6 Common Challenges in the Pharmaceutical Supply Chain and How to Overcome Them
Medical and pharmaceutical products are vital parts of our health care system, but they come with unique demands that strain supply chains and the organizations that depend on them. From temperature-sensitive vaccines to evolving regulations and rigorous documentation, pharmaceutical and medical supply chains have a lot to contend with. The COVID-19 pandemic put a spotlight on some of these problems, but they've been around for years.
As we aim to create a more resilient industry that can keep the public safe and reduce costs, all parts of the supply chain must be evaluated to address these challenges adequately. Thankfully, modern solutions can bring the supply chain together through integration and visibility. By implementing the right system, you can better address these common pharma supply chain challenges.
6 Problems Facing the Health Care Supply Chain
Like any industry, pharmaceutical and medical supply companies want to reduce costs and improve their services, but getting there can be difficult. Between unique product demands, heavy reliance on foreign countries, strict regulations and fast turnaround times, these organizations must juggle a diverse collection of challenges in the pharma supply chain.
1. Overstocking and Understocking
Maintaining appropriate stock levels is always a balancing act, especially when the spread of illness can affect demand. Pharmaceutical and medical supply companies must ensure adequate stock to provide quick delivery when needed, even if there is a spike in demand, such as during an outbreak of a virus.
Still, keeping too much product on hand can introduce further challenges related to handling and storage requirements. Medication might go bad or become damaged and requires additional care while in storage. The extra precautions that go into storing medication can increase costs and introduce opportunities for error. A poorly monitored storage room, for instance, might have a leaky roof or a broken ventilation system that creates an unsuitable environment for medications or supplies.
Another problem with determining optimal stock counts is the bullwhip effect, which occurs when those upstream in the supply chain overreact to initial shortages and overstock or overproduce. Orders won't match up to demand and members of the supply chain may end up with too much stock. With the ebb and flow of sickness outbreaks and other supply chain challenges, these industries are particularly susceptible to the bullwhip effect. The volatility of the health care field can make it difficult for companies to predict disruptions and prepare accordingly.
Without the right balance, overstocking and understocking can cause a wide range of issues, from an inability to deliver vital medications to extensive operating costs.
2. Temperature-Sensitive and Fragile Goods
Many items in the medical and pharmaceutical supply chain are vulnerable to subtle environmental changes, including temperature variations and improper handling. Improper handling can occur at any step of the process, from raw material sourcing and transit to when a medication gets administered to a patient.
About $35 billion gets lost each year in the pharmaceutical industry due to temperature-controlled logistics failures alone. Even a slight deviation from normal temperatures can render a shipment unsafe for use and lead to a costly write-off. Pharmaceuticals and medical supplies must also be handled carefully. Some medications might come in glass vials, and medical devices can have fragile moving parts. Rough handling is a fast track to write-offs in the industry.
Since supply chain errors can cause changes in chemistry, damage packaging or otherwise affect the safety of a product, organizations must carefully monitor for and prevent them. Manual monitoring solutions call for hefty labor and documentation requirements. Thankfully, digital solutions are becoming more accessible, reliable and affordable each year, making it easier and more efficient to manage cold-chain transit.
3. Fast Turnaround Times
In the pharmaceutical and health care industry, running out of a product can make a life-or-death difference. Sometimes, extremely fast turnarounds are necessary, especially when some products are only available from a single manufacturer. Managing complex supply chains to meet these fast demands can be difficult, and expedited fulfillment can lead to considerable costs.
One of the challenges of offering fast turnarounds comes from a fragmented supply chain. Without extensive visibility, each member of the supply chain works in isolation. They can't prepare for shipments or respond to interruptions in a timely manner.
Another problem with fast delivery is the difficulty associated with just-in-time (JIT) inventory models. These models rely on quick replenishment as stock starts to run low. On the surface, JIT makes sense since many of these perishable or sensitive items cannot be stored for very long. However, as we've seen, volatile demand fluctuations and transportation interruptions make JIT an unreliable option since a lack of on-hand stock during supply chain interruptions can prevent buyers from getting these vital resources at all.
