’re coming at it from a point of view of not even knowing what the acronym stands for, I agree with Chad completely. The longer the better.
Kevin: Yeah, and from my experience at RxCrossroads, we would tell our customers that the more time that you gave us to implement and work with you as a partner, the better. I would agree with that 18-month lead time, maybe even 24 if you can get it. The more time you have together, the better off you’ll be.
To Chad’s point, there have been times where on the RxCrossroads side, we did it faster and sometimes that was successful, but it was a challenge to get it done in that quick of a timeframe.
Rich: Jon, thinking about your former employer and its decision to choose a 3PL partner through a consulting firm, what was the thought process?
Jon: I think it was really that we didn’t know what we didn’t know. Portola was a small organization that was making that transition from a development organization to a commercial organization. We didn’t have the infrastructure in place to really know what we were looking for. As I said, the head of supply chain, the guy responsible for this, didn’t even know what the acronym 3PL stood for. I had it sketched out for me.
I was very lucky at Portola. I had a very understanding management team that brought in very good consulting firms to help us. As you talked about earlier on, Rich, that’s how you and I met. You drew the short straw in helping us navigate the 3PLs. I think the time that you took to educate us on what we were looking for really helped. At first glance, the 3PLs all sort of appear to be the same, but I don’t think they are. Helping us understand and find the right partner was really essential.
When we did this on the European side, we didn’t have that same level of guidance. With the benefit of hindsight, we didn’t select the right distribution partner in Europe in the same way that we did in the in the US.
Rich: That’s really interesting. It’s very kind of you to say that. It was a real pleasure helping you guys through that process and it didn’t go too badly because we’re still talking, right?
So Chad, tell us about your organization. Did you guys use consultants for shipping through 3PLs? What was that thought process?
Chad: Sure, yeah. Jon, I agree with you. If you’re a new manufacturer and you’re not sure what the acronym stands for, which to be honest, I didn’t when I got into this business either, I think it’s very important. Consultants are in a unique position to view products through a lot of different lenses and have insight to a lot of different capabilities from different 3PLs.
Jon, you mentioned there are a lot of 3PLs out there and lot of them do have the same core set of abilities. Even if you do understand what the 3PLs can offer and what those core abilities are, the landscape is constantly changing. There are new players coming to market, there are new models, there are new services being offered, and there are boutique services that are being offered.
So, you might hear of the big 3PLs and think you should definitely be with one of them, but dependent upon the product, you might be better serviced by a smaller shop or a different partner. You may not know that that partner exists because you only have visibility to a limited scope. Whereas, if you have someone who’s worked with a number of different products, a number of different manufacturers, and understands the entire landscape rather than just a snapshot of it, I think it could definitely help the business.
Rich: That’s really insightful. That’s sort of the privilege that consultants have to be able to see across multiple organizations and have the repeat experience that it’s hard to acquire as an individual organization.
So Jon, tell us in terms of selecting a consulting partner, what was the selection process?
Jon: So, I wasn’t actually involved in that process. I guess I just got lucky. I think there were a couple of consulting firms that we were working with. I was more on the operational side. So how do we stand the business up and actually get the drug into the channel? How do we make sure we have the right quality systems in place?
The commercial organization was also working with a consulting company and that’s where you came in on that distribution strategy. I think one of the challenges associated with how you manage a 3PL within the organization is that transition between the commercial organization and the technical organization. At Portola, we did that quite well. I’ve seen it done badly in other areas. So, I wasn’t really involved in the selection of the consulting partner. That was more on the commercial side.
Rich: Got it. Chad, what about for you guys? How did you choose?
Chad: I think the most important thing is industry knowledge, but in selecting someone that’s going to help me figure out how we’re going to bring a product to market and what partners we’re going to use, trust is the number one thing for me. You’re working with somebody, you’re trusting them with your business, and when that relationship is over, the consulting firm isn’t the one that’s holding the bag and carrying the business forward. The manufacturer is.
