How to keep pharma supply chains resilient and agile in 2021

10 February 2021 4 min. read

The Covid-19 pandemic has demonstrated the critical need for resilience and agility in pharma supply chains. With the world in its darkest hour, the pharmaceuticals industry needed to rapidly pivot and flex in order to support healthcare, at the same time revealing substantial vulnerabilities within the value chain. Melaye Ras-Work from Efficio Consulting on the importance of strong and agile pharma supply chains in 2021. 

While ‘big pharma’ is rightly attributed to heavyweights based in the US and Europe, their ingredients often emanate from China and India – two of the world’s most active producers of pharmaceutical ingredients. So, what happens when a reliance on a region is cut off and shut down? Inevitably, it’s thrown into turmoil and disarray. 

Fortunately, while China saw the first cases of coronavirus, it also responded quickly. However, ‘pharmacy in the developing world’, is dominated by India, the third largest producer of pharmaceuticals. The country has the largest number of FDA approved plants outside of the US and is estimated to supply 40% of the generic formulations in America.

How to keep pharma supply chains resilient and agile in 2021

Having these two hubs out of commission at a time when the pharmaceutical industry was being turned to as the white knight to save us all, was less than ideal. It exposed many companies’ lack of supply chain agility which in turn hindered their ability to react to demand effectively.

A risk of protectionism

This challenge has a knock-on effect, too. A recent book documenting the US’s reliance on China for pharmaceuticals by Rosemary Gibson and Janardan Prasad Singh, suggested that: “If disruptions occur for an essential ingredient made in China, the United States will wait in line along with Europe, India, and other countries to obtain it.”

“If a global public health crisis occurs, China will likely keep its domestically produced medicines at home and stockpile them to secure access for its citizens before seeing to the needs of other nations.”

While this hasn’t come to fruition yet, the lack of variation across American and European procurement channels does bring this challenge into play. Almost understandably given the localised impacts of Covid-19, we are witnessing an increased sense of protectionism. This can lead to stockpiling of both pharmaceutical raw materials and finished products. Rather than being a contributor to the global cause, those products being manufactured on the other side of the world have the potential to become strategic national assets.

In the UK, the impact of Brexit will likely compound pressure on public and private spending power as we move into the next phase of the pandemic. 

Time to be proactive as well as reactive

As the pressure on healthcare infrastructures continues at an all-time high, resilience in the pharmaceutical supply chain remains instrumental in its overall success. The national population is turning to the healthcare industry to be their champion. And in the champion command chair sits a Chief Procurement Officer (CPO) who’s primary goal must be to develop a more resilient supply chain. 

It is time for the CPOs to work with the wider organisations to review the current condition of their supply chains – to expose weaknesses or rigidity that might threaten supply in the event of future global lockdowns, restrictions, and protectionism. It’s impossible to prepare for all eventualities and challenges, but alleviating the impact of future tumult has to be the objective for 2021.

This requires a more agile, and resilient chain. The success of the industry and the future of our health depends on it. Below are four steps that pharmaceutical organisations should be taking now to build towards a more robust and prepared procurement function:

Collaborative planning and forecasting – pool your collective intelligence with suppliers to forecast likely requirements, before locking in prospective purchases or options

Risk sharing – in volatile environments, be prepared to proactively manage and share risks with suppliers 

Supplier diversification – keeping the pool too small restricts resilience; take this opportunity to find and qualify additional suppliers, incorporating the above two steps in this formulation phase 

Scenario planning – run ‘what if’ scenarios to offset elements of surprise and to embed a problem-solving mentality across the discipline

2020 was a challenge to say the very least and, so far in 2021, the demands of the pandemic are far from over. To keep up, pharma companies will need to prioritise dynamic supply chain management, and support from the right team with the right skills. This will ensure that pharmaceutical firms will be better prepared to battle through the immediate challenges ahead, whilst building greater resilience against future crises. 

Melaye Ras-Work is the co-founder of Efficio Consulting, an international procurement consulting firm.