What’s new for outsourcing in pharma supply? It’s not just about the costs
The pharma industry has always been progressive in its outsourcing efforts regarding research and manufacturing. The last ten years, however, has seen strong growth in demand for outsourcing in pharma distribution and supply.
Despite its considerable outsourcing experience, pharma is still trying to find the perfect recipe for the selection stage as even the most rigorous selection process can fail to get things right first time round - with problems being flagged up 12-18 months after entering a partnership.
Across its various functions a pharma firm may work with 350+ external partner contacts, unsurprisingly many in the industry wish to shrink this number. Manufacturers are seeking strategic partnerships so they can maintatin a global reach with the technologies they require but via a smaller base of contacts. Interestingly, the past few years has seen a consolidation of 3PL market and carriers.
Rising public pressure on pharma’s spending and the price-points of medicines further drives the appeal of outsourcing to cool costs.
However, emerging trends are suggesting that cheaper running costs are no longer the primary motive for outsourcing.
In fact the respondents of the 2016 NICE insight CDMO Outsourcing survey were most concerned with reducing the risk of supply shortages, improving quality and efficiency and gaining technical/operational expertise. The top focus in 2017 was gaining access to specialized technologies.
Technologies: Blending service and software
With many keen to see harness the benefits of blockchain and other new intelligent technologies, suppliers will need to be equipped with the technological expertise shippers desire.
A recent 2018 study revealed there was a large rise in the amount of shippers seeking IT services from 3PLs. But there was also a dip in shippers’ satisfaction levels with 3PLs. A recent study believes this dip was “…potentially due to higher expectations among shippers as technology has improved or because shippers are seeking enhanced analytical capabilities to help drive more effective supply chain decisions.”
Blockchain could contribute significant strides in supply chain security and transparency, but partnerships will remain key to the success of its implementation. Ken Toombs, Global Head of Infosys Consulting said: "Shippers and 3PLs will need to work together to drive value from blockchain, using lessons collectively learned from missteps with other emerging technologies like Radio Frequency Identification (RFID).
Reducing risk of supply shortage
When distributing medicine there are many deadlines to hit and departments that need to coincide to risking the supply. Supply chain deadlines can be missed due to a range of factors, not limited to:
· Disruptions in the flow of raw materials, such as Active Pharmaceutical Ingredients (APIs), are a common cause. These can be caused by a supplier shutting down, equipment issues, political unrest or issues with the plants which provide a raw material for a medicine.
· Any failures in manufacturing process quality can force a site to shut down in order to rectify the issue. On site equipment is often used to manufacture a range of medicines so this scenario can threaten the supply of a number of product lines.
· Errors in the production of packaging can lead to mislabeled products, which can have fatal consequences. These mistakes on a large scale can lead to recalls, write-offs and market re-supply initiatives.
· Large financial losses have hit pharma firms because of temperature excursions. It can take a matter of moments for a medicine to slip out of its permitted storage temperature. A typical temperature excursion can take over 40 labor hours to investigate involving multiple departments.
· Supply disruptions can occur even if communication protocols are not streamlined. Especially if there is an unforeseen spike in demand. These can be caused by disease epidemics, changes to clinical guidelines or the consolidation of traffic if one source supplying a drug encounters an interruption to their operations. The sluggish rectification of issues can compound into disrupting supply.
Partners can be very influential in the execution of supply chain deadlines, in either a positive or negative way. Suppliers need to value their positive contribution to the flow and harmonise with the supply chain at large.
Improving quality and efficiency: Biologics
The shift towards producing significantly higher potency large molecule biopharmaceutical drugs and biologics to better tailor drugs to a patient’s individual needs places new pressures on transportation and shipping. This is because these expensive and more complex protein based drugs are highly sensitive to temperature change.
Any deviations from their ideal storage or transportation temperatures can disrupt their protein structure and make them ineffective. Also, some cell or gene based products require unique supply chain structures going from patient to manufacturer to patient.
These unique requirements often lead manufacturers and shippers to depend on the expertise of their partners.
Globalization: Emerging markets expertise
In an effort to shrink costs, many manufacturers are increasing the amount of activities they outsource: API manufacturing, raw material sourcing, solid dosage manufacturing and packaging to locations such as India and China. These countries in some cases will be territories that are unfamiliar to a shipper and so these lanes require good planning, advice and pilot shipments.
Importing materials from a wider range of countries, some of which have limited infrastructure, exposes the supply chain to more risks, such as custom clearance issues with country specific requirements being a typical trigger for a delay.
The thirst to supply to emerging markets is likely to be evident as many pharma firms are eager to establish themselves in these growing regions.
Expertise gained by service providers in dealing with high volatility markets benefits the shipper as they gain access to proven business models and processes with flexi-resources (people, transportation and assets). This will lead to streamlined product interactions for pharmaceutical companies with their suppliers and end customers.
Particularly well-defined standard operating procedures need to be respected in regard to how the product and the raw material will be treated to ensure compliance measures are met.
Reaching a global network and retaining communication and visibiltiy needs a lot of work and many in pharma are struggling to locate the perfect approach.
it’s important that drug manufacturers strongly assess their partners to ensure they are trustworthy. This process can be complicated if the partner isn’t based locally.
It’s important to build in as much supply assurance as possible upfront into agreement terms. Strong quality agreements will be needed between all parties to protect the integrity of the product.
Reliable, high quality partners are crucial to pharma supply chains as a lot of responsibility hangs in the balance. Shippers will soon feel the financial drawbacks of making a decision on who to outsource with only based on their cheap price point.
it is encouraging to see the obsession with cost cutting settle slightly in favour of more sensible causes - boosting quality and efficiency .