5 steps to Reinvent Pharmaceutical Supply Chain


"Global drug companies are facing disruption. One powerful strategic response is to rethink their manufacturing and operation footprints," according to pharmaceutical industry experts Marcus Ehrhardt, Robert Hutchens, and Susan Higgins.

The business environment for big pharma companies has changed dramatically; Gone are the days when established pharmaceutical company like Pfizer owns the entire Lipitor market, recent patent cliffs have robbed the exclusivity of branded drugs and have placed big pharmas in an unsettling, uncharted territory where innovation is perhaps not the best option, due to the unfavourable regulations and decreasing R&D productivity.

I concur with the point made by Marcus, Robert and Susan which is transform supply chain to a powerful strategy in conquering these challenges. Indeed, traditional view of supply chain as a structure to prevent stockouts and comply with regulatory requirements has resulted in high costs and write-offs. To facilitate profitable growth, multinational companies ought to look into supply chain as a resource rather than a structure; and this can be done by creating an efficient and flexible supply chain strategy.

A call for a supply chain transformation in multinational pharmaceutical companies is needed. Below is a summary of a Five-Step Path as suggested by the authors.

1. Adopt tailored business streams
o Tailor each supply chain toward its product, market and customer groups.
o Develop supply chain around cost competitiveness.

2. Increase flexibility to product design and packaging
o Implement pack-to-order strategies by manufacturing one version of drug to be shipped to numerous global markets, rather than shipping multiple versions of drugs to separate region.
o Implement postponement strategies – drug are pack to order in final stages of manufacturing based on regional demand.

3. Restructuring the supply chain footprint
o No single blueprint for network design is available, company's approach depends on existing footprint, its product portfolio and overall company growth strategy.

4. Create a network of third-party suppliers
o Create a make-versus-buy strategy, one that requires a clear product and market criteria to justify the need to outsource.

5. Improve planning capabilities, significantly
o Integrate company's portfolio management strategy and product transition plans to the business planning process. Inputs from marketing, sales and finance departments, as well as the latest marketplace intelligence and historical demand are essential in creating a consensus forecast for drugs.

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