Postponement strategies could alleviate pharma supply chain woes
The ongoing COVID-19 pandemic is causing widespread supply chain issues across several industries. Automotive manufacturers are unable to get crucial parts to make their cars; shoppers are braving retail stores only to find important provisions (like toilet tissue) are completely out of stock.
The pharmaceutical industry also faces supply chain challenges. However, in this field, an outage of materials or product impacts human health and wellbeing in a very real and direct way.
Outsourcing-Pharma recently connected with two supply-chain experts from Alvarez and Marsal, a global firm that offers clients across several industries a range of advisory, business performance improvement, and turnaround management services:
- Jan Diederichsen, senior director
- Lee Feander, senior director
These leaders spoke with us about how the pandemic has impacted the pharma field specifically and offered insight as to solutions that could alleviate current and coming supply chain woes.
OSP: Could you please talk about some of the supply-chain challenges faced by the pharma industry before COVID-19 hit?
AM: Prior to COVID-19, having to balance adequate inventory planning while mitigating missed sales was at the forefront of all supply chain officers’ minds. Other ongoing issues tended to be around freeing up cash flow by outsourcing manufacturing to improve flexibility, a trend that has been exacerbated by the pandemic.
OSP: Please share your perspective on how COVID-19 impacted the pharma supply chain—what problems did the pandemic exacerbate, and were there any new challenges it created?
AM: Through the pandemic health systems necessarily prioritized COVID-19 care over elective procedures such as oncology and cardiology. Waitlists increased and demand for these medicines temporarily fell. Post pandemic, as health systems switched back to normal operation - at different times across various markets - there were surges in demand which increased the risk of stock-outs. These conditions are difficult for traditional pharma supply chains to cope with. Postponement is an alternative approach that increases flexibility, reduces working capital, and improves delivery performance.
OSP: Please share your thoughts on the shortages that have been faced in various corners of the world in recent months, and some of the solutions (effective, and perhaps otherwise) that professionals have turned to.
AM: Shortages have certainly dictated a lot of supply chain transformation in the past two years. In response, pharma is boosting capabilities and operational procurement. Success in these cases is sown through good engagement with a range of suppliers across the supply chain.
You no longer stand a chance if you rely on buying power because smaller firms can be deprioritized. Instead, you have to move away from single sourcing, even if it is practical in production, to dual or multisourcing which creates options that will help pharmaceutical companies address emerging issues with speed.
OSP: Please explain postponement strategies, and how they might benefit drug manufacturers in this situation.
AM: Postponement is a strategy that enables businesses to rapidly address changing market conditions using made-to-order tactics where stocks of almost-complete products are rapidly customized to address stock issues in local markets. In the case of pharmaceuticals, this would mean setting up generic stocks in local markets that can be quickly customized to address shortages. Under the strategy, lead times can be reduced, working capital is cut and waste is minimized.
This strategy has been widely adopted in other industries including consumer goods, with companies like Dell and Toyota among many multinationals realizing its benefits.
Applying postponement to pharma does present some complexities. For example, it is hard to do artwork and packaging late in the manufacturing process, with regulatory rules differing by market in terms of what information needs to be presented on blistering and outside packaging.
OSP: What are some of the key questions pharma professionals should ask and get answered prior to putting such a strategy in place?
AM: The first question to address would be: is worth it? A postponement strategy works best when it can adequately address market demand SKU-complexity and customer location management. Of course, wholesalers could be taking a greater role in this, acting beyond their typical “safety stocks for 15 days” policy to provide support.
Another issue to consider is tech capability. Efficient IT systems will maximize success and software will need to be brought on board to reflect processes and approaches.