Supply Chain Disruptions
To understand the definition and causes of supply chain disruptions, it's important to first gain a clear understanding of some key supply chain concepts.
In the life sciences industry, the phrase "pharmaceutical supply chain" refers to the network of companies—from suppliers of active and inactive ingredients, contract manufacturers (CMOs), packagers, and logistics providers, to pharmaceutical companies, distributors, and pharmacies—that take a pharmaceutical product all the way from ideation to manufacturing and into the patient's hands. A "supply chain disruption" refers to any event that causes an interruption or delay at any point in this process.
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Causes of supply chain disruptions
Supply chain disruptions are most frequently associated with events that have a negative impact on a pharmaceutical company's business. Examples include natural disasters like floods, earthquakes, and wildfires; and geopolitical crises, like wars and civil unrest, that interrupt normal operations at one or more of the companies that make up the end-to-end supply chain. Some additional reasons for supply chain disruptions include:
- Raw material shortages
- Incorrect lead times
- Distribution problems
- Quality control holds
- Failed inspections
- Equipment failures
- Lack of proper documentation
- Regulatory compliance issues
The COVID-19 pandemic is an example of a natural disaster that caused major supply chain disruptions as sudden shifts in product demand rocked the pharmaceutical industry.
Less frequently, supply chain disruptions can result from events that have a positive impact on the business, such as a last-minute request to significantly increase the size of an order, a new product launch, or the introduction of digital technologies that produce long-term efficiency gains and financial benefits following an adoption period.
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Better supply chain visibility means fewer disruptions
A lack of upstream and downstream supply chain visibility makes it difficult for many pharma companies to avoid supply chain disruptions. But thanks to new and emerging technologies, like digital supply networks and multienterprise work management applications, many pharma companies are achieving visibility beyond the four walls of their organizations.
The internet of things (IoT) is also helping companies significantly improve supply chain visibility. IoT sensors are used to transmit information about everything from the condition of manufacturing equipment to the temperature and condition medicines during transit. This information often helps pharma companies identify minor problems before they become major disruptions. Data generated from strategically placed IoT sensor can also help pharma companies improve security, demand forecast accuracy, and supply chain planning procedures.
Mitigating risks
Pharma companies have historically managed risks associated with disruptions and sudden shifts in demand by stockpiling inventory and storing them in strategic locations—and many continue this practice today. But as the industry moves toward manufacturing more specialty and personalized medicines for smaller communities of patients, creating large inventory buffers will no longer be sustainable. The combination of a digital supply network, multienterprise work management applications, and IoT can help pharma companies reduce the need to carry large amounts of inventory.
Building supply chain resiliency through redundancy and diversity of suppliers is another approach that can help pharma companies mitigate the risk of a supply chain disruption.
Supply Chain Distruptions FAQs:
Can an enterprise be entirely safe from supply chain disruptions?
Supply chain disruptions will always exist—but how significantly they impact your business is up to you. An enterprise hoping to guard against improbable supply chain disruptions should invest in supply chain resiliency measures, such as adopting digital networking technologies.
How can the risk of supply chain disruptions be reduced?
From a supply chain risk management perspective, technologies like digital supply networks and multienterprise work management applications help pharma companies increase supply chain visibility and reduce supply chain disruptions.
How do I prepare for a major supply chain disruption?
The key to preparing for the next major supply chain disruption is taking steps to increase your supply chain agility, supply chain visibility, and supply chain resiliency with cloud-based digital supply chain networking technologies.
Are supply chain disruptions always bad?
Supply chain disruptions can stem from positive events like the formation of new strategic partnerships or new product launches that require an adjustment period. Digital supply chain technologies can help organization minimize these types of disruptions and create greater supply chain resiliency.