Though it is not a new phenomenon, the pandemic has heightened public concern about drug shortages and API imports. In times of uncertainty, pharmaceutical companies take important steps to increase supply chain resilience, maintain manufacturing continuity, and ensure patient safety.
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When it comes to the supply chain, big pharmaceutical companies tend to stick with the same strategy, regardless of their products’ demand patterns (or volatility in consumer demand). This is a good model for high-margin products in a homogeneous market, but it won’t work in today’s lower-margin segments and disparate environments.
As a result, pharmaceutical firms must develop several specialised supply chains, each aimed at a specific product, market, and set of target customers. Cost-competitiveness can be achieved by manufacturing in low-wage countries and producing enough volume for lean inventories.
These can be based on demand history and forecasts for high-volume products under intense generic competition. As long as demand planning is relatively stable, companies can weather long production lead times and reap significant savings from high utilisation and low wages.
Stress Testing and Reassessment Regularly
Scenario planning and simulation models are frequently used by businesses to foresee and quantify their vulnerabilities and mitigate the effects of those vulnerabilities. One pharmaceutical company used digital-twin simulations during the pandemic of COVID-19 to better understand the impact of production delays and shutdowns on patient medication supplies.
They realised they had more time than anticipated to design and implement safer working practices at their manufacturing plants, allowing them to take longer and get the best solutions. You can assess the likelihood of different risks constantly once you have visibility into your supply chain.
Add Design and Packaging Options that are More Flexible
Pharmaceutical companies should use Pack-to-order strategies to manage the volatility of product demand for low-margin drugs. As per Yourway, manufacturing a single pill that can be shipped to multiple global markets instead of multiple versions for each region is a great way to achieve this.
Postponement strategies, in which drugs are packed to order at the end of manufacturing based on regional demand, would reduce overall inventory levels and SKU complexity and improve supply chain agility and response time to market needs.
This approach would also reduce the complexity of the supply chain. Inventory write-offs and production working capital are reduced thanks to increased adaptability.
Set Up a Supply Chain of Third-Party Vendors
A well-thought-out make-versus-buy strategy is essential if you want to be ready for market downturns. A company can better deal with a decrease in demand by outsourcing the production of specific products rather than cutting back on factory capacity utilisation and taking on the costs associated with idle fixed assets.
Pharma supply chain strategies have shifted dramatically as a result of Covid-19. Resilient networks will be crucial in navigating an increasingly turbulent market over the next decade.
Predicting and responding to chain disruptions will be easier for pharmaceutical companies that incorporate flexibility and redundancy into the entire value chain and increase visibility into their supply chains.