How you can overcome unique challenges by implementing the right business model and IT support

Getting pharmaceutical drugs on the shelves requires a network of coordinated supply chain activity. This complex array of processes not only ensures the proper storage, handling, and distribution of the product, but also adherence to the regulatory authority’s requirements.

The typical pharmaceutical supply chain will have the following nodes:

• Active ingredient production (the active ingredient is what makes us feel better when the medicine works),
• Bulk production (bulk describes if the drug in liquid or solid form before it is packaged),
• Finished Goods (“FG”) packaging, and
• Storage and distribution.

Some vertically integrated companies will own all tiers. Others might focus more on the upstream activity (active ingredient production) or downstream activities (packaging and distribution). Some companies rely on contract manufacturers for packaging, bulk, or active ingredient production while instead directing their attention on R&D. No matter what tier a pharmaceutical company centers on, pharma supply chains face shared challenges. These are linked to two main aspects: tight regulation and process-oriented manufacturing.
 

 

Pharmaceutical supply chain challenges

Both tight regulation and process-oriented manufacturing challenges manifest themselves in each node of the pharmaceutical supply chain. Let’s look at some of the key areas where supply chain planning is affected:

Storage, Distribution and Finished Goods Challenges

• If the same drug that is sold in different countries, it will typically have a separate SKU number for each of the countries because labeling and packaging requirements are different. This causes SKU proliferation with implications not only in planning, but also in master data management.
• Regional and country regulatory approvals require planning for new product launches, which complicates launch preparations.
• Changes in artwork for the packaging and labeling of the product are frequent due to changing regulatory requirements. For example, a drug might need a bigger font or an additional clause that needs to now show up on the brochure. Artwork changes require close synchronization with artwork suppliers and tight master data management of product revisions.
• All pharmaceutical products have a shelf life, and no one wants to hold stock that is about to expire. Therefore, tracking the remaining shelf life is important to ensure Finished Goods that are about to expire are not distributed and customers get the maximum shelf life they require.

Bulk Production and Active Ingredient Production Challenges

• Key raw materials also have shelf life, which need to be taken into consideration during planning to ensure that expired stock or about-to-expire stock is not used in production.
• Production occurs in fixed batch sizes for regulatory reasons. For internal efficiency, batches need to be grouped into “campaigns” to avoid unnecessary changeovers. The typical challenge is how much to product to group into a “campaign.” Big campaigns are more efficient but might choke resources and have an adverse impact on service level for other products. Since production size is driven by campaigns, the question is often asked, “What should be my ‘constrained’ campaign size be in case a critical material is short?”
• There is often a high degree of uncertainty in chemical and biological processes, which manifests in different than expected output quantity, or even more challenging, quality grade. Planning needs to account for those variations and constantly adjust based on real-time outcomes.
• Sometimes small demand does not justify a full batch of production. In this case, planning should accumulate “just enough” demand to justify a new batch.

Addressing these issues

Because pharmaceutical manufacturing is extremely complex, some of the challenges are hard to address systematically. This higher complexity means that some challenges require a planner’s intervention. However, meaningful improvements in service levels and inventory levels can be made by improving the links between the different layers in the chain, rather than focusing on internal planning activities. These links can be improved by addressing:

• Visibility: Breaking down the barriers between Distribution Centers and manufacturing sites. Production sites should be able to see in their plans the makeup of the end-customer demand (sales orders, forecast, and safety stock). This allows production tomake the right products and hold less buffer stock.
• Frequency: Information should be updated daily. In a market characterized by bids, it is important to know as soon as possible if a major bid is won or lost and to adjust the production.
• Accuracy: The data model should be accurate and reliable, meaning no duplication of SKUs, accurate inventory levels, and a forecast that is dependable.
• Organizational Friction: Clear roles, responsibilities, and accountability for inventory and service levels is needed. Responsibility must come with the right visibility, frequency, accuracy, and organizational structure in place.

Inspirage can help

To achieve pharmaceutical supply chain operational excellence, it is important to have agile technology and systems in place to react to changing regulatory requirements and industry standards. As the Integrated Supply Chain Specialists, with recognition from Gartner, IDC, and winners of Oracle’s ERPM (Enterprise Resource Planning & Management) & Supply Chain Management Cloud Partner of the Year (Global) awards in recent years, Inspirage is uniquely qualified to be your success partner. Whether you are upgrading your on-prem system or have decided to move to the cloud where continuous improvement is built-in, our team is prepared to guide you on your transformational journey. Contact us to learn more.