The importance of supply chain resilience
Supply chain resilience is one of the cornerstones of the entire pharma industry. A strong, dependable supply chain means a steady flow of medications, patients, and profit. Conversely, a weak, easily disruptable supply chain can quickly sink a pharma company. Recent world events, such as the Covid-19 pandemic as well as the war in Ukraine, have caused disruptions to the world pharma supply chain. Additionally, many smaller regional supply chains have also been affected. Although some have recovered, this leaves the market in a vulnerable place at the beginning of 2023. Thus, the future remains uncertain.
However, the fragility of pharmaceutical supply chains is not only an issue for businesses. Many patients are highly dependent on getting the medication they need to manage their conditions. When supply chains are disrupted, it can sometimes even result in public health crises. For this reason, maintaining the resilience of pharma supply chains is paramount, both for the ongoing health of the pharmaceutical industry as well as the health of millions of people worldwide who rely on life-saving medication.
In this article, we are going to explore the concept of a supply chain, why supply chain resilience is important, what causes it to become damaged or disrupted, as well as how to remedy any problems and strengthen it. It is important to be informed about these concepts going into the next year. With many pharma companies making breakthroughs in technology and serialization practices, the resilience of their supply chain might be what sets the real winners apart.
A simple breakdown of the pharma supply chain
If you are reading this article, you probably already know something about supply chains. However, it never hurts to brush up on your knowledge. Furthermore, we want to make sure you understand exactly what we mean when we talk about supply chain resilience, so this will ultimately serve to make this article more comprehensible.
The pharma supply chain is the process used to manufacture and deliver prescription medications to patients. It is highly intricate, necessitating a lot of actions and moving parts to guarantee that patients have access to important, potentially life-saving pharmaceuticals.
The basic pharma supply chain structure
Although not all medications follow this path, this is a general template for most supply chains. It consists of five steps as outlined by pharmanewsinte.com. Pharmaceuticals are:
- Made in manufacturing sites
- Transferred to wholesale distributors
- Stocked at pharmacies
- Subject to price negotiations as well as quality and utilization screening/processing
- Sold and dispensed by pharmacies to patients
Supply chain resilience falls into jeopardy when one or several of these steps are endangered. In the following sections, we will explore in greater detail how things can go wrong and what to focus on to ensure the integrity of your pharma supply chain.
Common problems with supply chain resilience
Now that we have discussed what exactly we mean by supply chain, let us explore what are the most common problems that can disrupt it. The most common link in the chain in the link to break first is the second one, namely transport. Because of the global nature of the pharmaceutical industry, medicines are more accessible than ever but this also means that the infrastructure designed around their transport is more fragile than ever.
The best way to illustrate it would be by a couple of examples from recent history:
Pharma businesses faced a crisis as Covid-19 cut off vital shipments of medicinal components from Asia. Their reliance on global supply networks carried a dangerous risk. This warning was not the first one. In 2011 and 2012, tsunamis destroyed pharma manufacturing facilities in Asia, and Hurricane Maria in 2017 took out Puerto Rico’s energy supply, shutting down many of the island’s approximately 50 pharmaceutical companies for months. What is more, supply chains regularly fall victim to cyberattacks and trade disputes. They are under constant threat from various forces.
Regarding COVID-19 specifically, supply chain resilience was challenged globally to an almost unprecendented degree. The disruptions led to worldwide shortages of important medications that some patients and businesses are still recovering from. However, these examples have also served as important lessons to be learned and have ultimately sparked a greater interest in creating more resilient supply chains.
We will now talk about how to do just that.
Improving supply chain resilience
Now that we have explored the most common issues that disrupt supply chains, we can begin talking about all the ways in which pharmaceutical companies can strengthen their supply chain.
Although shifting production closer to home markets would be desirable, doing so would be expensive and take years to complete. The robustness of current supply chains can be improved with a two-step strategy that is more practical.
The hazards that affect the entire supply chain must first be better understood by organizations. Leadership teams map production facilities, distribution hubs, and material flows (including APIs, inert ingredients, and packaging) against potential risks to promote transparency. They take into account geopolitical changes that could affect supply and demand and result in medicine shortages, such as trade wars, natural catastrophes, epidemics, and strikes. Based on the degree of impact and likelihood at both the corporate level and the site level, businesses can assess their risk exposure and work towards improving supply chain resilience
The leadership teams then develop new supply chain strategies by lowering risk exposure, boosting resilience skills, or doing both based on the findings of the risk assessments. According to bain.com, four essential elements should be present in effective plans:
Redundancy
Manufacturing facilities can be designed with capacity buffers to allow businesses to easily increase or decrease output volume. These buffers consist of safety supplies of essential medicinal components, flexible production lines with additional capacity, and shift patterns created for quick reaction, such as night shifts when necessary, with a mix of permanent and temporary staff.
