How Pharmaceutical Manufacturers Can Develop Agile Supply Chains

These steps minimize the impact of operational disruptions, ensure timely delivery of critical products and safeguard the bottom line. The stakes for pharmaceutical manufacturers are high — but it’s entirely possible to rise to the moment.

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For pharmaceutical manufacturers, disruptions across manufacturing, supply chain logistics and distribution are no longer a matter of if. They’re a matter of when.

Consider the shortage of the generic version of Adderall that we’ve experienced since last October. This ongoing disruption resulted from a combination of factors, such as an initial manufacturing delay coupled with a shortage of the drug’s active ingredient. An unanticipated increase in ADHD diagnoses, along with delays in government quota allowances for Adderall prescriptions, has only made matters worse — leading to the perfect pharmaceutical storm.

While product shortages of this nature used to be an exception, disruptions at scale are becoming an accepted part of the pharmaceutical industry. The COVID-19 pandemic exacerbated weak points throughout global supply chains including inefficient, manual processes and slow reaction times. Pharmaceutical companies, in particular, continue to battle a variety of headwinds that make manufacturing operations less predictable, such as rising inflation and labor shortages.

Disruptions are here to stay, and considering medication, drug and vaccine production is now an issue of national security, manufacturers are under increased pressure to develop the organizational resiliency to better absorb these shocks.

With regular interruptions now the norm, the question becomes: Are organizations ready?

Over-dependence on a single source or operation compounds risk

The adage "don't put all your eggs in one basket" is particularly relevant in today's manufacturing environment. Although globalized supply chains and large-batch production are cost-effective manufacturing methods, this lack of diversification invites instability.

To avoid significant operational interruptions, manufacturers must spread out potential risks. Again, consider the ongoing Adderall shortage as an example. Several major Adderall manufacturers have historically relied on a small number of suppliers in their global supply chain. While this approach offers cost savings, it has also created an industry-wide dependency on a few sources. If a central supplier is located in a region affected by a natural disaster, for example, the entire drug production process is jeopardized — and with little notice.

Globalized supply chains also increase operational complexity across disparate systems. Today, many manufacturers lack the technologies to synchronize production activities across different sites and countries, leading to siloed efforts and limited collaboration. Delays or disruptions at one point in the supply chain may go unnoticed until it’s too late for downstream operations and distribution channels to pivot, resulting in consequences such as wasted production batches or costly — and in the case of pharmaceutical products, harmful — delivery delays.

Further complicating matters is large-volume production, the most widely used option among pharmaceutical leaders. In the pharmaceutical realm, when a large quantity of vaccine doses, for example, are produced at the same time and place, a single issue on the production line can quickly damage a significant portion of the overall global product supply.

By focusing too heavily on cost-reducing practices like globalized supply chains and large-volume batches, manufacturers entrench narrow operations unfit to accommodate complexity. As these disruptions also incur reputational damage and loss of market share, the long-term financial consequences of these up-front cost-savings outweigh any short-term gains.

Ultimately, pharmaceutical manufacturers must hedge their bets and reduce risk by diversifying practices. This doesn’t mean avoiding traditional methods altogether, but rather layering in a more balanced manufacturing and technology approach.

Digital transformation provides a foundation to diversify operations

For most pharmaceutical manufacturers, diversifying operations is best achieved through systemic, internal upgrades that address operational inefficiencies. These efforts should focus on improving data quality, reducing information silos and enhancing real-time data sharing capabilities. Without this degree of technology evolution, pharma leaders will remain reactive, rather than proactive.

Technological upgrades start with adopting the right solutions. Digital twins and data utilization, for example, are enhancements that are particularly effective at addressing the complexities of modern pharmaceutical supply chains. Digital twins — virtualized copies or digital representations of physical assets, products or systems — can be manipulated and adjusted like real-world objects. This capability enables companies to simulate different scenarios and pressure test the full impact of changes made, which helps manufacturers identify and respond to potential issues or supply chain bottlenecks before they cause disruption.

Data utilization, on the other hand, involves the use of advanced analytics and machine learning algorithms to extract insights from large volumes of data generated across the supply chain, which manufacturers can then use to improve business operations and decision-making. This data-driven approach helps pharmaceutical companies identify trends and patterns, forecast product demand and optimize production and logistics.

Used together, digital twins and data utilization provide powerful tools for improving supply chain resilience, agility and performance — ensuring vital healthcare products get into the hands of consumers on time and safely via the right balance of localized and global supply chains.

However, technology adoption should always be accompanied by organizational change management. Research from McKinsey & Co shows that approximately 70% of attempts at large-scale organizational transformation fail, and even successful organizational transformations deliver less than their full potential. To achieve digital transformation and navigate disruptions, pharma manufacturers can follow a few best practices:

  • Have a vision: A clear vision is critical to guide digital transformation activities. A well-defined roadmap should outline transformation goals, timelines, and success metrics. This upfront planning helps organizations stay focused, aligned, and motivated throughout the digitization process.
  • Assess process maturity: Digital transformation initiatives only succeed if technologies are embedded in business processes and well understood among end users. To successfully apply advanced technologies like AI and ML, as well as to achieve automation at scale, it’s crucial that digital solutions are well defined and documented. By assessing the maturity of processes and refining best practices as needed, manufacturers can ensure future technology investments are integrated into the organization effectively and practically.
  • Start small and scale: When first implementing technology such as digital twins and data utilization, start with a valuable, yet not overly complex use case. This approach ensures quick wins and builds momentum for broader efforts over time. By starting small, pharmaceutical manufacturers can refine technology use, learn from challenges, and better anticipate roadblocks as they scale transformation efforts.

It’s time to absorb disruption

As disruption becomes an increasingly common occurrence across the pharmaceutical industry, it’s important to adopt a more balanced and de-siloed approach to manufacturing. Under this updated strategy — along with the right technologies and best digital transformation practices to back operational improvements — pharmaceutical companies can increase organizational agility in lockstep with today’s world.

These steps minimize the impact of operational disruptions, ensure timely delivery of critical products and safeguard the bottom line. The stakes for pharmaceutical manufacturers are high — but it’s entirely possible to rise to the moment.