Since the 1990s we have witnessed an era of hyper-globalisation, and with it the formation of the global supply chain that we know today. Since its creation, the global supply chain has faced several challenges driven by uncertainty which causes the chain to suffer. Covid-19 is no different, as it threatens to bring businesses and manufacturing to a standstill due to containment measures that were put in place. For example, in China industrial production has fallen by 13.5% in January and February, compared to the previous year (1).
In this article, Andrew Walker, Chief Technical Officer of Kind Consumer, explores the ways in which longer supply chains and extensive risk management, which pharmaceutical companies are familiar with, act as a benefit to businesses during Covid-19. He also looks at the differences between using a local supply chain compared to overseas and how these differences could allow businesses to maintain the same momentum as they achieved prior to Covid-19.
Whilst the production, shipment and delivery of pharmaceuticals is being prioritised over that of any other goods, this does not mean pharmaceutical companies are without issues. Most, if not all, supply chains have a bottleneck, whether they are onshore or offshore, the key is to have effective contingency plans in place to combat hurdles. The same applies for overcoming the havoc create by Covid-19 for businesses and their supply chains.
In most cases, especially in the case of pharmaceutical companies, supply chains are developed in a way that is so robust, that it can survive the level of disruption that we are seeing today. This could be as simple as keeping emergency stock on hand or dual sourcing to overcome any slowdown in manufacturing or the delivery of raw materials. These quick and flexible responses are essential to the pharmaceutical industry and it is something I have seen repeatedly in practice throughout my career. For example, picking the right suppliers paired with a solid communication process allowed my team to increase production of a product quickly in response to the swine flu outbreak. Due to the long and heavily regulated supply chains that come with the development of a pharmaceutical product, it is common practice to stockpile resources in case of a Covid-19 situation.
The pitfalls of offshore supply chains
Dealing with bottlenecks can be even more problematic when we add in physical overseas distance, especially when a business relies on one region for a significant portion of their manufacturing. Despite this, many pharmaceutical companies have been steadily moving the manufacturing and development of their products to countries like China and India to cut costs, resulting in these countries being the largest global producers of active pharmaceutical ingredients (APIs). This has resulted in breaks in several supply chains and exposed weaknesses in some businesses processes when dealing with the impact of a global shock.
Covid-19 is undoubtedly going to leave its mark in the same way as any other global crisis and perhaps a key takeaway for businesses should be to spread production across different markets and chains to help limit the impact of disruption. Another option, which I have witnessed to be efficient in my current position, is to use UK-based suppliers but with global operations and manufacturers on offshore sites. This creates a system of multi-sourcing through one supplier but with strong offshore interests to mitigate against the risk of relying on a site in one country.
More than just a manufacturing issue
Clearly the manufacturing of a pharmaceutical product is incredibly complex when it comes to regulations, supply chains and raw materials. However, this is not the only area in the process facing challenges brought by Covid-19.
Whilst a product may be manufactured in one country, it may have to be moved elsewhere for packaging and labelling before it is marketable to the consumer. This is where the benefits of having a product that is ‘made in Britain’ really show. For example, strong local supply chains and connections has helped to simplify the manufacturing process of complex respiratory devices which are some of the most difficult to develop. Whilst still being hit with staff shortages and social distancing measures, these problems do not coincide with cross-border issues and delays as the physical distance between production stages are miniscule in comparison to having part of the process carried out in China or India.
Overcoming challenges and getting your product to market
Every company should regularly review and monitor their processes, contracts and licenses in order to really understand where the weak points are, before a crisis hits. This will help to determine where you need to double up on supplies or perhaps where you look to open a new factory for a particular stage of production to mitigate against the impact of a crisis in the future. It could be that Covid-19 results in an increase in the use of highly automated processes which can run with fewer people, as businesses monitor social-distancing policies. In my experience, whilst automated processes are difficult to get going and require a lot more investment, they are more efficient when running at high volume. However, this is exclusive to products with long life cycles, such as pharmaceutical products which last for generations with very little change.
Not to mention the importance of building a high-quality team with vast amounts of pharmaceutical experience who have faced challenges and know where mistakes were made in the past. These same individuals are also likely to be people who have established strong relationships with local suppliers and created strong connections and collaborative partnerships.