Is Your Pharma Supply Chain Ready for the Next Global Crisis?
Source - Alt: A pharmaceutical company works hard to produce the next few lines of medication
The COVID-19 pandemic has exposed intrinsic cracks in our pharmaceutical supply chain that pose as dire problems severely impacting the industry till today.
As of 2023, 50 major pharmaceutical companies announced layoffs to generate cost savings in Q1, including giants like Bristol Myers Squibb, Biogen, Pfizer, and Thermo Fisher. Grifols has cut down a jarring 8.5% of its workforce, roughly 2,300 positions
Sure, there were plenty of opportunities to thrive, given the circumstances, and plenty of companies made billions. However, due to drug shortages, product inventory build-up (due to population immunity and high vaccination rates), logistical bottlenecks, and more, companies are estimated to see a huge drop of up to two-thirds of their revenue this year.
And with all the infrastructure and production put in place, it’s clear the crisis laid bare the consequences of a reactive approach to crisis management.
The industry and the world weren't ready, and we're still paying the price.
As pharma leaders, transitioning to proactive, resilient strategies is no longer an option but a necessity. What happens when the next world crisis hits? What happens if we have a COVID 2.0, war breaks out, or an economy upends without warning?
Modern businesses must move beyond crisis-driven responses to establish supply chains designed not just to cope with sudden disruptions that may surface but thrive within an ever-changing and uncertain terrain.
This guide will explore actionable and future-proof strategies to execute pharma supply chain management and ensure preparedness in the event of another global challenge.
The Role of Proactive Measures in Ensuring Continuity
Source - Alt: A close-up of someone ill and coughing
Predicting what lies ahead is futile.
However, having an assessment of your pharma supply chain is pivotal to understanding what can cause a downturn, identifying potential weak areas and addressing them before they come to the fore.
Taking on proactive strategies is crucial in this effort.
This may include strategies such as:
- Diversifying suppliers to minimize dependency on single sources
- Reducing the impact of regionalized disruptions.
- Increasing critical product stock levels creates a buffer against sudden surges in demand.
Furthermore, investing in digital tools enhances supply chain visibility, enabling real-time monitoring and data-driven decision-making.
Adopting technology in this way, allows you to see as much data on your processes at a time, and is essential to making fast, data-driven decisions that could save you time.
This is already happening. Pharmaceutical manufacturers aim to spend around $4.5 billion a year by 2023 on data analytics forecasting, an industry set to grow by 27% CAGR, with the global industry set to spend $244 billion on research and development.
Remember, the global landscape is dynamic; regular risk assessments and updates to contingency plans are crucial. Proactivity involves constantly adapting your strategies in face of the ever-evolving threats and opportunities.
By embracing these measures, they can ensure continuity in the lifespan of your pharma company so that it can navigate uncertain futures with confidence.
Let's take a look at some of the most necessary strategies now.
Embracing Scenario Planning and Simulation Exercises
Scenario planning and simulation exercises are powerful tools for building pharma supply chain resilience.
It's a process that involves envisioning various potential disruptions – from geopolitical instability to natural disasters – and their impact on your supply chain.
Simulation exercises test your contingency plans in these hypothetical scenarios, exposing vulnerabilities before they become real problems.
These exercises provide a safe space to analyze how your supply chain reacts to stress under different conditions. Incorporating real-world data and trends into these simulations makes them more accurate predictors of potential challenges.
One Forbes article found that in a PwC survey of 1,000 business execs, data-driven organizations were three times more likely to achieve ‘major improvements’ in their decision capabilities.
By testing responses and identifying weaknesses proactively, you optimize contingency plans and bolster your pharma supply chain's readiness for unpredictable events.
You're essentially harnessing the power of technology and the opportunities it provides to its full potential. When computer applications and AI can do the heavy lifting for you, you'll no longer need to guess or run the numbers at risk of human error.
Putting It Into Practice
To translate proactive measures into tangible actions, consider these examples:
- Supplier Diversification: Map your current supplier network, identifying areas of over-reliance. Proactively seek out and onboard alternative suppliers in different regions to mitigate geographical risks.
- Enhanced Inventory Management: Implement advanced inventory tracking systems that provide real-time visibility into stock levels of critical drugs. Couple this with data analysis to identify optimal stockpiles for rapid response.
- Digital Supply Chain Transformation: Invest in technologies like cloud computing, predictive analytics, and blockchain to improve supply chain transparency, data sharing, and real-time decision-making.
Cost-Reduction Strategies Without Compromising Preparedness
The pressures of inflation create a need for cost reduction, but this cannot jeopardize supply chain preparedness.
Fortunately, strategies exist to achieve both.
Of course, this depends on your business model, but typically, lean management principles that focus on eliminating waste and streamlining processes will grant improved efficiency.
What's more, taking the time to automate routine tasks can reduce labour costs while enhancing accuracy. Saving resources in these areas enables you to redirect and focus on other, more problematic areas of your company, as outlined in the section above.
Additionally, open, sometimes even automated, renegotiations with suppliers can lead to more favourable contracts in the long run.
While these efforts might require upfront investment, remember that the costs of disruption significantly outweigh them.
Investing in resilience and preparedness is an investment in minimizing future financial losses and protecting your pharmaceutical company's ability to serve patients.
The pressures of inflation create a need for cost reduction, but this cannot jeopardize supply chain preparedness.
Here are specific tactics with real-world impact:
- Lean Management: Pharmaceutical companies can significantly reduce waste by identifying non-value-adding activities and streamlining processes. A McKinsey study found that implementing lean principles can lead to 20-50% cost savings in various industries.
- Automation: Automating repetitive, manual tasks reduces labour costs and improves accuracy and speed. In a recent survey, 60% of manufacturing firms using automation reported cost reductions of at least 10%.
- Supplier Renegotiations: Building long-term strategic partnerships with suppliers can lead to more favourable terms. Consider volume discounts, joint procurement initiatives, or extended payment cycles to improve cash flow.
- Strategic Outsourcing: Carefully evaluate which supply chain functions might be more cost-effectively managed by external partners. This could include logistics, warehousing, or elements of the manufacturing process.
Rethinking Sourcing Strategies Post-Pandemic
COVID-19 highlighted the risks of over-reliance on international sourcing. While returning to entirely domestic sourcing might be impractical for many pharma companies, exploring alternative strategies is crucial for building resilience.
Consortiums with other companies can pool purchasing power, ensuring the availability of critical supplies even during shortages. Investing in local manufacturing capabilities, even if at a smaller scale, can increase responsiveness during disruptions.
The key is flexibility and adaptability.
Rigid sourcing models are vulnerable to changing circumstances. A strategic balance of domestic, international, and collaborative sourcing options provides your pharma company with the agility to navigate supply chain challenges and guarantee uninterrupted access to vital medicines.
Conclusion
The COVID-19 pandemic was a wake-up call for pharma.
It revealed the fragility of supply chains when a reactive approach prevails.
Now is the time to transform this challenge into an opportunity. By embracing proactive measures, leveraging scenario planning, addressing cost reduction strategically, and rethinking sourcing, your pharma company can build a resilient supply chain.
This shift is not just about survival; it's about ensuring patients worldwide have uninterrupted access to lifesaving medicines.
Invest in resilience today to shape a more secure future for global healthcare.
Ready to learn more?
Join us at LogiPharma Asia in Singapore, where industry leaders convene to forge resilient supply chains. Network with peers, gain actionable insights from global experts and learn strategies to future-proof your pharma operations.
This is your chance not just to react to challenges but also to confidently anticipate and overcome them.