The COVID-19 pandemic has created a global shortage of life-saving drugs and supplies, just as social distancing has hampered the life sciences supply chain. Meanwhile, the postponement of nonessential procedures has reduced demand for products such as those used for vaccinations and ophthalmology.
These impacts expose weaknesses caused by a reliance on third-party manufacturers and just-in-time (JIT) inventory — without the risk management and resiliency provided by cloud-based visibility and collaboration platforms, and the redundancy provided by a broader base of suppliers.
To best serve their patients, healthcare providers, business partners and shareholders, life sciences companies must rethink their supply networks and JIT practices. They must also improve their ability to quickly sense and respond to sudden changes in supply, demand and inventory levels.
Based on our discussions with life sciences leaders, we predict four long-term effects from the pandemic on supply chains:
Today, China and India account for almost a third of drug manufacturing facilities registered by the U.S. Food and Drug Administration. That is because life sciences companies have traditionally organized their supply chains with an emphasis on cost reduction rather than risk management.
We expect China and India to continue to implement temporary export controls for essential drugs and equipment, and other governments to pressure life sciences providers to move production closer to home. To reflect this new environment, life sciences companies will reduce risk through multiple complementary measures. They’ll source ingredients and manufacturing from a more diverse range of partners; pre-approve the use of ingredients; increase reliance on supply chain modeling, optimization and simulation software; and deploy risk-tracking and mitigation platforms.
Currently, a lack of end-to-end supply chain visibility leaves manufacturers blind to which products are in shortest supply, those that might run out given various lockdown scenarios, ideal stockpile levels, and country-of-origin information for every ingredient or part that could affect their manufacturing capability.
In the short term, life sciences companies must quickly deploy supply chain visibility platforms (or enhance their existing platforms) and create a rapid response team as part of a multi-geography, multi-function supply chain command center. Longer term, they will need to deploy supply chain “control towers” — central functions that use data to support decision making aided by scenario planning and simulations.
Today, life science companies struggle to meet demand for personal protective gear, COVID-19 test kits and ventilators, while demand is collapsing for new products and those used in elective procedures. News or scientific reports postulating that certain drugs could help fight the pandemic often trigger a surge in orders and empty shelves. Meeting these fast-changing needs requires an improved ability to “sense” supply and demand trends, which calls for leveraging additional data sources ranging from third-party sales and social media to information captured by connected devices. Dynamic planning will become critical, as will the ability to plan based on probabilities of change rather than firm predictions.
Regulators are already fast-tracking the approval of COVID-19 virus and antibody tests and new and off-schedule treatments, as producers of products and drugs scale their ability to quickly develop, test, manufacture and distribute new treatments.
As the pandemic eases, life sciences companies will seek greater speed by adopting advanced manufacturing capabilities such as preconfigured production modules, single-use technologies that are easier to leverage for multiple products, and continuous manufacturing that replaces multiple batch steps. All of these actions will be required not only to fight COVID-19 but for future pandemics as well.
Urgently, life sciences companies should more quickly and accurately detect changes in demand and balance their manufacturing capacity with inventory to minimize stock-outs and prevent nonessential stock build-ups.
This improved “sense and respond” capability must include real-time awareness of demand variability across markets. It must also provide continually updated projections for internal and external manufacturing site capacities and logistics partners based on evolving regional lock-down status. To prepare for a quick response, life sciences companies should deploy a cross-functional rapid response team with responsibilities such as those shown below:
Long-term success in the post COVID-19 world will require shifting from an extensive reliance on far-flung manufacturing partners as well as prioritizing risk mitigation over cost reduction.
Cloud-based supply chain platforms can help life sciences companies more closely coordinate with these new, more diverse partners, influence which companies to work with and how, and balance efficiency and cost optimization against new priorities (such as the resilience of supply networks and risk management).
Among the changes we suggest are:
The scale of disruption caused by the COVID-19 pandemic is forcing life sciences companies to rethink their supply chain strategies and associated business capabilities. After addressing their most urgent needs, they must rapidly pivot to build medium- and longer-term capabilities that will provide the visibility and flexibility they need to meet future pandemic- and non-pandemic-driven business disruptions.