Finding Strategic Levers in the Supply Chain

May 31, 2013
By Pharmaceutical Executive

Admit it. When most pharmaceutical executives think about the pharmaceutical supply chain, their eyes start to glaze over. Traditionally, the supply chain has been considered, at best, a back-room function that reports in to operations and is responsible for delivering a reliable supply of product to meet forecasted demand.

In fact, the supply chain is a deep and widely underutilized strategic resource for companies seeking to focus their organizations on the changing healthcare environment. New customers with different needs are emerging in every sector of the healthcare market—from tech-savvy consumers that expect instant informational gratification, to newly integrated healthcare delivery systems with access to vast stores of information about how and by whom pharmaceutical products are being used. And pharmaceutical supply-chain executives are seeking new ways to understand the central question of how they can deliver greater value to their organization by helping to improve the customer experience.

Traditionally, pharmaceutical supply-chain management has been defined as managing the network of suppliers, resources, and manufacturing capabilities that are needed to supply product demand or sales targets. This role is, by nature, somewhat static and reactive rather than proactive, and its ability to be responsive is further limited by the highly regulated nature of the pharmaceutical industry. In general, pharmaceutical supply-chain capabilities lag behind those of the technology and consumer packaged goods (CPG) sectors. In the technology sector, for example, Dell has built a global reputation for its ability to deliver custom-configured products of high quality and reliability, and has built a nimble and flexible supply chain that lets them consistently meet their customer needs and wants. Consider what it would take for a pharmaceutical company to deliver custom-configured products to its millions of customers worldwide. Yet this type of customer need is becoming increasingly possible as science continues to unveil the possibilities of personalized medicine and individualized therapies.

Although the challenges of personalized medicine are likely a few years out, there are ways in which the pharmaceutical supply chain can be more effectively engaged to address current customer unmet needs. Customers in emerging countries, for example, may have substantially different wants and preferences in terms of pharmaceutical product taste, texture, package size, unit dosing, or services. All of these aspects of the product can be addressed through the supply chain, and could have a large impact on local acceptance and usage.

Decisions about how to build or engage local manufacturing are another area where strategic supply-chain decision-making can come into play. Traditionally, many pharmaceutical companies have invested in regional manufacturing, building large facilities to meet demand during products' extended lifecycles. Today, however, companies are exploring partnerships with local manufacturers that have underutilized capacity, and are teaching these local resources the skills needed to manufacture and distribute more complex specialty products, such as biologics or other large molecules. Such arrangements may save capital, but perhaps more importantly, prevent the company from having to navigate complex local tax and investment regulations.