Providing adequate supplies of pharmaceuticals has taken on accelerated precedence in order to satisfy demand, not just domestically but also internationally to countries without the facilities to manufacture certain drugs in sufficient quantities. As other sectors adjust to operating in the ‘new normal’, pharmaceutical companies will be no different in examining ways that individuals, authorities and the industry as a whole can help to transform its supply chains for a new era.
Among the problems for pharmaceutical supply chains during this pandemic are the restrictions and impact of COVID-19 on China and India, two of the largest global producers of active pharmaceutical ingredients (APIs) and generics.
Since the outbreak started in China and lockdowns were imposed, supply from their manufacturing facilities has reduced. The true extent is still difficult to quantify although the typical workforce is now entirely engaged in their business operations.
A second roadblock was that India had restricted the export of 26 active pharmaceutical ingredients… which represents about 10 percent of the country’s export capacity. As the contributors of 20 percent of the global generics supply, the decision to restrict exports due to fears of internal supply shortages has far-reaching impacts, particularly on supplies of paracetamol, several antibiotics such as tinidazole and erythromycin, the hormone progesterone and vitamin B12.
According to reports, the restrictions were imposed because our country’s manufacturers rely heavily on imports of their APIs from China. As a result of the lockdowns and closures, slowed production of APIs by the latter resulted in less availability and higher costs for the materials required for generics production.
COVID-19 has demonstrated just how real these supply chain risks are, and the need for pharma companies to, wherever possible, have multiple sources of supply spread across different geographies so they can quickly switch production from highly impacted to lesser impacted territories.
Supply and demand shocks
The initial impact of COVID-19 on the pharma supply chain revolved around material and information delays. When, with immediacy and urgency, many governments sent countries and regions into lockdown, there was little time for employees and companies to prepare for a remote working scenario.
This led to delays for many organisations when it came to accessing information and documentation as all involved adjusted. Delays in deliveries of raw materials were also caused because of the cessation of operations by small suppliers. Adding to the woes of manufacturers was the unavailability of regular transportation modes.
The international movement of supplies and goods was hugely impacted. For imports, these delays were caused by factors such as the unavailability of original documents, an increase in paperwork, etc. In contrast, for exports, some of these delays were seen because of reduced workforces at ports, resulting in difficulties in getting the containers for export shipments.
In full container load (FCL) shipments, delays were observed owing to vessel schedule changes, whereas in cases of less than full container load (LCL) shipments, consolidation was a problem because of the non-availability of products from other industries.
In the case of air shipments, freights were increased at some points by three to four times more than usual and were changing by the hour. Limited cargo flights were also subjected to cancellation. Like every aspect of the pandemic, it was a fluid situation. All these issues collectively resulted in an increase in lead times when sourcing raw materials, as well as the final dispatch and delivery of finished goods.
Resilience means more complexity
Medical supply chains have been described as ‘uniquely complex’ and have only grown more complex as they have integrated many different types of organisations within them. At a time when other industries are looking to simplify their supply chains, the need to quickly select between suppliers in different markets and regions and expand manufacturing into new territories to satisfy the increasing demand of governments and regulators adds complexity.
Some companies have already begun the process of complexifying their supply chains by recruiting two or three alternate suppliers, while others have begun to integrate their supply chain much more closely with their suppliers and customers.
At the same time, regulations such as the Drug Authentication and Verification Application (DAVA) place added level of stress on how companies work with partners, distributors and logistics providers. Although we’re seeing some DAVA exemptions to deal with the COVID-19 emergency, resilience is required to meet track and trace, monitoring and licensing requirements. To achieve this level of resilience, pharmaceutical companies need to work harder and smarter to deliver full digitisation to every part of their supply chain operations.
About 60% of the industry workforce performs activities which require full on-site physical presence to ensure the business continuity, production and release of drugs. Such activities range from material and inventory handling to production processes, testing and maintenance. These workers are required to keep sites up and running and for this reason, it is critical to build and enhance business continuity plans to prevent an outbreak from stopping operations completely.
Another 40% of the industry workforce performs activities requiring partial on-site presence, such as production and quality managers, scientists, technicians, or engineers. Enhancing these workers with remote collaboration tools to limit their on-site presence is a key to minimising the risk of an outbreak.
Visibility enhances agility
One of the key challenges in supply chain has been the lack of visibility that leads to inaccurate predictions, poor planning, delayed decision making, higher risks and ultimately, loss of business. Supply chain visibility means having access to real-time data from ground truth (sensor data) that you can use to make decisions for your organisation. It’s this visibility that is the foundation for increased resilience and agility, increased operational efficiency, and improved collaboration with partners and suppliers up and down the supply chain.
COVID-19 demonstrates the ingenuity and the speed at which companies can move. We’ve seen many instances of pharma companies quickly retooling manufacturing to start producing products that are in high demand. This ability to repurpose capacity provides a model for business agility going forward. However, accelerating product innovation and manufacturing requires more than identifying capacity; it also requires engineering, design, production, and distribution of resources.
Building simulation models that consider inventory levels, demand patterns, and supplier lead times will not only enable a comprehensive view of operations and value chain risk now, but it will also help executives anticipate if interventions are needed as disruption continues and/or becomes more severe. This includes addressing the impact of additional logistic challenges – such as pricing in increased freight costs — export restrictions and reduction in freight options on lead times that could result in changes to inventory position.