So for me, trust is one of those one of those key things that I need to have with the people I’m working with to really understand, what is the goal for the brand? What kind of partner are we looking for? What are the capabilities? And make sure there are no other agendas and that we’re both working toward the same thing. For me, trust is paramount.
Rich: I’m glad to hear that. I was worried someone was going say the cheapest price wins, but no one did.
Chad: It does doesn’t hurt. But trust is key and industry knowledge is second.
Rich: Yeah, that’s very sensible. So Jon, once you got started on the 3PL selection project, how long did the overall project take? Can you remember the key parts of it?
Jon: The selection process wasn’t that difficult. As I recall, there was an RFP, and we got the big players to come and present their strategies to us. Then core teams within our organization went on a road trip. We visited them and had a look around the different facilities and then the selection was made.
Once the selection was made, it was really the contracting and the implementation that took the most time. The actual selection process itself was reasonably quick. Again, I think that speaks to your help, Rich, in helping us navigate through it.
One of the challenges that we faced was there was a lack of ownership internally as to who was actually responsible for owning and selecting the 3PL partner. I think that could have led to some real churn on our side if we didn’t have the right consulting partner to help cut through that and focus on what’s important.
Rich: Yeah, I think that’s exactly right. Fond memories of that road trip to check out each of the main vendors.
Jon: The road trip was a lot of fun. I was visiting parts of the country I’ve never been to before, and I’m never happier than when I’m in warehouses. So yeah, it checked all the boxes for me.
Rich: That’s excellent. Chad, what about for you guys? How did that process work?
Chad: For us, it was about 3 months from RFP to selection, and that’s not including contract negotiation, testing, and all those things. As far as figuring out capabilities through the RFP, players, who you’re going to be working with, what management looks like, what the day-to-day looks like, fit from a brand standpoint, and the product that you’re going to be launching with them, I’d say three months.
After that the contracts can take anywhere from an hour if you sign the first thing they put in front of you, to months, depending on how those negotiations go.
Rich: Yeah, it’s another great reason to have a little buffer in your timeline because you really never know how long negotiations will take. I think that’s a great point.
Kevin: Hey, Chad, you mentioned that trust is really critical in working with a 3PL partner. I agree. I think relationship is critical. Finding an organization that’s culturally aligned with your organization is very important.
What would you say some other important factors are when considering 3PL partners and deciding on one of them?
Chad: Yeah, it’s a great question, Kevin. I’d say the ability to be nimble, the ability to pivot and go outside of the norm. Everybody wants the launch to go exactly how they plan, exactly how they forecasted. It’s the same with a product move or an existing product in the market. It’s going to change. Things are going to go sideways at some point and you may not even see it coming.
So, to have a partner that’s able to shift and be solution-oriented and think outside the box and apply learnings that they’ve had with other manufacturers to address your problem, and do that quickly, is huge. I’ve been a part of moves or launches where things go sideways, and you need a partner that can shift with you and keep the patients and brand in mind. To be able to pivot and shift without a whole lot of red tape and move with you is one of the most important things.
Kevin: Thank you, Chad. Jon, would you agree? Is there anything else that you thought of when considering your 3PL partners?
Jon: I would agree. I was looking at it from a very operational perspective, though. From a manufacturing perspective. So, what I was looking for was an organization that would really look after our baby, so to speak. Our first product was a very expensive biologic that a lot of us had spent a great deal of time working on. We wanted to feel that the 3PL partner was going to treat our product with the same kind of care and respect that that we did. So, what does the pick/pack process look like? How is that being done? How are you organizing your warehouse? What kind of shipping solutions are you using to receive the material on the dock? And how are you packing the material to ship it out of the dock, ultimately to patients?
From a quality perspective, let’s have a look at your quality systems. How are you dealing with deviations? How responsive is your quality team? That was really very important to me from the operational perspective. We had very limited inventory. It was really going to make or break the company. When we shipped pallets of this drug to the 3PL, we didn’t want to hear stories about broken vials. We wanted to hear stories about no problems, no deviations, shipments going out to customers on time and in-full. Invoicing being done, customer master files, etc. That was really what we were looking for, and we got it in the end.
