The Supply Chain Of The Future: A Strategic View
By Peter Bigelow, president, xCell Strategic Consulting
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. Ingredient suppliers, manufacturers, quality standards and audits, and logistics are just a few areas where we can expect to see many changes. Adapting to these changes will be critical to everyone involved in the process and in ensuring that medicines are delivered to patients safely and effectively.
The pharma supply chain has certainly undergone significant change in 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 its own manufacturing. In the 1990s, API manufacturing became globalized, global quality standards were rolled out, and generic and biotech manufacturers emerged.
In the first decade of the 21st century, dosage-form manufacturing went global, companies instituted operational improvement programs, external supply departments were established, and outsourced products were managed more consistently. There was also greater scrutiny, with regulatory actions increasing exponentially. Business interruptions are now pervasive, with plant shutdowns resulting in drug shortages and higher manufacturing costs.
Take A Strategic Approach
To improve supply chain performance and avoid costly and disruptive delays, companies must take a strategic approach. This begins with setting goals that redefine performance. First and foremost, pharma must make 100% customer service levels their top priority. Pharma should strive for short cycle times, low inventory levels, and no products on the drug shortage list. Quality levels should be set that consistently beat expectations, including zero regulatory actions, processes with advanced warning systems in place, and value driven decisions being made at every level. Waste elimination must also be a top priority.
Part of a strategic approach involves the preparation of a strategic plan. Several factors should be considered when preparing this plan. Counterfeiting and diversion are things the industry has to attack smartly and aggressively. To do this effectively, everyone in the supply chain has to be held accountable. Counterfeiters must be identified and prosecuted wherever in the world they happen to be. We must also devise creative solutions to fight counterfeiting quickly and effectively. These solutions must be supported by everyone, including regulators.
Pharma companies must take needed steps to reinvent outsourcing. 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. Cracking down on poor cGMP practices will require drug developers to support the audit services industry and the push for manufacturing uniformity. 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. We also 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, 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?
Once changes are made, how can you know progress is being made? There are several metrics that can be used to gauge progress.
Critical drug shortages should be rare, and customer service metrics should indicate a 99% or greater shipment completion rate. The pharmaceutical industry should be managing suppliers better than any other industry in the world. When regulatory actions have been all but eliminated, medicines are available to all at an appropriate cost, and when we have altered the risk/reward situation for diverters and counterfeiters, we will know we are making progress.
If changes are done correctly, drug manufacturers will not only secure their supply chains and reputations, but also will have the highest levels of compliance and customer service. The result will be safer medicines, fewer adverse events, and lower costs for pharma.