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Emerging Supply Chain Risks in the Pharma Industry: Why Must This Issue be Addressed?


By Marshall Mathias

Logistics accounts for 45–55% share of the value chain of a drug. Tied in with associated complexities around sourcing and manufacturing, supply chain management (effective or otherwise) clearly has a strong bearing on the total cost of a drug. Players in the pharmaceutical space, therefore, are undertaking a range of strategic initiatives to reduce cost across all phases of the pharmaceutical supply chain. These range from sourcing raw materials outside of a company’s home country to outsourcing and joint ventures and partnerships.

Along with these new strategies, come new risks, such as counterfeiting, which has resulted in costly product recalls; regulatory-compliance-related risks, which many executives consider to be second only to counterfeiting; and distribution delays, which could cost companies millions of dollars in lost sales. Pharmaceutical companies, therefore, need to identify and implement new strategies and processes, supported by new technologies, to aggressively reduce and manage the new challenges they may face.

The Smart Cube recently wrote an article on pharmaceutical supply chain management, which included seven proposed solutions to managing or mitigating the risk that these new strategies present. They include:

  • Greater collaboration
  • Better integration
  • Technological enhancements
  • Packaging solutions
  • Balancing the trade-off between low-cost and low-risk
  • Strategic sourcing and supplier relationship management
  • Flexible and adaptable supply chains

Supply chains will play a major role in their ability to adapt, consolidate or refocus their core business segments. Therefore, pharmaceutical companies will need to institute the right supply chain configuration and adaptability, by using internal, external and country-specific resources to create best practice-based supply chains, and to overcome supply chain obstacles in a constantly changing global environment.

What is your company doing to manage or mitigate supply chain risk?