Kevin: Yeah, that makes perfect sense. With manufacturers and biopharma companies bringing their first drug to market, that 3PL role is critical and the operational excellence that they need to consistently display can make or break the success of a product launch.
If you’re looking at third-party logistics companies, Chad, what stakeholders did you involve in the process? Who’s important to be in that room when meeting and selecting those 3PL companies?
Chad: I think Jon made a great point in his last comment regarding, deviations and QA. Your 3PL is an extension of the manufacturer itself. They’re housing product that is owned by the manufacturer. It’s another arm of the manufacturer, and you want to make sure that the right stakeholders and experts are in the room. So, supply chain is obviously a piece of that. QA is a huge piece of that, along with regulatory pharmacovigilance. Legal, obviously, is going to be a part of any agreement that you set up. I’d include finance in that as well, because they are going to be, in a lot of cases, doing your cash-to-order management as well.
Kevin: Yeah, finance always plays a critical role in that process. Jon, would you agree? Do you have any other stakeholders that you would add to that process?
Jon: I would add IT to that process. I think this is the one mistake that we did make. Our selection team consisted of supply chain, quality, accounting, and IT. What we didn’t do was clearly define who owned that relationship right from the start.
Supply chain was responsible for delivering the product to the 3PL and then making sure that shipments going out of the 3PL were done correctly, so we thought we owned the relationship.
Quality thought they owned the relationship because the product was still ours at the 3PL, so they had quality oversight.
Accounting thought that they owned the relationship because they were responsible for managing the order-to-cash process out of the 3PL, and then IT thought they owned the process because we were setting up data tunnels with inventory feeds coming into our Oracle system.
We ended up with about 4 or 5 different people who thought they owned the relationship. That’s where we got it wrong. I agree with everything that’s been said so far, but I would just add IT to that if you’re looking at building a seamless data tunnel back in so that you understand what your inventory levels are so that your salesforce can see how much is in stock, the expiration date, etc. You also need to understand from a revenue recognition position exactly how much you’ve sold and what your inventory asset prices are.
Kevin: Yeah, I think that’s a great callout, Jon. In looking back at the customers who we’ve worked with in the past, when you talk about how early to engage a 3PL partner, one of the things that takes a while to get set up and properly tested is the IT component. The longer that you can give your 3PL partner and your IT team to develop the data feeds and test them appropriately, the better off and more successful that you’re going to be.
From a contracting perspective, once you chose a 3PL partner, Chad, how long would you expect it would take to get contracts in place?
Chad: I’d say anywhere between 3 to 6 months. I know that’s a long timeframe but thinking about legal departments, the size of the companies that you’re working with, and the product itself all have a play in this. I mentioned earlier that it can be as quick as a week if you’re willing to sign everything and depending on whose paper you’re using, or if the 3PL is just willing to sign everything. That’s few and far between, obviously.
We managed to do it fairly quickly. I’d say 3 months is a pretty expedited review of contracts if you’re starting a new relationship, but it can take up to 6. I think that would probably be the extreme, though.
Kevin: Yeah, I agree. And another reason to start that engagement process early. Jon, what do you think? What have you seen?
Jon: I think it should be 3 to 6 months. I think we were closer to 6 months because we didn’t clearly define who the owner of the relationship was. So, everybody wanted their say in the contract. The more people you involve in the contracting process, the longer it takes. When you’re a small organization just getting started and you don’t have that clear ownership upfront, it can really complicate things. So, you think you’re okay and you’re really close to a final draft and then suddenly, somebody in the accounting department decides that they need to put their stamp on to it.
As I said, there were a few mistakes that we made, that was one of them. Three to 6 months seems reasonable. The overriding sentiment in all of this conversation seems to be that you can’t start this process too soon, but you can start it too late.
