In every industry, supply chains have become global and more complex than in the past. With more outsourcing, new modalities, and new ways to reach patients, pharmaceutical companies must ensure that their supply chains can withstand shocks.
The COVID-19 pandemic revealed many issues in the supply chain that led to drug shortages of essential and life-saving medications. Sole sourcing and lack of complete visibility down the supply chain are severe problems for the pharma supply chain.
Keep reading to learn how to secure and improve the pharma supply chain.
General Pharmaceutical Supply Chain Risks
While the pharma supply chain tends to be more resilient to shocks due to high inventory, it is still at risk of disruption. Companies must understand the risks that threaten the supply chain to build resiliency in the supply chain.
Every company faces challenges and risks, but several threats to the pharmaceutical supply chain affect every company. The digital nature of the pharmaceutical industry leaves it vulnerable to cyber-attacks. Geopolitical circumstances threaten the pharmaceutical supply chain.
Trade disputes and natural disasters create significant risks for supply chain distribution. High levels of international trade and pressure to relocate parts of the supply chain from governments and consumers make globalization challenging. Companies often source critical raw materials from a single supplier or multiple suppliers in the same region.
Ways to Improve the Pharma Supply Chain
Improving the pharmaceutical supply chain may seem impossible, but there are several actions companies can take to build resiliency in their supply chain:
Increase Visibility Down the Supply Chain
Lack of visibility is a significant risk for pharmaceutical companies. Without complete visibility, a company may lose its reputation due to an overseas supplier being accused of unfair labor practices like child labor or unfair wages. Pharma companies must map their suppliers through each aspect of the supply chain and identify risks.
Each stage of the supply chain poses its risks. Understanding vulnerabilities through each part of the supply chain, including product development, shipping, delivery, and storage, helps companies better protect their supply chain from shocks. Clear and frequent communication between suppliers is the key to building visibility down the supply chain.
Perform Risk Testing and Assessment
Once a company has visibility down the supply chain, it can assess the likelihood of different risks and shocks. Using simulation models, companies can anticipate their vulnerabilities and determine the impact of a surprise. Pharma companies can evaluate how to mitigate the effects of disruptions to the supply chain and minimize their financial impact. Continuously monitoring internal and external data regarding the supply chain is essential to identify potential risks.
Reduce Exposure to Shocks
Nearly 40% of the pharmaceutical industry’s core components and raw materials are sourced from China and India. Single sourcing for critical raw materials can be a vulnerability. Companies can reduce their exposure to single sources by diversifying where they buy materials. Some companies may be able to move to domestic production of specific components.
Companies can also work to strike a better balance between just-in-time inventory and just-in-case inventory levels to be better prepared for a shock. Additionally, companies can search for alternative shipping and delivery routes in areas prone to certain natural disasters. Flexibility in production and shipping can allow pharmaceutical companies to stay in production during a shock.
Build a Unique Insurance Portfolio
The answer to improving the pharma supply chain does not lie solely within the industry itself. Insurance is a great way to protect your company from potential loss due to a supply chain shock. Pharmaceutical companies should invest in several insurance policies, like business interruption insurance, to protect their supply chains. Reach out to Post Insurance today to learn more about the best insurance policies to protect the pharma supply chain!