Supply chain planning in the time of Coronavirus!

April 17, 2020
The recent outbreak of the COVID-19 (Coronavirus) and the related supply chain interruptions has highlighted the vulnerability of global supply chains. Initial concern related to shutdowns in China production but as this country worked through the issues and restarted their production operations these concerns have become much broader.

Supply chain is an area that is neglected until the proverbial hits the fan – and the impact of a delay or disruption in even just one link reverberates through the whole network. Never before has the subject of supply chain, suppliers and logistics been so actively discussed in online forums – as well as the printed press and other media. In the case of lifesciences it comes as a shock to some leaders to find that the suppliers that they believed were located in relatively low risk countries are in fact vulnerable. The reality is that many of the starting materials and API originate in some form or other in China – and other South East Asian locations. And there are many players in the supply chains that feed into the production of manufacturing equipment – in particular disposable technologies that are used in biotech production.

The list goes on for materials and components that are now at risk of shortage – even commodity items like bleach and disinfectants are running out in certain areas. And that is just for inbound materials and equipment feeding into production.

The domino effect of these stoppages is already being felt in the area of logistics – with increased demand for airfreight to keep the supply lines moving resulting in space constraints – and of course related cost increases. As countries close borders, restrict travel and in the case of USA even prohibit the entry of flights from Europe, this shows no immediate sign of coming to a resolution.

For those of us that have spent decades in the area of supply chain management this is no surprise – although the proportions of this disruption are unprecedented. Over the years the impact of volcanic ash on air traffic, tsunamis and other weather-related issues have been overcome, despite some level of disruption initially. A recent case in point was the impact of hurricanes in Puerto Rico where many items utilized in biotech production are made. In this situation it was possible to identify alternative sources of supply, re-qualify suppliers and make adjustments to schedules. The current situation is more challenging as so much of the globe is impacted – and there is no guarantee that relatively ‘safe’ locations will not be impacted.

In the gloom and doom of the current moment there appears to be no immediate light at the end of the tunnel. But there is always an end to a bad situation – and the time is now to start thinking about remediation. And prevention of risk areas in the future.

As organizations move into social distancing – or alternative work situations – this is the time for leaders to step forward and take a long and hard look at their operational environment. Gather with the functional heads – albeit it through conference call and digital media – and start planning for the future. For the moment when the immediate threat of infection of global populations subsides and business as usual becomes a reality.

Life Sciences has always had a well imbedded risk assessment approach for a range of processes – apply this thinking into your supply chain operations. By performing a series of ‘what if’ scenarios it will become clear where the cracks are in individual operations and where different regions and functions are vulnerable. This FMEA (failure mode effect analysis) is tried and true – and if nothing else will put minds at rest in terms of future direction.

Other than the danger to human health, one of the biggest concerns is the impact of supply chain disruptions. Delays and congestion in logistics assets is one of the bottlenecks that is currently creating issues. As the global state of emergency continues there will be other challenges, many of which will be harder to address by small companies that do not have the reserves or the resources of larger organizations. The reality is that not all will survive this situation, certainly not without the intervention and assistance of government agencies and business partners. And this is where the close cooperation and collaboration across supply networks can play a greater role. The ecosystem of small and larger partners in each supply chain have an inter-dependency that can be leveraged to ensure the survival of these communities.

Understanding how each of these links interact and the financial impact across the whole chain is important to facilitate the development of a proactive approach in times of shortage of cash and materials. Over the decades many different industries have acknowledged this dependency and implemented programs for supplier development to ensure continuity for materials and components to support their ongoing operations. An example of this is the automotive industry – an example that is well known in supply chain circles is Toyota.

Toyota have mature and effective supplier development programs, to include financial support, operational training and integrated supply and demand management. This is an approach that has been emulated in other automotive supply communities, although not always to the same extent or with such successful outcomes!

There are other examples closer to the life sciences industry – for example, large vaccine manufacturers secure supplies of eggs each year for the production based on forecast

(counting their eggs before they are laid so to speak!).

These programs include the provision of up-front payment to ensure that these farmers are well equipped to respond to demand. And of course ongoing communication as any increases or decreases in projected demand are known.

Leaders in the driving seat can learn from these programs, evaluating their own supply chains and communities – to include suppliers as well as distribution partners. Strong inter-personal relationships should be developed with all critical partners, at all levels within the organization. Open and honest conversations will reveal vulnerability and enable the development of remediation and contingency plans. All of which are important to ensure the restart of stalled operations as well as the continuity of those that are close to failure.

Start with a review of your bill of materials (or a list of materials and components that are used in operations. For those organizations that are still evolving this is an important first step!).

  • Evaluate the relationship between each of these items and the materials, ingredients and/or products they are related to.
  • Consider the inventory planning approaches that are in place for these items – and the cost to procure and hold this in appropriate quantities to meet projected demand.
  • Review your relationships with direct suppliers – and the related extended suppliers that contribute to this supply chain – down to the first participant!
  • Consider the location, size and financial health of each of these entities – and the impact that failure could have on the ability of the chain to supply.
  • Categorize these suppliers into strategic – high and low risk suppliers.
  • Develop alternatives if possible – and/or how to secure supply to remediate against disruptions.
  • Contact all key suppliers and engage in open and honest conversations – develop strong relationships where possible.

This is an exercise that should be done across all partners that could potentially impact the ability to produce, package and distribute your products to patients.

Knowledge is power – use the time at hand to plan for the future!