The Life Science industry has a set of unique set of supply chain challenges that add additional complexity for management. In our company experience the following are all “pain” points for managing a successful supply chain at a pharmaceutical company:
- High-Mix of Products – Pharmaceutical companies tend to have thousands of products with many factors such as packaging, languages, dosage forms, and more that add to the complexity of managing a long tail of inventory in the supply chain.
- Compliance Regulations – Due to Drug Enforcement Agency (DEA) regulations over Controlled Substance, Pharmaceutical Companies are required to strictly monitor their drug inventory and ensure their data is “readily retrievable” in the event of an audit.
- Expiration Challenges – Expensive drugs expiring before use is a huge challenge for companies managing pharmaceuticals.
- Mergers and Acquisitions – Due to the competitive nature of the industry, mergers and acquisitions are very common in Life Sciences. The result is a multitude of disparate computer systems that manage their inventory in different ways, and lack the holistic end-to-end visibility of a complete supply chain.
Alexa Cheater, of Kinaxis’ 21st century Supply Chain blog, wrote a great article detailing a list of 8 challenges that Life Science companies deal with in regards to Supply Chain Management:
Lack of robust sales and operations planning (S&OP) tools
Traditional S&OP tools don’t always account for the specific needs of the life sciences supply chain. S&OP in this space requires volume level planning at multiple hierarchies and provide mix level detail including material and capacity constraints at the site and SKU level.
Solution: Implement an S&OP tool that provides easy balancing of supply and demand at multiple levels of aggregation. Planning functionality should include multiple time dimensions with real-time analysis, and give you the ability for robust scenario simulation to evaluate options.
Tenders, trade promotions and new product introductions
It can be hard to manage these types of demands considering they often don’t exist in legacy ERPs. Given approximately 80% of profit from new products comes during launch, this is a crippling obstacle for many.
Solution: Find a way to get that critical data into your ERPs. Supply chain management software exists providing just such a capability. You’ll also need the ability to model the probability of demand for tenders and trade promotions, including probabilities and priority-assignment. Modelling NPIs as pseudo parts (with their own pseudo demand and bill structures) provides much-needed visibility and analysis to projected fulfillment, revenue, capacity and material availability.
You can only satisfy demands with supplies meeting specific characteristics
Expiry dates, stop-sell dates and batch numbers – you have to account for all of these special attributes when looking at your supply. You may think you’re able to fulfill demand, only to discover you don’t have enough products meeting the expiry date requirements to actually deliver. That’s not a great way to improve customer satisfaction levels, and can lead to greater amounts of excess or obsolete inventory.
Solution: Enable special supply and demand allotment based on these unique parameters and make sure you factor them in when calculating available demand. It’s even better if your technology solution can handle all this automatically, including providing projected excess.
Expiry dates are associated with specific SKUs
With thousands of SKUs all with individual SKU and batch expiry dates, the odds of those items expiring on warehouse shelves becomes a real concern. It directly impacts availability and inventory excess. Not to mention what it does to your inventory risk and bottom line.
Solution: Calculate projected expiry at multiple levels when planning. And don’t forget to consider inherited expiry from lower level supplies. When a batch of products does expire, make sure to stop considering the quantity as viable and plan for new supply to meet future demand. Your best plan of action is to monitor product expiry by country and affiliate-specific criteria related to allowable shelf life, and set up a system of alerts before expected expiry dates, so you can take action before the item is no longer usable.
Multiple production line setups often result in poor equipment utilization and way more inventory than you need at any point in time. It’s inefficient, costly and not a great way to run your operations if you want to stay profitable for long.
Solution: Make sure you connect production of the same material when executing through batches. This will help reduce the number of setups and make your production line more effective in the long run.
Transition dates are assigned for SKUs
That means if regulatory approvals are delayed or expedited, the change in dates affects supply and demand.
Solution: You should model transition dates to work to determine what materials you need to produce to account for the change (including lower level materials).
Increased outside pressures
As with any business, there are often outside pressures that have a big impact inside your operations, and those working in life sciences aren’t exempt. Things like shifts in regulations and changes in approvals are beyond your control. As are patent cliffs, which can have a monumental effect on your revenue streams as competitors get license to sell the same products.
Solution: Make sure you thoroughly evaluate supply chain risk and have all available information before making any decisions. Simulate scenarios and evaluate impacts across the entire supply chain, but ensure you compare the results against key performance indicators so you know exactly where you’ll need to make any tradeoffs.
It can be difficult to manage lot traceability across all levels of your supply chain, including aligning supply to upstream work orders. Without that alignment, you risk not having full visibility into who supplied what and where it ended up. This becomes vital for accountability and in case of recall.
Solution: Connecting your end-to-end supply chain within a single system will help you alleviate this issue. You’ll be able to plan packaging work orders split from different bulk locations based on quota arrangements and create work orders from bulk locations based on products’ batch sizes. That way you’ll always have clear visibility into your supply chain operations.
Invistics has 20 years of experience serving the Life Science industry. We understand the unique challenges of a pharmaceutical supply chain and build a solution to tackle them. Download our Case Study of Shire and Patheon and learn how we can help.