Kevin: Thank you, Jon. Both of you guys have been working with your 3PL partners for a while now. In knowing what you know now versus what you knew when going through the process, you’ve learned a lot. You’ve got a lot of experience under your belt with these 3PL partners servicing your product. If you had to do it again, would you adjust anything in the selection criteria that you used? Chad, what do you think?
Chad: I don’t know if I’d do anything differently or look at the selection criteria differently, Kevin, but I would stress that the business should be reviewed fairly often. Not quarterly, not more than once a year, but there are so many different partners out there and different models and enhancements that come in the distribution space and the 3PL space, that it’s important to make sure you’re still with the right partner. 3PL partners can change, players can change, so I think you should be consistently looking at the business, not just picking one and saying, “Okay, we’re married forever.” Make sure that the 3PL and the manufacturer are both still getting what they need out of the relationship
Kevin: Thanks, Chad. Jon, what do you think? Any changes, adjustments?
Jon: I’m going to think about this from the two 3PLS that we implemented, one in the US and one in Europe. In the US, we took the time to understand what we wanted before we went out and selected the 3PL partner. I don’t think I would change anything about the selection criteria on the US side. If I had to do it again, I would want to clearly define a business owner up front and make sure that everybody on the team understood that this is the business owner. It would be supply chain of course because everything revolves around supply chain. And then have made sure that everybody else understood they were there in an important but supporting role.
On the European side, I think we got that very wrong. We didn’t take the time to work with a consulting partner in the same way we did in the US, which was a real mistake. In Europe, it’s an even more complicated horizon, looking across all of the different countries. As a result of that, we put the wrong selection criteria in place, and we chose the wrong partner. So, Portola, or Alexion, and then AstraZeneca as it now is, is still working with the 3PL partner that we selected here in the US, but the 3PL partner we selected in Europe, we actually moved on very quickly after we selected them. We realized that we didn’t get it right, so we went back and chose somebody else.
Kevin: Great call outs. Thank you, Jon. Again, in looking back at things and judging the relationships that you have and what is working and some of the challenges, what do you think the one or two things that are needed to maintain a successful relationship with your 3PL? Chad, you mentioned a few things, but could you boil it down to one or two?
Chad: I’d say trust is a big thing, but also understanding the needs of the business. The manufacturer is partnering with somebody that is essentially helping them get product to patients. For me, the ultimate goal is the best and quickest and easiest way to get product in a patient’s or prescriber’s hand. It’s having a partner that fully understands, that is on board and willing to work with you to make sure that is in place, and if it needs to be changed, that it’s changed. Somebody that can bring solutions to the table.
Kevin: Thank you, Chad. Jon, what do you think?
Jon: I agree with that. I think then having the ability to clearly communicate that business need to the organization and not giving your 3PL partner conflicting messages. A lot of churn and a lot of inefficiencies can happen through mixed messaging from an organization. You might have an accounting team telling them one thing and then you’ve got an IT group telling them another thing and the quality group telling them something different, and the supply chain team telling them something different. You end up in a position where that trust that Chad’s talked about a couple of times can get eroded, and that’s the beginning of the end at that point.
Kevin: Yeah, so really understanding your needs, your requirements, your business objectives, and communicating them clearly and frequently. That’s great.
Rich: Great discussion. Jon, I’m just wondering, other than this internal confusion you’ve mentioned around who owned the relationship, is there anything else that surprised you through the selection process or after you selected the 3PL?
Jon: I don’t think so. I think choosing the right consulting partner is really important. I think if you select the right partner, then you have to be able to have that trust that they will guide you through the process. If you come across some surprises during that process, then perhaps your consulting partner hasn’t prepared you as well as they could have. Maybe you’ve selected the wrong partner. There will always be some surprises and some things that come up, but they shouldn’t be huge surprises that derail the business and prevent you from getting drug to patients.
Rich: Yeah. What about for you, Chad?
