What Is The Pharmaceutical Supply Chain?

The definition of the healthcare & pharmaceutical industry supply chain includes planning, execution, and control of all activities related to the flow of materials and information, from the purchase of raw materials to the final delivery of the product to the customer. These companies include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.

Supply chains are distinct from what is known as the value chain, as although they both are similar, the latter has a slightly different focus. Simply put, the pharmaceutical value chain allows companies to create distinctive products and experiences for their customers; this includes all the strategies that a company uses to offer its customers unique added value and thereby gain a competitive advantage.

Thus, the supply chain in the pharmaceutical industry is designed to increase profits and provide a better customer experience by ensuring products can be manufactured as planned and become timely available in pharmacies, hospitals, and other health services as needed. In short, the functions of a supply chain include product development, marketing, operations, distribution, finance, and customer service.

The pharma supply chain is currently confronted with an ever-increasing complexity at various levels. In addition, Business models have also changed significantly in recent years: the trend being towards results-oriented models, in which integrated diagnostic and treatment solutions are at the fore. That is why effective supply chain management is essential to create a supply flow that ensures that the proper medication or device is delivered to the right place, at the right time, and to the right person.

Pharmaceutical supply management 

Pharmaceutical supply chain management consists of the strategic coordination of the entire value-added process of a product (pharma value chain) and the logistics. This refers to the collaboration between manufacturers, suppliers, distributors, business partners, and consumers from procurement to final delivery.

The pharma supply chain management’s primary goal is to achieve maximum competitiveness in the market and optimize profits. As supply chains are evolving into a logistical system that is even faster, safer, more flexible, more personalized, more accurate, and more efficient, efficient supply chain management is unthinkable without optimizing the company’s logistics.

Traditional supply chain management systems consist of five components:

1. Planning

The process includes planning a product from raw materials to the consumer, including all resources needed to meet customer demands for a company’s product or service. 

After the supply chain is in place, metrics must be defined to measure whether the supply chain is operating efficiently and effectively, delivering value to customers, and meeting business goals.

2. Procurement

The process includes selecting suppliers to provide the goods and services needed to manufacture the product. The next step is to set up processes for monitoring and managing supplier relationships. Key processes include ordering, receiving, managing inventory, and approving suppliers’ payments.

3. Production

The process includes organizing the activities required to receive raw materials, manufacture the product, inspect quality, pack for shipment, and schedule delivery.

4. Delivery and logistics

The process includes coordinating customer orders, scheduling deliveries, executing shipments, billing customers, and receiving payments.

5. Returns and Recalls

It is the process of creating a network or process to take back defective, excess or unwanted products.

Pharma supply chain risks 

The pharmaceutical and biotech supply chain is about life, health, speed, and accuracy. For this reason, customer expectations are correspondingly high. But medicines or biological medicines that require special cold chains, bottlenecks, and quality issues can quickly jeopardize a company’s supply chain. 

Supply chain risks can be categorized into financial, environmental, technological, operational, regulatory, and sociopolitical risks. 

Among some of the most common and of significant importance supply chain risks, we can find:

1. Regional concentration of suppliers

As we know, drug component manufacturing, production, and packaging are concentrated in the Asia-Pacific region. This poses a high risk for companies not located in the Asia-Pacific region, as about 20-40% of the Active Pharmaceutical Ingredients (API) and small molecule compounds sold worldwide come from China and India. In addition, FDA statistics show that only 28% of API manufacturers supplying the U.S. market were in the country. In contrast, 72% of API manufacturers supplying the U.S. market were overseas. . This dependence can pose a high risk as extreme weather conditions, delivery failures, delays, and geopolitical risks can quickly lead to disruptions in the supply chain. 

2. Regulatory requirements

Government agencies, regulators, and industry associations highly regulate all drugs and biotech products throughout the supply chain. Yet, at the same time, counterfeit medicines remain a chronic threat. A lack of knowledge of these regulatory requirements can pose a risk of delays and delivery failures; at the same time, counterfeit medicines endanger human lives and damage the company’s reputation.

3. Complex supply networks

Millions of people depend on different products being available at all times. A supply chain connects manufacturers with hospitals, pharmacies, doctors, and consumers. Advances in technologies and therapies increase the demands on the manufacture and distribution of medicines, creating an ever-increasing complexity at various levels. New product launches with innovative and diverse dosage forms per product may require new delivery models and better product safeguarding during the distribution phase.

Managing a supply chain and focusing on reducing its risk is challenging work; despite plenty of logistics providers and new technologies available worldwide to assist companies with their supply chain troubles, having access to the right partners and technologies is vital to the operation’s success.

Managing disruptions in the pharmaceutical supply chain

Unmanaged or wrongly managed risks commonly cause supply chain disruptions. As pharmaceutical supply chain risks are often related to a lack of information or deviations in the information, risk identification in the supply process of pharmaceutical companies is highly recommended to mitigate and reduce supply chain disruptions successfully. 

