The pharmaceutical supply chain is vulnerable to adverse events, and the pandemic has served as a reminder of how these networks can be tested. The industry has learned tough lessons from COVID-19 that must be translated into modernisation and improvements
Words by Isabel O’Brien
At the height of the pandemic, the sourcing of critical materials and the location of production sites became a challenge for the pharmaceutical industry. While the sector has a global supply chain, the materials used to make medicines, or even the medicines themselves, are often sourced from a single region. For example, 86% and 96% of the antibiotics streptomycin and chloramphenicol sold in North America and the EU respectively come from China. This suggests that companies need to broaden and diversify their product sources to avoid future disruption from adverse events, whether it’s another pandemic, an extreme natural disaster or something else entirely.
While McKinsey believes that 38-60% of the international pharma trade could potentially be considered for sourcing diversification in the future, industry insiders are convinced that a push towards reshoring is unlikely. “When we first saw some of those national discussions the answer was generally ‘not’ from a reshoring perspective, given the centres of excellence and reliance on certain key partners,” says Angela Bowden, Partner, Supply Chain Consulting, Deloitte, speaking at the FT Live’s Pharma and Biotech event.
Instead, companies have identified increasing inventory as a far more effective tactic than reshoring. Many are seeking to strike a shrewder balance between their ‘just-in-time’ and ‘just-in-case’ inventory levels, as well as taking an altruistic approach to operational continuity by pledging to offer relief to production bases if and when they are affected by crisis.
Digitalisation improvements
Another key area that is undergoing review is the lack of digitalisation, digital analytics and AI usage in pharma’s supply chains. During the pandemic, many companies suffered delays and shortages as they had not invested in monitoring tools that allowed them to have clear visibility of their networks, or scenario planning software that could predict potential threats that could derail operations. As a result, McKinsey notes that companies are investing up to $50m in digital and advanced analytics use cases to eliminate operational risks, including investigating the scope of blockchain.
FarmaTrust, a blockchain and AI solutions firm, has recently assembled a group of pharma companies to launch the world’s first fully-digital pharma supply chain. The blockchain system allows all stages of the supply chain to be visible to hospitals and pharmacies, mapping a product’s journey, length of transit and conditions of transit, as well as creating an avenue for prescriptions to be sent directly from factories to patients.
Currently, this is a novel project backed by the UK Government, but analysts hope that it will lead to a surge in adoption of AI technologies within supply chains by individual companies. Also speaking at FT Live’s conference, Shabbir Dahod, President and CEO, TraceLink, says: “There’s a balance that needs to be achieved, but it’s going to require the industry moving more aggressively towards managing their supply chains in a more effective manner, so governments can feel more comfortable standing back from them.”
Business value
“You will always come across supply chain issues that need to be managed,” says Sheena Behn, Vice President, Vaccine and Oncology Supply Chains, AstraZeneca, also speaking at the FT event. “The most important thing is the response,” she emphasises.
Far from being a ‘nice to have’, accelerating the modernisation of supply chains is a necessary next step following the pandemic. “The supply chain itself is becoming make or break to company success,” concludes Bowden. The question lies in whether these networks can be successfully revamped before the next major crisis hits.
