Did you know the global value of pharmaceutical items traded has increased sixfold in the last two decades? From $113 billion in 2000 to $629 billion in 2019, supply chains have become increasingly global, complicated, and opaque due to this expansion.

Companies are exponentially using contract manufacturers for production, introducing new modalities, and experimenting with fresh ways to contact patients. Pharmaceutical supply chains could suffer significant losses if they do not examine and plan for these developments’ risks.

Supply-chain risk is a significant factor for pharma companies’ susceptibility to disruption. Knowledge of the nature of the supply chain’s risks is the first step in establishing supply-chain resilience.

Some ways are increased visibility, rigorous risk management, and modern technology that enable businesses to better predict and respond to shocks. Although supply-chain risks aren’t entirely avoidable, they are manageable.

Here are three ways to prevent supply-chain risk in the pharmaceutical industry.


1.   End-To-End Transparency

A lack of visibility into suppliers’ business activities can be a substantial risk for pharma businesses. For instance, exploitation of child labour by suppliers overseas can make brands inadvertently participate in unethical labour practices.

To have an end-to-end perspective of the supply chain and detect weaknesses, a corporation must map its suppliers by tier. It’s critical to understand exposures beyond supply, such as how items are manufactured, delivered, and kept. Each stage has its own set of issues. A minor transportation provider’s insolvency is a vital area; for example, it might bring an entire supply chain to a halt.

It is vital to gather leading and lagging resilience metrics in seven areas from internal and external data sources to get a comprehensive picture of each stage’s ongoings:

  1. Data Security
  2. Finance
  3. Operations
  4. Organisational Maturity
  5. Regulation
  6. Reputation
  7. Structure

An assessment of a company’s data security might identify weak data-protection policies. Similarly, a structural analysis may reveal a high concentration of suppliers in a location prone to natural disasters.

Companies can adopt a wide range of cutting-edge or persisting technologies to undertake such studies. Here are some examples:

  • Firms can establish partnerships with third-party organisations, such as venture-backed start-ups, to make small investments. It can help map their value chains and establish risk-monitoring systems.
  • Investments in digital and advanced analytics can help reduce operational risks. AI-driven root-cause detection to improve quality is one such case.
  • Corporations can set up reliability rooms. They track performance and risk metrics in near-real-time across their end-to-end networks to discover and rectify issues before they cause outages.


2.   Routine Stress Testing And Re-Evaluation

Companies frequently employ scenario planning and simulation models to predict their vulnerabilities, evaluate the potential impact, and minimise the consequences.

During the COVID-19 pandemic, for example, a leading pharmaceutical business employed a digital-twin simulation to comprehend better the impact of production slowdowns and shutdowns on patient drug supplies. This allowed the corporation to recognise that it had more time than expected to create and implement safer working practices in its production plants.

Therefore, the best solutions were possible. Once a corporation has visibility into its supply chain, it can continuously assess the possibility of various hazards.


3.   Measures To Reduce Shock Exposure

Expanding the network of suppliers is one of the most prevalent ways for robustness. Depending on a single source for vital components or raw materials or several suppliers located in the exact location can be a weakness.

However, multi-sourcing isn’t the sole solution. A corporation can take measures to balance inventory levels better. It can fortify physical assets to withstand hurricanes and storm surges and provide financial support to troubled but critical suppliers.

Many businesses are experimenting with technologies that allow suppliers to make quick modifications and advanced analytics that might help them identify possible problems.

The ability to reroute components and shift manufacturing between sites can also help keep production running in the aftermath of a shock. It necessitates sophisticated digital technologies and analytics to investigate various scenarios.

It also necessitates a uniform operating model—a firm with 20 different API requirements has a much-reduced ability to flex its production. Regulatory filings should also describe the technical specifications of the supply that a product relies on.


Summing Up

Leaders must see their organisation’s risks and have personnel review and mitigate them regularly. Supply-chain interruptions are unavoidable, but disruptions are. A corporation that wishes to improve its shock resilience can assess itself against these factors to see where to begin and progress.

Supply-chain resilience in the executive schedule is also a sure-shot way to mitigate risks.

Organisations must incorporate supply-chain risk and resilience into their strategic planning and day-to-day operations. It is best to have structured governance to ensure that decision-making and implementation of plans occur at appropriate levels and times. Integrating supply-chain resilience into existing discussion forums and forming a chartered risk committee are two common ways to achieve this.

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