Increased knowledge of essential risk management procedures and structures can significantly improve the decision maker’s ability to implement appropriate mitigation treatments for identifiable risks. 

Some solutions to mitigate the before mentioned supply chain risk mitigate supply chain disruptions are:

1. Secure critical supplies 

They continuously monitor your end-to-end supply chain for all types of risk, particularly regional, geopolitical and supplier-related risks. Prepare risk mitigation plans and prediction models for all conceivable scenarios, and stock your company with critical supplies before a shortage.

2. Get a deeper insight into the dependencies within the supply chain and can better assess the influence of your partners on your business.

This way, you can ensure that suppliers comply with regulatory requirements. With comprehensive risk profiles, you can better assess your business partners in terms of quality, sustainability, cybersecurity, working conditions, and more. In addition, transparency at the sub-supplier level, real-time monitoring, and prepared action plans give you the opportunity to react quickly to compliance violations in your network.

3. Monitor trends in your supply chain very closely and assess the effectiveness of remedial measures.

Document all your steps. Increase and ensure full transparency with your sub-suppliers, manufacturers, distributors, and logisticians right up to the customers. Understand how incidents in your supply network affect your business. Stay informed about irregularities at all companies involved in your supply chain. These can be, for example, financial problems, failures, and disasters in plants or compliance violations at (sub) suppliers and contractors. Recognize negative trends and use action tools to intervene when it’s more convenient.

Safeguarding pharmaceutical supply chains in a global economy

No industry is immune to the threat of financial loss and damage to the brand reputation caused by supply chain failures. However, the increase in technologies and distribution channels in today’s global economy has caused an increase in supply chain disruptions and an increase in reports of counterfeit and mislabeled medicines, thus increasing the pressure on manufacturers and regulators to take stronger preventive measures.

Safeguarding supply chains in today’s global economy is a joint effort between suppliers, manufactures, distributions, and their local governments.

Here are the best ways to safeguard supply chains in today’s global economy:

1. Adopt advanced manufacturing practices.

Advanced manufacturing practices use innovative technology to improve products and processes; it offers many advantages over traditional pharmaceutical manufacturing that can translate into significant cost efficiencies, improved quality controls, increased capacity for rapid scale-up, as well as a reduced footprint. In addition, some of the innovative approaches of advanced manufacturing, such as continuous manufacturing, can even provide potential efficiencies for many medicines and their ingredients, thereby facilitating geographic diversity in sourcing and supply chain resilience.

2. Participate in Regulatory and Policy Initiatives

The main hurdle that may thwart any innovative effort to safeguard supply chains is the current regulatory framework. Because most regulations were developed based on traditional batch manufacturing methods and traditional delivery and distribution channels, the current regulatory framework needs to adapt better to the ever-changing global technologies. Therefore, it is recommended that manufacturers actively engage with other stakeholders in the industry, academia, and regulatory agencies to identify and address regulatory hurdles.  

3. Promote Domestic Manufacturing

The best measure is to promote domestic manufacturing to reduce dependence on foreign suppliers and avoid materials and product shortages due to possible supply chain disruptions.  

Transforming pharma logistics with the internet of things 

As more and more drugs and medical products are manufactured, packaged, and shipped the likelihood of supply chain counterfeiting, cyberattacks, and other security breaches increases. 

As a product moves down the supply chain, companies must track all ingredients and movements in the pharmaceutical and biotech industries from the beginning. To prevent counterfeits and comply with regulations, manufacturers must also be able to print unique serial numbers on drug packaging and unique product identifiers on medical products. This serialization has many facets, including using Global Trade Item Numbers (GTINs), 2D barcodes, and aggregation processes.

The traditional supply chain model has evolved into supply chain 4.0, making it much easier for us to ensure that medicinal product traceability and security are maintained throughout the supply chain. In addition, a number of technologies are constantly developing in the value chain, such as cloud computing, internet of things (IoT), artificial intelligence (AI), etc., pushing the value chain in the direction of hyper-transparency, data sharing, and predictive analytics.

A strategy to make pharma supply chains more resilient

A supply chain’s resilience is determined by its ability for resistance and recovery. Therefore, the best strategy to make your supply chain more resilient is

1. Acquire knowledge: To create an effective plan to mitigate risks and disruptions, the best way to start is by learning your supply chain strengths, weaknesses, opportunities, and threats.
2. Act proactively and customize your supply chain to your specific business needs: Close security gaps and maintain action plans to minimize all conceivable risks.
3. React faster: Optimize your supply chain technologies and synchronize supply and demand with real-time data. Real-time data can also be used to optimize your risk reduction measures before the risk event occurs.
4. Act risk aware: Create transparency at the sub-supplier level to have an overview of the entire supply chain. Implement a Robust Supplier Alliance/Partnership Program; by doing this, you can ensure better quality, efficiency, transparency, traceability, and on-time delivery with minimal risks.