Why managing an external supply chain needs more than firefighting

Many companies manufacture all or part of their portfolio externally. Some do so by design. Our most recent experience was with a company growing at pace through acquisition, moving quickly into new markets, and building extraordinary commercial success on the strength of its marketing excellence and medical insight. It gained early agility by avoiding capital investment and, for a time, operated without the weight of operational complexity.

Others arrive at an external network model for similar strategic reasons, for product-specific needs, or simply because history led them there. The result is often the same: an ad hoc supply-chain network marked by diversity and duplication, serving products in varying formats and presentations, produced using sometimes similar processes of wildly differing capability, by geographically spread companies with differing alignment and commitment.

When that network performs poorly, the whole organization can be thrown into crisis. A single product on the brink of stock out pulls everyone in, the skilled and the not so skilled. All share in the panic. Cost of manufacture is rarely the determinant of profitability and the reputational damage of failing to supply can be ruinous. Management attention is dragged into repeated interventions and away from the focus that had driven and sustained growth. The agility once assumed because others were looking after supply chain is lost.

In the scramble for rapid solutions, inventories are almost always increased dramatically – an expensive comfort blanket that avoids the need for real operational understanding but one that may not be as effective as its advocates suggest. Teams work harder, call in favors, pay to jump queues, and collapse in celebration when stock out is narrowly avoided – but nothing really changes. The next crisis simply lands on another product in the portfolio, manufactured by another CMO, because in reality nothing has been done to strengthen the supply-chain network.

We built the page because we have lived this pattern repeatedly, across different companies, products, and continents.

The challenge of deliberately improving supply-chain performance, robustness, and long-term relevance is exactly what the External Supply Chain page on the Net+U website is designed to address.

The page is based on collective experience in improving highly diverse external manufacturing networks serving high-value, low- to high-volume products across the US, Europe, and Asia. In some instances, multiple sites of a single CMO were used; in others, small single-site CMOs were employed. Typically, inherited supply chains comprised geographically separate DS, DP, and packaging locations. Across the portfolio there were multiple instances of sites with very similar processing capabilities but working in complete isolation, with little shared learning and no coordinated management approach.

The page tries to move the discussion beyond firefighting and toward strategy. At its core is a simple idea borrowed from Richard Rumelt: strategy requires diagnosis, guiding policy, and coherent action. That matters because supply chains often struggle not only with technical problems, but with weak prioritization, inconsistent standards, and fragmented activity. Teams may know improvement is needed yet still lack a clear way to define what matters most, what “better” looks like, and how effort should be aligned.

The Rumelt framework helps impose that discipline.

First, it requires diagnosis. On the page, that means defining strategic objectives and then assessing status through several lenses: context, current performance, constraints, potential impact, and scale of opportunity.

Second, it requires guiding policy. The guiding policies are not decorative principles. They are the working expression of best practice – the ideas that should shape decisions, improve consistency in execution, and support communication across products, sites, and supply-chain participants. They also create a basis for learning. If experience during execution shows that a policy is incomplete, weak, or no longer reflects best practice, it should be revised.

Third, it requires coherent action. The response cannot be a loose list of good intentions. It must be a set of actions that reinforce each other and move the supply chain toward the stated objective.

That is where the matrix comes in.

In that matrix, products are ordered by revenue – the sense being that, all other things being equal, the most important product is the one that generates the greatest income. The two most critical factors in assessing “all other things being equal” are also called out: cost of goods and remaining exclusivity. This matters because headline revenue alone can be misleading. A product with limited remaining exclusivity, regardless of revenue, is unlikely to justify substantial deployment of resource in improvement effort.

Across the top of the matrix sits a second ordering logic: stabilize, simplify, optimize, contingency, and grow.

This sequence is deliberate. If a product is unstable, it will consume disproportionate time in repeated crisis. If its supply chain is overcomplicated, optimization effort may be wasted because basic structural problems remain. Contingency matters because even improved networks can fail, and the ability to respond quickly to disruption can be the difference between setback and serious loss. Only once dependable supply has been established does it make sense to invest heavily in growth-oriented work.

The matrix uses traffic-light indicators – on the webpage, hover over the coloured dots to see explanatory notes on categorization.

Expectation should be of priority expanding radially from the stability of the highest-value product outward – and when deployment is markedly different, people should ask why. The purpose is not to be absolutist, but to ensure management attention is directed deliberately.

We hope that the management process described, if adopted, will turn supply-chain improvement from a reactive exercise into a strategically important, disciplined, and effective initiative – one that drives both organisational performance and ongoing learning. In summary, the loop is initiated by reviewing the environment and the opportunity; diagnosing where performance stands against the strategic objective; defining and applying guiding policies to shape coherent action; measuring outcomes; and then revising both the matrix view and the guiding policies based on what has been learned.

Our contention, obvious though it may seem, is that external supply chains perform best when objective, diagnosis, policy, and action are connected – and when management attention is directed to the products and issues that matter most. Where we believe we add value is in providing a framework and approach to deliver that connection and focus, as well as experience in doing so.

If you face similar challenges, we hope you’ll find the page useful. And if you do, we would genuinely welcome the chance to share experiences and discuss challenges, options, and differing perspectives.

Get in touch

write2us@netplusu.com