To be able to change production volume and location as necessary among a variety of possibilities, leaders build an agile production ecosystem through flexible contracts with suppliers and manufacturers. They build numerous backup sources for crucial commodities and a variety of quality certification solutions to ensure a quick response to market shortages.
Adaptability
A modular manufacturing strategy enables businesses to move production as needed to different locations throughout the world. Increasing the automation and digitization of production lines also helps with adaptability and therefore with supply chain resilience. This in turn helps operators when they have to react quickly to an interruption.
A third aspect of adaptation is creating detailed strategies for various eventualities. When pharma businesses have prioritized SKUs and set up swift, practical decision-making procedures, they can respond to disruptions quickly and adjust their investment plans as needed.
Prediction
Leadership teams have significantly better network visibility thanks to control tower technology and artificial intelligence solutions, which also help foresee demand swings and dangers. By exchanging real-time product demand and stock information, leaders may give suppliers and customers more visibility. These businesses regularly examine available data and run scenarios in order to spot possible weak points in the supply chain and take swift action on their discoveries.
Empowerment
Successful businesses strengthen problem-solving skills throughout their organizations and at production locations to get the most out of robust supply chains. Importantly, they give local groups the authority to take actions that help safeguard company continuity in a crisis.
Four additional measures for supply chain resilience
According to mckinsey.com, there are four additional things you can focus on to ensure your supply chain remains resilient. These should be viewed as complementary to those above mentioned.
End-to-end transparency
For pharmaceutical companies, a lack of knowledge about the business operations of suppliers and suppliers’ suppliers can pose a serious risk. When foreign suppliers were proven to have employed child labour, many consumer brands were accused of unfair labour practices. To get a complete picture of the supply chain and pinpoint weaknesses, a corporation must map out its suppliers by tier.
Additionally, it’s critical to have a thorough awareness of exposures that go beyond supply, such as how items are created, delivered, and kept, as each stage presents a unique set of potential issues. An entire supply chain could be disrupted, for instance, if a tiny transportation company in a key region filed for bankruptcy.
Routine stress testing and reassessment
Scenario planning and simulation models are frequently used by businesses to identify their vulnerabilities, estimate the potential impact, and take mitigation measures. For instance, a top pharmaceutical corporation used a digital-twin simulation during the COVID-19 pandemic to comprehend the effect of manufacturing halts and slowdowns on the supply of patient medication. The company was able to take more time to find the appropriate solutions since it realized that it had more time than it had anticipated to create and implement safer working practices at its manufacturing facilities. A corporation can regularly assess the likelihood of various hazards once it has visibility into its supply chain.
Reduced exposure to shocks
Extending the network of suppliers is one of the most often used methods for fostering supply chain resilience. A vulnerability might result from relying on a single supplier for essential components or raw materials or from having several suppliers centralized in one area.
Multisourcing isn’t the only solution, though. Additionally, a business can strengthen its physical assets to withstand storms and storm surges, achieve a better balance between just-in-time and just-in-case inventory levels, and offer financial assistance to struggling but crucial suppliers. Numerous businesses are testing out technology that allows for speedy supplier changes and sophisticated analytics that improve challenge prediction.
Production can continue after a shock if parts can be rerouted and production can be flexible among sites. Analytical tools are needed to study various possibilities. A unified operating model is also necessary since a company’s ability to adjust its production is significantly hindered if the same API has various specifications at each of its 20 locations. Regulatory filings must also contain the technical details of the components that make up a product. It is challenging to substitute alternatives when a company’s filing depends on a certain brand of venous-access device.
Supply-chain resilience on the executive agenda
Strategic planning and day-to-day operations of an organization should include consideration of supply-chain risk and resilience. Structured governance should be in place to guarantee that decisions are made and taken action upon at the appropriate level and time.
The risks facing their company must be visible to the leaders, who must then direct staff to regularly assess and reduce them. Supply-chain shocks are unavoidable, but disruptions are not, as Biogen demonstrated during Hurricane Maria. All pharmaceutical companies have some of the four factors mentioned, but few have all of them. A business that wishes to become more shock-resistant might assess itself against these criteria to figure out where to start and what to do next.
Where to find help for your supply chain
After reading this article, you are probably more aware than ever of the importance of supply chain resilience. If you were fortunate enough, you have not yet had many issues with your supply chain and thus did not have to deal with the fallout of a very bad disruption. However, make no mistake: they can be brutal. Therefore, a preventative approach is ideal
Here, services like our Nubinno Assessment can help you identify any issues in your supply chain and move towards fixing them. We can furthermore advise you on how you can optimize your supply chain as well as other aspects of your pharmaceutical company. Before the next pandemic, war, or global disaster put your business and the lives of the many patients relying on your supply chain in peril, heed the advice in this article and, if you need to, get in touch with us for additional, personalized help.
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