Supply Chain Challenges in Pharmaceutical Manufacturing Sector

 In the current competitive market landscape, pharmaceutical companies recognize the pivotal role of enhancing supply chain performance to sustain a competitive edge.

Managers are tasked with making decisions across various domains such as forecasting, planning, procurement, financing, stock levels, and marketing strategies.

The challenge lies in carefully weighing these factors and addressing their interconnected impacts simultaneously to attain organizational objectives.

This article aims to highlight a few of the challenges within the pharmaceutical supply chain (PSC). Additionally, the article proposes some strategies to overcome these challenges.

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1. Forecasting Inaccuracies

Forecasting involves predicting future demand for products, and inaccuracies can occur due to various factors such as sudden market changes, unexpected events (e.g., natural disasters, economic downturns), bullwhip effect or insufficient historical data.

Efficient forecasting requires a seamless flow of information through the supply chain. Logistical challenges, such as delays in data transmission or lack of real-time visibility, can hinder accurate forecasting.

Inaccurate forecasts can lead to overstocking or stock outs, affecting customer satisfaction, tying up capital in unnecessary inventory, and increasing warehousing costs.

Without timely and accurate data, forecasting models may not capture the dynamic nature of the supply chain, leading to suboptimal predictions and subsequent challenges in inventory management.

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2. Extended Lead Times

Lead time is the time it takes for a product to move from the order placement to delivery. Extended lead times can result from delays in manufacturing, shipping, customs, or other logistical processes. As such, logistics play a critical role in determining lead times.

Delays in transportation, customs clearance, or disruptions in the distribution network can extend lead times.

Longer lead times may lead to stock outs, increased carrying costs, and challenges in responding quickly to changes in demand. Prolonged lead times can amplify the bullwhip effect, where small fluctuations in demand can result in larger variations upstream in the supply chain, causing inefficiencies and increased holding costs.

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3. Suboptimal Inventory Targets

Determining the right level of inventory is crucial. Setting targets too high may tie up capital and space, while targets too low can lead to stock outs. Inventory is a key component of logistics. Poor inventory visibility, inaccurate tracking, or inefficient warehouse management can contribute to suboptimal inventory levels.

Suboptimal inventory targets can result in increased holding costs, reduced profit margins, and a higher risk of stock outs or overstock situations. Inadequate inventory management within the logistics chain can lead to excess carrying costs, stock outs, or overstock situations, impacting the overall efficiency of the supply chain.

4. Elevated Supply Chain Costs

Supply chain costs encompass various expenses, including transportation, warehousing, labor, and procurement. These costs can escalate due to factors like fuel price fluctuations, geopolitical events, or disruptions in the supply chain network.

Logistics costs are a significant part of overall supply chain expenses. Rising fuel costs, transportation expenses, and the complexity of global supply chains can contribute to elevated costs.

High logistical costs can erode profit margins and make products less competitive in the market. Optimization of transportation routes, use of technology, and strategic partnerships can mitigate some of these challenges.

It is therefore imperative to choose a logistics partner efficient enough to mitigate on the challenges and help in reasonably managing the cost element.

Proposed Strategies for Overcoming the Challenges

 Addressing these challenges often involves a combination of improved data analytics for more accurate forecasting, optimizing supply chain processes to reduce lead times, fine-tuning inventory management systems, and implementing cost-effective supply chain strategies.

Further, to address these logistical challenges, businesses can invest and through strategic partnerships, take advantage of advanced technologies such as IoT (Internet of Things) for real-time tracking, implement robust warehouse management systems, and leverage data analytics to optimize logistics and enhance overall supply chain visibility.

Additionally, building resilient and flexible logistics networks that can adapt to changing conditions is crucial in mitigating the impact of unforeseen events on the supply chain.

It’s important for businesses to continually reassess and adapt their supply chain strategies in response to changing market conditions and technological advancements to remain agile and competitive. Below are some of the strategies to mitigate on the challenges;

1. Establishing Cooperative Partnerships

The concept of supply chain collaboration, involves two or more chain members working together to gain a competitive advantage through shared information, joint decision-making, and mutual benefits resulting in greater profitability by satisfying end customer needs collectively rather than individually.

Collaboration enables firms to mitigate the negative effects of the “bullwhip effect” and enhances responsiveness to market volatility.

When targeting improved firm performance through more effective supply chain management, the role of Logistics Partners becomes crucial in coordinating supply and demand effectively.

Strategic alignment saves time and effort, while collaboration with strategic suppliers and shipping and distribution partners enhances responsiveness to market fluctuations, leading to increased capabilities, knowledge sharing, and communication.

2. Investing in Emerging Technologies

Another strategy for improvement involves the adoption of new technologies to enhance research and development processes, improve product quality, optimize production and shipping processes, and reduce rework and material waste hence reduced cost in shipping of raw materials.

Studies emphasize the significant impact of production technologies on competitiveness and the flexibility enhancement achieved through innovative manufacturing technologies.

Advanced manufacturing technology, essential for pull production businesses, improves efficiency and effectiveness.

Investment in new technologies in pharmaceutical companies results in increased flexibility, product quality, and customer satisfaction. Additionally, reduced production lead time improves supply chain responsiveness.

3. Establishment of Information Technology (IT)

Information within supply chain companies varies between upstream and downstream entities, leading to the challenge of calculating future market demands based on incomplete information.

This often results in higher inventory levels to mitigate the risk of stock-outs and maintain responsiveness to market changes, leading to increased warehousing costs resulting from holding high inventory levels. As a result, the establishment of information technology for visibility and information sharing among supply chain entities is critical for an effective supply chain management.

IT facilitates accurate inventory tracking and demand forecasting, reducing the need for unnecessary safety or inactive inventory and decreasing associated warehousing or inventory holding costs.

Increased stocks and inventory visibility through IT based inventory management systems (Warehouse Management System – WMS) minimizes the bullwhip effects, enhancing certainty in inventory management.

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 Conclusion

In conclusion, achieving value and optimizing the supply chain network, constitutes the ultimate goal of supply chain management, and requires the integration of both inter and intra-organizational processes.

Achieving supply chain effectiveness is closely tied to the effectiveness of integrated management of the logistics component, where process integration involves coordinating activities and sharing resources and information to collaboratively manage the overall supply chain process.

In light of the foregoing considerations, the policies recommended in this study aim to foster greater integration within the pharmaceutical supply chain. Specifically, the implementation of Collaborative Planning, Forecasting, and Replenishment (CPFR) is suggested for pharmaceutical supply chain management.

Read Also: 6 Things to Consider When Choosing a Logistics Partner for Your Business.