In practice, this means setting up a risk analytics cloud platform to enable live monitoring of the supply network. It will require a dedicated crisis team to assess and recommend actions based on the data. It could include establishing ‘digital twins’ of the supply chain to mirror operations digitally across the entire supply network to uncover risks that were previously hidden. It amplifies the importance of predictive modelling and applied intelligence. This is all useful for an emergency, as now, but also for more resilient supply chain in the future.
Logistics network optimisation
Today, the focus has shifted from mitigating supplier issues in specific regions to addressing global supply chain challenges from logistics disruptions to supply delays. Mitigating these challenges requires intelligent decision making enabled by end-to-end visibility of the supply chain and resource prioritisation.
In the wake of the COVID-19 crisis, the pharma logistics segment is experiencing major upheavals due to the economic downturn and the supply chain disruptions in the market. Many companies have been successful in responding proactively to these disruptions by manufacturing and marketing medicines more efficiently, but they’ve invested relatively little effort in re-configuring their manufacturing, logistics, and supply chain management operations.
However, logistics and supply chain management is just as important to driving process efficiency as it’s the link between the manufacturer and the marketplace. Supply chain network optimisation solutions help businesses to gain actionable insights on inventory levels, efficiently meet the compliance issues and devise a robust disaster recovery plan. This also helps organisations to streamline and reshape their supply chain processes to drive better outcomes.
Considering the current business milieu, pharma companies can reduce logistics costs by 35% to 40% with the help of pharma logistics optimisation solutions. Notably, leading pharma companies have made tremendous strides in reducing costs by automating processes and driving innovation in logistics operations. While these innovations have brought in waves of transformations that have helped reduce costs, their greatest impact can be felt in the area of circular supply chains. Hence, it’s quite evident that pharma logistics optimisation not just helps optimise supply chain and logistics processes but plays a key role in reducing costs and driving supply chain efficiency.
Below is a list of practical recommendations by stakeholders and decision-makers in the pharma industry for improving pharma logistics optimisation.
- Develop a cohesive approach for improving supply chain security by developing effective category management and supply chain management capabilities.
- Devise robust logistics management procedures and capabilities, linked to the master deployment plan and the manufacturer through effective supplier relationship management.
- Design a centralised logistics network to minimise transport time and replenishment rate. To do so, businesses can consider leveraging geographic data and insights from metered installations to manage stocks and conduct periodic audits to eliminate squirrel stocks.
- Leverage logistics analytics to inform better decision-making around resource allocation and asset optimisation.
- Track and monitor logistics movement in real-time by deploying advanced analytics dashboards. Implementing a robust approach to sort, test, repair and recycle assets will also help you get a step closer to establishing circular supply chain.
Drugmakers have been racing to build supply chains for their coronavirus vaccine candidates, finding manufacturing sites and ordering specialsed production equipment. As some drugs advance to final-stage clinical trials, logistics providers are making large-scale preparations to deliver them securely.
The distribution operation—taking drugs from far-flung manufacturing sites to medical teams via warehouses, cargo terminals, airports and final storage points, all in a matter of days—promises to be a logistics high-wire act with risks at every stage. Breakdowns in refrigeration equipment, transportation delays, broken packaging or other mishaps could leave many thousands of doses useless.
Keeping all of that in mind, logistics operators have been expanding their refrigeration and freezing capabilities in recent months and adding to their fleet of vehicles, particularly as the scale of activity will be vast, that cold chain facilities will be required and that delivery to every corner of the planet will be needed.
Governments are equally responsible to begin careful planning now with logistics and life sciences industry stakeholders and international agencies to ensure full preparedness for when vaccines for COVID-19 are approved and available for distribution.
Currently, more than 250 vaccines are being developed and trialled. And as COVID-19 vaccines have leapfrogged development phases, ‘stringent temperature requirements (up to -80°C) are likely to be imposed for certain vaccines’ to ensure that their efficacy is maintained during transport and warehousing.
This however poses novel logistics challenges to the existing medical supply chain that conventionally distributes vaccines at around 2 to 8°C.
For a sustainable future
Although pharma is traditionally conservative by nature, it will see a higher integration of technological advancements in the future.
Customers will be swift in selecting alternate quality suppliers that can show value in their supply chain as being resourceful, knowledgeable, innovative and flexible. Thus, there will be many growth opportunities for companies that are willing to be creative and solve new problems as suppliers.
Going into a changed world, flexibility will become increasingly crucial as businesses will need to be able to demonstrate their ability to adapt and continue operations in the face of emerging issues.
Partnerships would also emerge as a way to support and nurture innovation by providing access to resources and sharing the burden of risk. Prior to the COVID-19 pandemic, there was limited academic interest in advanced research on novel pathogens such as coronaviruses, and limited pharma industry interest in investing in this foundational research due to concerns around ROI. This combination created an environment in which novel infectious disease partnerships were not mutually beneficial, despite the need for them today. In light of COVID-19, such partnerships have started to grow to meet the needs of the moment but will require additional support to ensure sustainability.
By examining trends showing that current incentives for pursuing innovation lack long-term approaches, governments and industry players can pursue practical solutions that will lead to more sustainable commercialisation of pandemic innovations and better preparedness for the future.