Of the 29 drugsmakers quizzed – largely directors and VPs at big firms like GSK, Lilly, Sanofi and Bayer – a third said they bought over 60 per cent of their raw materials from one source.
While the one source approach means firms can negotiate lower prices, recent natural disasters and problems at manufacturers that interrupted supplies have led supply chain management specialists to question putting all the raw material “eggs” in one basket.
Speaking to in-PharmaTechnologist.com, Cameron Tew executive director of research services and business operations for Best Practices, added that even if a firm uses more than one vendor, “a supply chain is only as strong as its weakest link.”
He said that firms should risk rank all vendors to “spotlight” weaknesses in the system, so that if one vendor fails to deliver – for instance in cases like the recent shortage of HIV medication in South Africa – there are contingency plans.
“It is helpful to rank vendors based on risk to spotlight supply chain weakness,” he told us. “Early warning systems work best when fortified and supported with redundant resources.”
Tew added that firms must run risk assessments across the entire value chain – supply, development and distribution.
“Increasingly veteran business continuity managers are identifying risks across previously unrelated functions and systems,” he said. “Consequently, parallel risk audits and integration among systems are practices on the rise and this can impact the vendors that you utilize for different business processes.”
He said that maintaining at least least two suppliers in all critical supply areas, and having those suppliers in different regions is vitally important when hedging against disruption risk.
However it seems firms are now learning their lesson, if their responses are anything to go by. One business continuity director, who described vendor management as an “Achilles’ heel” for the anonymous firm, said: “We’re working with strategic sourcing to risk-rank our suppliers.”
Emergency response systems score poorly
The survey respondents also flagged up issues in emergency drill training to safe guard supplies in manufacturing plants, with over 60 per cent conducting response exercises only once or twice a year – some not at all.
The analysts said this leaves the supply chain open to harm because “training frequency goes hand in hand with response effectiveness.”
The team said though many of the occurrences covered in emergency drills are unlikely – for instance fires, natural disasters, or terrorism – when they happen they have a big impact.
“CFOs believe risk is well managed,” Tew told us. “This seems to be a false security from what we have seen in our research.”
He added that business continuity is still in its infancy, and that often firms have no singular hub for risk functions instead delegating responsibility to different teams. He said this often leads to “camouflaged” risks.