The Future of Pharma Supply Chains
Dr. Rakesh Singh
The pandemic demonstrated the critical need for resilience and agility in pharma supply chains. In a post pandemic world, Pharma supply chains have to deal with supply and demand disruptions. With the emergence of a complex network of hospitals, providers and physicians, supply chain complexity has increased manifold. Pharma companies can no longer remain immune to the changes and operate static supply chains.
Across most performance parameters pharma supply chains lag their counterparts in other industries. For example, Pharma Companies have an inventory of 258 days as compared to 72 days for FMCG companies. Manufacturing lead time is 150 days as compared to 5 days for FMCG companies. Obsolescence rate in pharma is 3 percent of the sales, in FMCG it is 0.5 percent. Cash to cash cycle for Automobile sector is 94 days and Hi-Tech and electronics is 5 days. For Pharma companies it is 200 days. Is it possible for pharma companies to ignore the demands of rapidly changing market dynamics? Isn’t there an urgent need to realign the entire supply chain in order to bring in speed, flexibility, responsiveness, visibility and efficiency into the supply chain?
The Way Ahead
Pharma supply chains need to learn from other industries. FMCG companies have adopted end to end supply chain framework. They have linked their supply chain planning and strategy to business strategy leading to superior service, lower cost and a competitive edge for themselves. They also have used information technology to make movement of information and goods flow seamless reducing both stock outs and surplus. Forecasting and sales and operations planning as a starting point of all supply, logistics and sales planning have given them an edge.
What should pharma companies do to prepare for a more competitive world that is emerging? The first and foremost need is to marry their supply chain strategy to business strategy. The second is digitalization. Pharmaceutical companies struggle with end-to-end and “outside-in” visibility. Digitalization has the potential to fundamentally transform pharma supply chains, improving end to end performance. Pharma companies need to leverage the increased access to data, Artificial Intelligence & Machine Learning, IoT, Digital Twins, and Control Towers to better manage the massive network of suppliers, manufacturers, distributors, pharmacies and patients. They should take immediate steps to digitalize their supply chains and develop a strategy and road map for the next three to five years. Second, they need to adopt a cross-functional approach to supply chain planning that would set the architecture for a better supply chain. The companies that can take the lead will gain sustainable competitive advantage; operate with greater agility, cost-efficiency, and control.
It remains to be seen how the industry will shape their supply chain strategies as we move ahead.
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