The Key Challenges in 2012 for Pharmaceutical & Medical Supply Chains

Big Pharma recently saw a significant merger and acquisition period of market globalization and product offering expansion. Now, it appears that the tides may be shifting.

A segment of Big Pharma is shedding non-core business units and focusing on core profitability. Acquisition strategy is not dead, however, and these seemingly divergent paths are both focused on increasing flexibility and profitability to adapt to market uncertainty. Supply chain planning and adaptability are moving forward as integration of business units increases on a global scale.

Supply Chain Focus to Support Business Strategies

Supply chain leadership will be responsible for much of the successful execution and profitability in pharmaceutical and medical products, as strategies evolve and re-evolve through M&A, regulatory and pricing shifts, emerging market growth demands, and new product quality, as well as security and logistical challenges.

Pharmaceutical supply chains have always been focused on product security, product protection, and customer safety. Many past supply chain decisions have leveraged risk as the primary factor, making it easier to justify budgets and expenditures. Today, the safety of product and patient is still the top concern, but best practices, responsiveness, and cost reduction are also critical.

To compete successfully, all pharmaceutical companies are by default global organizations – serving patients in multiple countries with customized product delivery solutions. The goal is 100% fulfillment to those in need, but there are significant challenges.

Key Supply Chain Challenges

• Evolving and Emerging Global Markets – Multiple tier pricing structures and approval processes make market entry and sustainability challenging. Who to service and at what cost and risk?
• Government Price Controls - New legislation is now impacting facility and production location selection. What options to produce and deliver at the lowest possible cost?
• Track & Trace Regulation - Governments around the world are moving toward product serialization. For example: Regulations, such as California's 2015 pedigree mandate and the European Union’s (EU) ratified Falsified Medicine Directive, which set the stage for expanded use of serialization designed to help protect the integrity and safety of pharmaceutical and medical supply chains. How to best plan and manage global inventory and be compliant globally?
• Sourcing and Quality Controls – Issues with global suppliers, particularly in Asia, continue to demand more inspection. Who to partner with and how to manage suppliers and co-manufacturers in local markets with global APIs and components?
• Integrated Versus Decentralized Supply Chains – Integrated systems create efficiency, and rapid organizational realignments make adaptability critical. How to maintain maximum flexibility to meet changing demands at the lowest cost and investment without reducing control?
• Logistics Service Providers (LSP) Rationalization – Having fewer partners with a wider global reach increases short-term flexibility, while reducing risk. But also consider costs and restrictions when selecting core LSP partners. Who are the global partners that offer rapid market entry as well as highly efficient established market services with competitive cost structures and industry expertise?
• Integration or Diversification of Supply Chains – Whether companies have shared facilities, consolidated shipping, or integrated procurement and sourcing, the ability to add or shed business units while maintaining secure and seamless business execution is essential. What does the supply chain of tomorrow look like and how easily can it absorb new units or be decoupled without significant cost impact?

A Vision for Critical Supply Chain Planning and Execution

Due to additional pressures and uncertainties anticipated in 2012, it is important to ensure a short- planning horizon for supply chain adaptability and rapid reorganization. An integrated, adaptable global supply chain that has full visibility and shared planning is needed to achieve profitable growth.

Focus on the following in 2012:

1. Understanding Existing and New Markets and Developing a Solution for Each: This does not mean a unique solution for every market, but one that leverages the global infrastructure in place works with established partners, and builds off those to service each market. Fulfilling an order in North America is much easier than one in rural China, but it must be done more efficiently in China. Is it time for you to initiate a global supply chain assessment?

2. Building Adaptability and Demand-Driven Responses into the Supply Chain: Risk, instability and rapid change are here to stay. As such, they challenge the validity of all planning processes: Strategic planning, partnership models, contingency planning and financial planning. Being adaptive is not about having a great plan, but being able to move and change very quickly to stay ahead of the market. And via demand-driven supply chains, costs can be saved and customer satisfaction improved by responding to real demand in the market that are reported through each link of the supply chain. Now is the time to review your operational capabilities, network infrastructure and partner’s capabilities; as well as gain true supply chain visibility by having a demand-driven supply chain.

3. Integrating the Business: As the industry becomes more complex, the segregation of supply chains for business units increases costs. Bringing divisions from OTC, Pharma, animal health, bio-tech, and medical device together enables easier market entry, better leveraging of facilities and partners, and eliminates duplicate supply chain execution efforts and costs. Facility rationalization and consolidation go hand in hand with inventory management planning.

4. Leveraging Technology and Automation: In order to increase efficiency and meet all track & trace regulations, as well as security challenges, the requirement to implement the appropriate systems and equipment is mandatory. This ties into integrating supply chain facilities and leveraging your partners to create operations of enough size and volume to justify investments. In established markets, in-sourcing is much more viable than in emerging markets. Warehouse, distribution center, and operations systems upgrades should leverage operational experts and harness the power of equipment and integration experts to develop turnkey solutions.

Conclusion

For pharmaceutical companies in 2012, supply chains will play a major role in their ability to adapt, consolidate or refocus their core business segments. The world will continue to throw new obstacles and challenges for moving products and materials into and out of specific markets and countries. But with the right supply chain configuration and adaptability, pharmaceutical and related healthcare supply chain leaders can overcome these obstacles by using internal, external and country-specific resources to create best practice-based supply chains.

© Tompkins International, Inc., All rights reserved.