Chad: Jon, you make a great call out as far as choosing a consulting partner that is guiding you through the process. When you’re in an RFP for 3PLs, you’re dealing usually with sales teams, not necessarily the operations teams. The partners that you have helping guide the way can really help navigate those discussions and those capabilities and make sure you understand them.
One thing that can be surprising with 3PLs is how different they can be, whether it be systems or players and who you’re going to be working with. Having a partner help you understand those things and discuss those things is key. But I think Jon makes a great point that if they’re doing their job, there shouldn’t be a whole lot that surprises you during the RFP process or when you go to launch.
Jon: I do remember when we went through the selection process, all the main players came to the Portola office to present their pitch to us. All the big players turned up and they brought football teams of people with them. It was amazing. Then, the very last presentation was one of the big guys and 1 person turned up for the presentation. It was their head of sales. We all looked at this internally and we were like, what’s going on? Why is there only one person here when everybody else brought all of their other people? I remember thinking, wow, that’s not great. We’re not overly impressed by that.
Then we did the road trip. We went around and we looked at them all and lo and behold, the one guy who turned up on his own was the 3PL partner that we chose and was incredibly successful. I remember looking at you, Rich, when this guy turned up on his own and just basically saying, “What gives?” I remember you looking at us and saying, “You’ll see.”
When we’d made the selection at the end of it, I remember saying, “Well, I think this is the one we’re going to go with,” and I asked you very specifically if we made the right decision, and you said, “yes.” I said, “What would you have done if we hadn’t made the right decision?” And you sort of looked at me and smiled and said, “I’d have nudged you back in the right direction.”
That leads to the consulting side of things, right? We had a partner who understood the business but let us go through the process. You knew right from the start the right fit for us because of the extensive knowledge of what was out there, but we had to go through that process and make those decisions ourselves and the company that we thought were the outsiders were the ones we ended up choosing in the end.
Rich: Yeah, I think that’s the key part of a good process. If you’re meeting with the operational folks that you’re going to engage with rather than the sales team and you see that actual warehouse and where they’re going to do stuff, that often has a big influence on your final decision. And to your point about it being your first and only baby at that time was super important. You had the right partner to help you with that.
Anything else that you would do differently if you had to do it all again, Jon?
Jon: Other than what I’ve outlined already, just understand the ownership. Having a clear owner throughout the process would have saved us a lot of headaches in subsequent years. Other than that, I don’t think so. I learned a great deal during the process. We selected a great partner, and we had a successful launch with limited inventory of our product. That was in no small part due to our selection of the right 3PL for the product.
Rich: That’s terrific. Chad, any other thoughts about what you’d do differently or words of wisdom for folks who are looking to choose a 3PL?
Chad: I don’t think I’d do anything differently. Jon, you bring up a good point. Don’t shut anybody down during the process without talking to the person who’s guiding you. You mentioned that the one 3PL showed up with one person and it didn’t fly very well, and the organization ended up working with them. You relied on Rich to push you in the right direction. That’s what they’re there for. That’s why we work with consultants.
As far as closing advice, the biggest thing I’d say is just ask questions. Don’t ever make any assumptions. Set expectations with the 3PL partners as well as consultants as far as what you expect to get out of the process, what you expect from a partner, and talk about what’s important to you.
With 3PLs that I work with, if it’s the first time I’m meeting them, I’ll come out and say what’s true, that I can be very high maintenance, especially if there’s an emergency. Let them know what’s important to you, and ask questions. There is never a stupid question. You don’t ever want to make any assumptions.
Rich: Great advice. Chad, Jon, I really appreciate you joining us today and sharing these great experiences and lessons with the audience. And thank you all for tuning into Avalere Health Essential Voice. I hope you enjoyed Part 1 of this series in the Distribution space. Please stay tuned for Part 2 as well as other Essential Voice episodes. If you’d like to learn more, please feel free to visit our website at www.avalere.com. Thank you again.
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