According to McKinsey, the value of pharmaceutical goods traded has grown sixfold. From 116 billion euros in 2000 to 594 billion euros in 2019. In the last ten years, there has been a drastic shift in Active Pharmaceutical Ingredients (APIs) production, mainly due to cost. According to the FDA, 40% of registered manufacturing sites for APIs are in India and China. The relocation to south Asian countries has directly affected the reliability of these supply chains.
When the pandemic outbroke in China, these manufacturing sites were shut down. This caused a severe toll on the pharma industry, as there was a massive shortage of APIs in the USA.
Rebecca Guntern, President ad interim of Medicines for Europe and Head of Europe at Sandoz International, explained that due to Covid-19, there was “an unprecedented combination of demand surge and supply crunch.” This was mainly due to explosive demands for generic medicines, used particularly in intensive care (ICUs), and scarcity of drugs due to travel restrictions, lockdowns, and closure of factories in India and China.
The relocation of crucial manufacturing to Asian countries such as China, Taiwan, and India has directly impacted supply chain reliability. It has led to drug shortages for various reasons, including distance and workforce availability.
Leading pharmaceutical companies have successfully shifted their supply chains to drive growth and manage costs. But unless they assess and plan the inevitable risks, they can suffer huge losses.
Let us discover the latest innovation and strategies that pharma industries adopted to decrease their losses and shortage of stocks, for better sustainability and growth in an uncertain environment.
How can pharma companies take steps towards building a resilient supply chain?
Attaining data and digital maturity:
In a survey conducted by aspentech, nearly 50% of the respondents rated their pharmaceutical organization poor in data optimization to predict their supply shortages. Although several companies are moving closer towards data maturity after the pandemic, many organizations are still in the early stages of cleaning and optimizing their data.
According to a study by Splunk, data mature companies are 12.5% more profitable than fewer data mature companies and have better decision-making capabilities.
Integration of Artificial Intelligence in the supply chains:
The pharmaceutical industry lies among the top industries that still rely on paper trails or excel for their stock optimization. The same study by Aspentech shows that even though some companies are data mature, they cannot use the data correctly because they lack suitable AI software to exploit their data. Hence, they fail to derive an accurate predictive analysis. Pharmaceuticals can integrate a backward and forward-looking MRP, into their workflows to improve patient care and maximize profit simultaneously based on accurate forecasts.
Improvement in data sharing:
Most of the pharma industries are in the early stages of connecting numerous supply chains and improving data flow. There is a high vulnerability in the industry, but significant benefits can be seen if supply chains become more transparent. For example, Procter & Gamble successfully integrated data sharing in their global supply chain. They were able to achieve real-time data for its plants, suppliers and distributors, from inventory forecast to road delays and weather forecasts. Data collaboration is highly recommended for supply chain’s efficiency both vertically and horizontally.
Diversifying suppliers geographically:
As most of the APIs manufacturers are confined in India and China, it increases vulnerability in transportation, supply chain disruption, and a high lead time when an uncertain event occurs.
Companies are already diversified their suppliers to minimize the aftershocks of these events. Many companies have already successfully relocated several of their manufacturing units to be efficient. The biggest industry to do so is the Automotive Industry. Auto manufacturers designed products with common components to achieve supply chain resilience and decrease lead time. Hence, it decreased the use of custom parts in different products. For example, in pharmaceutical industry, Doliprane already accomplished this.
Innovation and Competitive advantage:
With the expansion of market, the big pharma companies are moving towards innovation by collaborating with small companies. Major companies like Jhonson&Jhonson believe that the R&D process in their companies is broken, lack data sharing and needs amendments. Today, small enterprises drive massive innovation, and have total 63% of all new prescribed drug apporvals. Whereas big pharma, consider this as an opportunity to fund this innovation. It is becoming a win-win situation, which is cost effective for giant companies and provide scientific breakthroughs for upcoming scientist. Also, the drug developed and marketed is highly affordable for general public.
There is a recognizable advancement in QR-enabled packaging to increase health literacy and patient compliance.
During clinical trials, innovative packaging (featuring RFID tags) and wearable devices optimize the interaction between patients and doctors, using real-time data to identify side effects and improve the outcomes for both parties.
In one of the interviews, Stephanie David, vice president of Pariveda, said, “A dynamically connected and integrated ecosystem can enable life sciences supply chains to finally be patient-centric and purpose-driven.” Patient-centric, digitally mature supply chains can improve end-to-end visibility of the movement of drug products with real-time analysis. The key here is “patient-centric”. Billions of lives were saved because of efficient supply chain during the pandemic. Hence, it is critical to optimize pharmaceutical/ bio industry supply chain to the fullest.
With a lack of maturity, fortunately pharmaceutical companies have great opportunities to enhance their capabilities and make data and patient-centric decisions. Hence, they can build a resilient supply chain that can predict demand and supply in the long run, and pharmaceutical industries can work efficiently and effectively for the sake of humanity.
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