If the COVID-19 pandemic has been overwhelmingly difficult, restoration of the disrupted supply chain and building a resilient and agile one will be even more formidable because of the vulnerabilities exposed. To address the challenge of allocation of scarce resources, one must resort to establishing priorities for strategic action. Transforming certain links in the overall supply chain is superior to attempting to enhance the whole chain of links. While it may be true that only 10% of companies are adequately consumer-centric, we are also aware that systems do not adequately integrate with partnering businesses, information is not shared, bull-whip effect distorts response, demand surges of Black Swan events are astronomical, and excessive dependence exists for raw material on overseas suppliers. What is the fundamental step required to reconfigure the supply chain of tomorrow?
In a demand-driven supply chain, the nexus for evolution of a resilient enterprise must be Assurance of Supply in a global marketplace. In order to achieve transformation of status quo, the supplier must be transformed to be an extension of the enterprise. This will require a comprehensive strategy which addresses processes, people and technology where the contract with the vendor is not transactional but strategic. The flow of material, information and capital must be aligned.
The lop-sided dependence on China as a source of nearly 80% of APIs, materials and supplies must be the first order of business to recognize an external reality. The risk, long lead time and resultant slow response time are the characteristics of the current supply chain which must be altered fundamentally. Bringing India, Brazil and other countries to supply has to be a long-term direction.Lack of diversification of suppliers, when today you may be single-sourced, is a drastic constraint and an impediment to achieving resilience. The reality of a two-year time cycle to get FDA approval for a supplier is unacceptable. Industry must demand a Fast Track for approval of another supplier by FDA.
Reconfiguration of the inventory, manufacturing factory capacity and plant location are mandatory for production of APIs and medical supplies to deliver rapid response at point of care. While the traditional configuration of the supply chain was driven by the minimization of cost of manufacturing, distribution and carrying inventory, the paradigm shift must include the cost of stockout. In order to increase market share for the long run, the Japanese automotive manufacturers, after decimating the US automotive market with their superior product quality and design, built manufacturing plants in the USA.
Once a strategic decision is made by the drug manufacturer with the numerous suppliers, generating near real time visibility of materials, production, delivery, quality, inventory and assets has to be achieved. Powerful solutions are available for visualization of information for improved decision making. This will trigger improved planning and execution for enhanced customer service. Orchestrating a symphonic operation from the supplier to the drug manufacturer will require the construction of a digital platform for the ongoing business relationship.
Fortunately, technology solutions for instituting the platform exist today which can be owned or utilized as a SaaS model. The FANG companies (Facebook, Amazon, Netflix, Google) and others have built digital platforms for a seamless, automated and efficient collaboration with all the stakeholders. This will lead to the evolution of best practices. Sharing of forecasts will ensure better utilization of suppliers’ capacity, improved delivery of SLAs and optimization of inventory. Considerable waste will be eliminated by monitoring product quality from supplier’s supplier to drug manufacturer.
The task on hand is totally doable to insulate healthcare from the vagaries of an apocalyptic pandemic. While assuring supply is a critical response for the war on COVID-19, the solutions envisioned will also deliver a quantum leap in the resilience and agility of the supply chain of Life Sciences.
Submitted by Devendra Mishra, Executive Director, BSMA