Still, these products can be expensive and perishable, so suppliers must strike a balance between JIT practices and safety stock.
4. Overseas and Poorly Diversified Sourcing
Like many industries, the pharmaceutical field has offshored the vast majority of production to Asian countries like China and India. China, for example, makes around 70% of the acetaminophen used in the United States and 80% of the global supply of the anticoagulant heparin. It also makes up almost half of the world's active pharmaceutical ingredients (APIs), or the chemicals that provide medicinal characteristics.
While reliance on global production may not be a problem during normal circumstances, it can pose a significant risk during disruptions. We saw these effects clearly in 2020 when shutdowns in China led to worldwide shortages of vital medications and supplies, like face masks. In some cases, these shortages came from shutdowns of just one or two manufacturing facilities. Overseas sourcing further contributes to the difficulty and cost of working with foreign manufacturers.
Even domestic sourcing can be problematic when few manufacturers are available. If one manufacturing plant faces interruptions, such as a natural disaster or a worker's strike, it could ripple throughout the supply chain and put public health at risk.
5. Maintaining Compliance
In health care, there's no room for error. Rigorous government and industry standards outline procedures, quality standards and documentation requirements. While they're essential to ensuring public safety, these requirements increase medical supply chain challenges. After all, continuous visibility might be difficult, but if it's the only way to ensure that a life-saving medication is still effective, it's worth the hassle.
Another important element of compliance that the pharmaceutical industry must consider is continuously changing regulations and international trade requirements. While environmental conditions like temperature and humidity are important, regulations can also entail recordkeeping, packaging, handling protocols and labeling requirements. For instance, temperature or humidity monitoring sensors must meet calibration standards from the National Institute of Standards and Technology (NIST).
Health care suppliers must stay abreast of these requirements and remain agile enough to respond to changes as they appear.
6. OTIF Requirements
On-time in-full (OTIF) delivery is an accepted standard in the pharmaceutical industry that assesses whether a supplier delivers shipments that:
- Have the right items
- Have the right number of items
- Go to the right location
- Arrive on time
Suppliers must meet all elements of OTIF. Missing one is akin to not delivering the shipment at all. Delays or partial damage thus require complete replacements in expensive, rushed timeframes. Many retailers have different shipment requirements, too. Packaging procedures for one buyer may lead to a rejected shipment for another. Keeping track of these varied demands and ensuring OTIF shipments can be a significant challenge.
How to Combat Supply Chain Issues in Health Care
The idea of addressing all of these issues can be intimidating, but modern-day technology has made it easier than ever. It all comes down to visibility. High visibility between platforms, partners, products and real-time conditions can allow health care organizations to improve their supply chains and tackle the unique demands of the industry.
Creating a system with end-to-end visibility calls for a comprehensive platform that addresses all parts of the supply chain. While solutions like integrated business planning (IBP) and sales and operation planning (S&OP) platforms may work well for other industries, they don't offer the rigor and flexibility that pharmaceutical and health care supply chains demand. Constant disruptions, unique handling requirements and volatile demand patterns create a unique landscape for health care supply chains.
Today's industry offers seemingly unlimited data collection, from sensors on the manufacturing line to real-time location data on a shipment in the middle of the ocean. With the latest technology and insights powered by artificial intelligence, health care suppliers can bring all of the required information together into a centralized, highly visible space. The right platform allows you to understand your supply chain on a much deeper level to address the challenges we've discussed.
Below are some strategies for combating supply chain issues in the pharmaceutical and health care supply industries.
1. Focus on End-to-End Visibility
Many organizations make the mistake of zeroing in on a specific part of the supply chain. While every stage is important, using solutions built for just one segment can cause you to overlook the others. For example, implementing an inventory management solution might help you master your inventory management, but it doesn't address elements like logistics or packaging. It could also give you an inventory management approach that doesn't consider its relationship to other stages, such as how your storage solution slows down your shipping process.
