Rethinking the Pharma Supply Chain

The international pharmaceutical business environment continues to develop at a rapid rate. Increasing interactions between economies has raised many important issues regarding transport infrastructure, logistics and broader supply chain management (SCM).

It must be recognized that a product is delivered to the ultimate customer through a complex interaction of several companies on the way; pharma companies are increasingly relying on a global network of R&D partners, suppliers, logistics providers and contract manufacturing organisations (CMOs) to develop, test, produce, ship and distribute their products. Using specialised outsourcing partners for key supply chain activities provides companies with significant cost and flexibility benefits.

The manufacturer’s ability to give the customer what they want, when they want it, at the price and quality that they want, is not just determined by the efficiency and effectiveness of the manufacturer’s own operation. Inefficiencies anywhere in the supply chain will reduce the chances of the manufacturer successfully competing against other suppliers. Without a proper focus on total supply chain management, therefore, a company will never achieve true competitive advantage. The increasingly international nature of markets and companies has resulted in many companies becoming part of large and complex global supply chains. In addition, the potential benefits associated with emerging electronic commerce technologies provide the potential to simultaneously improve customer service levels and to reduce supply chain costs. These factors have sharpened the focus on the need for improvements in all aspects of supply chain performance.

Yet, in recent years, the industry has been facing significant challenges:

  • The competitive intensity has significantly increased with the fast rise of generics.
  • Overall, the product portfolio has grown more complex, with more niche products for new markets.
  • For over-the-counter (OTC) products, large drugstore chains are imposing the same high standards (e.g. on-shelf availability, promotions) as they do to consumer product companies.
  • Healthcare providers and government reforms continue to put strong downward pressure on prices.
  • Quality regulations, the rise of counterfeited drugs and the serialisation mandate are forcing pharma companies to make their supply chains more robust to ensure full traceability.

All of this is putting new demands on the supply chain to help address these challenges and bring products to market cost-effectively and at the required service level.

Following other industries, like high-tech and consumer goods, pharma companies should consider if their existing supply chain management systems and processes provide:

  1. Accurate information across the entire chain at any point and at any location
  2. Instant access to real-time updates and alerts if issues are detected
  3. Visibility of all handovers in the supply chain
  4. Traceability back to source of all materials
  5. Seamless collaboration between all parties

New strategies use the experience of consumer product companies but take into account the specifics of the pharma industry. A cloud-based network to enable end-to-end visibility and collaboration among supply chain partners, combined with dedicated decision-support applications that leverage the data in this network is the best set-up. The benefits are substantial:

  • Up-to-date, end-to-end supply chain visibility – ‘one version of the truth’ shared across all partners
  • Full quality control of CMOs – as required for traceability and serialisation
  • Higher on-shelf availability, generally with lower inventories
  • Through smarter channel allocations, better margins and ultimately higher market share

The early adopters are already capturing these benefits, putting themselves ahead of their peers.

At Tribord, we have already built a solid Supply chain operating network, particularly between North Africa, Europe and Asia, in order to provide the best characteristics of SCM in evidence that might be regarded as world class.

It is impossible to develop an exhaustive list of the characteristics of SCM excellence but the following four elements appear to be of critical importance for most companies in most sectors:

  • Identification and measurement of customer service because customer service ‘sets the spec’ for supply chain design
  • Integration of supply chain activities and information because many supply chain NVAs are caused by fragmented supply chain configurations
  • SCM a senior management function because SCM is a strategic activity
  • Establishment and measurement of supply chain key performance indicators (KPI’s) because what gets measured gets done!

In short, A well designed supply chain with robust planning cycles that takes care of the various lead times in the end-to-end supply chain can help achieve speed to market as well as an agile supply chain.

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