The Supply Chain Of The Future: A Strategic View

By Ed Miseta, Chief Editor, Clinical Leader

Evolutionary theory teaches us it is neither the strongest nor the most intelligent of the species that survives. It is the one that is the most adaptable to change. Peter Bigelow, president of xcell Strategic Consulting, likes to mention this quote, widely attributed to Charles Darwin, when opening presentations on the future of the pharmaceutical supply chain. Ingredient suppliers, manufacturers, quality standards and audits, and logistics are just a few areas where we can expect to see many changes going forward. Adapting to these changes will be critical to everyone involved in the process, and in ensuring medicines are delivered to patients safely and effectively.  

The pharma supply chain has certainly undergone significant change in just the last 40 years. In the 1970s and 1980s very little outsourcing was performed in pharma. Companies had separate domestic and international divisions, each with their own manufacturing. The regulatory environment, along with product SKUs and formulas were different around the globe.

Peter Bigelow, president, xcell Strategic Consulting

In the 1990s, things began to change. Among other things, API manufacturing became globalized, global quality standards were rolled out, generic and biotech manufacturers emerged, and the industry witnessed better supply chain data and processes. The first decade of the 21^st century also saw significant change. Dosage form manufacturing went global, companies instituted operational improvement programs, external supply departments were established, and outsourced products were managed more consistently. However, pharma also found itself under greater regulatory scrutiny. As a result, regulatory actions suddenly rose exponentially.

“We are now in a situation where business interruptions are pervasive,” says Bigelow. “Plant shutdowns are more common, resulting in drug shortages and higher manufacturing costs. Manufacturers are now recognizing there must be a better way to improve the performance of their supply chains.”

Take A Strategic Approach

To improve supply chain performance and avoid costly and disruptive delays, Bigelow recommends companies take a more strategic approach. This begins with setting aspirational goals that redefine performance.  First and foremost, pharma must make 100% customer service levels their top priority. “That means no products on the drug shortage list and short cycle times with low inventory levels,” he says. “Quality levels should be set that consistently beat expectations. This includes no Warning Letters or other regulatory actions, processes with advanced warning systems in place, and value driven decisions being made at every level. Companies should also strive for lower costs via the elimination of batch losses and other waste.”

Part of a strategic approach involves the preparation of a strategic plan. Bigelow identifies nine areas that should be addressed with this plan.

1. Globalization – Consistency around the globe must be a primary goal. Companies must identify how to efficiently manage global suppliers while striking the right balance between supply redundancy (back up) and cost.
2. Cost Pressures – A leading driver of cost pressures is likely to be generics, which could continue to redefine the pharma landscape. Companies also need to gauge the impact of healthcare politics and global economic priorities. Important drugs will continue to spring from emerging markets and developing countries. Having a plan on how to best gain access to those drugs will figure prominently in a company’s cost structure.
3. Outsourcing – Three trends must be understood and analyzed by pharma in this area. Will the rationalization of underutilized facilities continue? Will the outsourcing industry consolidate, thereby creating better resourced suppliers? And how will the industry align incentives between sponsor companies and suppliers?   
4. Products – Two primary concerns will need to be considered. Will dosage forms become more complex and what product offerings (such as personalized immunotherapy, new devices, and extended release) will emerge and impact the market?
5. Biotechnology and Vaccines – In these areas manufacturers will need to determine what the facility of the future will look like, and begin to plan for it. Additionally, pharma will need to understand the future role of biosimilars and biogenerics, and the technology advances that are on the horizon.
6. Regulatory – The regulatory landscape is changing rapidly. Standards may be consolidated and accountability may shift. Additionally, Boards of Health around the world may consolidate data and resources.    
7. Counterfeiting and Diversion – Serialization will soon be a reality, and manufacturers will need to understand the technical implications of it. This could cause cross-border sales to accelerate. While at the same time counterfeiting and IP issues could impact the speed of consolidation.
8. Facilities – Several factors could have an impact on manufacturing facilities. Capacity issues will need to be better managed, insourcing and outsourcing trends will need to be better understood, and firms will need to understand what geographies will be the primary draw of future investment dollars.
9. Finally, macro industry trends will need to be understood and addressed. Will regulation and standards around the world become aligned? Will developing nations have a bigger voice? Can fragmented industry efforts be brought together?

Get To Work Today!

All of these factors will impact the supply chain, and should be a part of every strategic plan. But in addition to these considerations, Bigelow identified five additional factors that will affect strategic plans, and should be aggressively worked as soon as possible. The first is attacking counterfeiting smartly and aggressively. “There are several steps involved in this process,” notes Bigelow. “We must hold everyone in the supply chain accountable, and identify and prosecute counterfeiters wherever in the world they happen to be. We must also devise solutions to fight counterfeiting that are creative, are supported by everyone including regulators, and can be implemented quickly and effectively.”

Bigelow believes pharma companies need to reinvent outsourcing, and there are several steps they must take to do so. To assist in managing suppliers, firms should establish a set of GSPs (good supplier practices). Part of this is developing a set of metrics for suppliers and improving the way customers and suppliers communicate with each other. Drug developers also need to support the audit services industry to assist in cracking down on poor cGMP practices.

Third, all companies need to make a push for uniformity in the industry. This should consist of an alignment of standards for product classes, consistent penalties for risky behavior, a drive for consistency across regions, and a consolidation of industry support organizations (generic, OTC, branded, biotech, etc.)

Fourth, there needs to be improvements and investment in technology. “This is an area where firms need to make a quantum leap,” says Bigelow. “We need to see stronger integration of information technology in the supply chain, a seamless integration of data with suppliers, and investment in continuous manufacturing, electronic batch records, automated processes, and other IT advancements we have seen in other industries.”

Finally, Bigelow believes there needs to be a greater focus on getting operational excellence right. Manufacturers must attack variability, waste, and inefficient processes with a vengeance. Managers must engage and motivate employees from top to bottom, while focusing on mindsets and behaviors. A focus on training will be essential, and when new ideas are adopted, they cannot be hypothetical. Managers must make sure the improvements are actually happening on the factory floor.

Are You Making Progress?

It’s easy to lay out good ideas and make them part of your strategic plan. But even if those plans seem to be executed properly, how can you know that you are making progress, and in fact securing your product as well as your supply chain? There are several metrics that pharma can look to when gauging progress.

First, critical drug shortages should be very rare, not a common occurrence, and customer service metrics should indicate a 99% or greater shipment completion rate. “Our goal should be a pharmaceutical industry that manages suppliers better than any other industry in the world,” adds Bigelow. “When regulatory actions have been all but eliminated, medicines are available to all at an appropriate cost, and we have completely altered the risk/reward situation for diverters and counterfeiters, we will know we are making real progress.”

If done correctly, drug manufacturers will not only secure their supply chains and reputations, but will have the highest levels of compliance and customer service. The end result will be safer medicines, fewer adverse events, lower costs for pharma, and more patients getting the desired results from their medicines.