November 01, 2022 | Supply Chain
The pharmaceutical supply chains, increasingly globalized and dependent on certain geographies, have faced several stress tests because of the COVID-19 pandemic and the Russia-Ukraine war.
Drug shortages and stockpiling, logistical bottlenecks and export restrictions by India and China have hit the supply of active pharmaceutical ingredients (APIs) and generics.
Pharma companies as well as governments are now implementing the lessons learnt in the last two years and are veering toward greater supply chain localization and regional or national self-reliance.
This intense desire to look at increased localization can promote local stockpiling and manufacturing, increased outsourcing to local contract drug manufacturing organizations (CDMOs) and pharma companies building their own good manufacturing practice (GMP)-approved and - licensed sites.
Localization of end-to-end manufacturing also presents some challenges. Early-stage high-tech manufacturing requires complex raw materials, skilled labor, and investment to build facilities.
Hence, a hybrid model which is balanced across global, regional, and local sites is most likely to improve supply chain resilience by establishing redundant capabilities with multiple suppliers along with closer cooperation with contract manufacturers.
Alternatives to pure localization include smart localization strategies such as the “hub-and-spoke” model. In this model, additional in-country manufacturing capacity is provided by local "spokes”, but the overall control is still with the central "hub”.
For instance, indirect services such as procurement, planning and quality control may be shifted to a global hub in the U.S. for a spoke in Mexico.
This is a low-cost strategy for localizing manufacturing as it improves supply chain agility while eliminating the investment in a full-scale manufacturing site.
The concept of a procurement “clearing house” or virtual collaborative management of warehouse management can reduce stockpiling and increase transparency and integration across pharma supply chains. It’s a virtual organization that balances raw material availability with demand and acts as an order management vehicle that aggregates and forwards orders for common raw materials to suppliers.
Collaborative strategies such as joint warehousing where companies share capacity can provide a localized source while the co-location of supplies would allow for easier material sharing between companies in case there is a supply chain disruption.
Additionally, pooling large-scale manufacturing facilities would also allow companies to reduce expense and risk while increasing agility by providing access to a full-scale local facility.
Pharma companies have access to real-time supply chain visibility platforms thanks to advanced logistics and sensor technologies, private secure networks and AI and machine learning.
These integrated digital platforms enable data linking at multiple levels and provide insights into real-time supply chain situation and visibility.
Pharma supply chain resilience will not be achieved by one single approach. Improved collaboration between pharmaceutical companies and key stakeholders such as policymakers, providers, payers, and patients must serve as the foundation for rethinking supply chain resilience.
Author: Manasi Baswe