Instead, prioritize end-to-end visibility that incorporates information from every step. Bring all of your data points into one program, and look for a solution that provides a comprehensive view, rather than a stage-by-stage approach. Also, consider different levels and how your software allows you to view your supply chain at local, regional, national or even international levels.
2. Create Cross-Platform Integration
You likely work with a wide range of platforms and partners. Cross-platform integration can ensure that they communicate with each other and facilitate a connected, informed supply chain. Some platforms natively integrate with each other, but the sheer volume of programs needed in most pharmaceutical businesses usually requires an overarching system that incorporates every part of the supply chain, from ensuring real-time inventory updates to communicating with a third-party logistics (3PL) partner.
Another important part of cross-platform integration is the ability to collaborate. Going back and forth between programs can be confusing and time-consuming. Communication can fall through the cracks. Remember that the goal is visibility, and platforms that don't play nicely with each other can get in the way of that goal. Cross-platform integrations can facilitate collaboration by sharing information with your partners and bringing stakeholders onto the same page.
No stone should be left unturned. An agile supply chain depends on collaboration, and cross-platform integration makes it possible. It's also vital for creating a supply chain ecosystem, so everyone involved can:
- Respond to issues quickly and communicate needs.
- Proactively monitor and prevent potential problems based on partner information.
- Make more informed decisions.
- Implement changes issued by partners, governments and industry regulators.
- Identify cost-saving initiatives and work more efficiently.
- Work together to improve each company's competitive advantage.
3. Implement a Compliance-Focused System
In the health care field, compliance is non-negotiable, but it doesn't need to be a source of stress or a costly part of your day. With a strong, connected supply chain, you can avoid problems that might affect compliance, such as poor recordkeeping or a lack of visibility into product conditions.
For example, a temperature-sensitive shipment might leave the manufacturing plant at the right temperature and arrive at a pharmacy at the same temperature, but what happens during transit? A brief but overlooked power outage at a storage facility could turn that product into a severe safety hazard. If you can't prove that the shipment stayed within a safe temperature range from the moment it left the manufacturing line, it may not be suitable for use at all.
Careful, dependable monitoring procedures can help collect required compliance documentation and prevent errors in the first place. In the above scenario, smart sensors could, for instance, provide notifications when the temperature starts to dip, allowing facilities to respond quickly and restore power.
Prioritizing compliance can help you avoid expensive corrective action, like sending replacement stock or making write-offs. While compliance with safety guidelines is crucial, you'll also need to consider compliance with partner standards and industry regulations that can help you meet your goals. You might need to manage complex packaging requirements from different partners or follow certain procedures to achieve a coveted industry certification. Good supply chain management can help you keep track of and meet these goals.
4. Take Advantage of Modern Technology
In the last decade, supply chain management tools have made great strides. Consider how you can solidify your supply chain with tools like:
- Predictive analytics: Stay proactive with calculations that assess your current situation and potential benefits or disruptions. Predictive analysis can help you run hypothetical scenarios, optimize routes, understand how disruptions might affect your metrics and much more. You can respond to problems before they happen and mitigate their adverse effects.
- Digital twins: As a digital version of your entire supply chain, a digital twin can help you monitor all aspects of your supply chain, share information with others and predict issues that might prevent OTIF delivery. These insights provide a host of powerful tools that support collaboration, agility, resilience and other qualities required for a strong supply chain.
- Automation: By connecting your supply chain, you can enable process automation that frees up countless hours and helps you improve accuracy and timely delivery.
Strengthen Your Pharmaceutical Supply Chain With ParkourSC
For an end-to-end supply chain management solution, pharmaceutical industries turn to ParkourSC. Our comprehensive platform covers the pharmaceutical supply chain at all stages, with a focus on cold chain visibility and embedded intelligence. ParkourSC includes cutting-edge tools like digital twins and predictive analytics to make the most of every piece of information that enters the system.
Whether you're monitoring outgoing shipments, managing deliveries from multiple sellers or playing another role in the fast-paced pharmaceutical supply chain, ParkourSC can help you meet your goals. Learn more about how we support niche industries like pharma by reaching out to our team today!