The pharmaceutical industry is one of the most successful industries over the past decade. Pharma companies excel in all disciplines (research, development, manufacturing, and marketing), while adhering to the highest safety standards and quality standards. Because of this, profits and sales have increased more than any other industry.

However, in recent times, the industry has faced significant challenges.

With the rapid rise of generics, the competitive intensity has increased significantly.
The product portfolio is becoming more diverse, with more niche products available for new markets.
Large drugstore chains impose the same high standards for OTC products (e.g. Large drugstore chains impose the same high standards (e.g., availability on shelves, promotions) for OTC products as they do for consumer product companies.
Prices continue to fall because of the strong competition from healthcare providers and government reforms.
Pharma companies are being forced to strengthen their supply chains to ensure traceability due to the increasing use of counterfeit drugs, quality regulations and serialization mandate.
This is creating new challenges for the supply chain.

Pharma companies increasingly rely on global networks of R&D partners and suppliers as well as logistics providers and contract manufacturers organisations (CMOs), to develop, test and produce their products. Companies can reap significant flexibility and cost savings by using specialised outsourcing partners in key supply chain activities. Many large pharma companies outsource to some extent.

This new model of outsourcing adds complexity. How can you manage a tight supply chain that is becoming increasingly virtual? How can you manage an outsourced supply network when your in-house enterprise resource plan (ERP) only sees what is within the company’s four walls? How can you manage information exchanges with third parties at multiple levels of your supply chain?

Redefining Supply Chain Management

Pharma companies should focus on these five initiatives, just like other industries such as high-tech or consumer goods.

Create and share a business network. A digital business network connects all external supply chain partners electronically through the cloud, and is the foundation for a multi-enterprise supply chains. This network is not like the traditional point-to-point model. It connects everyone just like the Internet and allows all partners to work together. This allows for both end-to–end visibility and collaboration to facilitate business interactions between the various actors. This network works in the same way as an ERP system but it is for the entire supply chain. It is nearly impossible to achieve the necessary level of visibility and coordination among supply chain partners without such a platform.

Understanding true demand. Forecasts of demand are just an educated guess at future demand. The most innovative pharma companies follow consumer products companies to capture large amounts of demand-related data which is then fed into advanced demand sensing solutions to better predict real demand. This includes capturing data at the point of sale (POS), or using signals such as weather forecasts and flu trends via social networks. The improved demand picture is then communicated to all supply chain partners. This ensures that all parties (pharma company, suppliers, and CMOs) are aligned. The result of demand sensing is a significantly higher shelf availability and lower inventories.

Manage the quality of the CMOs. Pharma companies must ensure traceability from end to end. Pharma companies must be able to see the manufacturing operations of their partners in order to monitor product quality throughout the multi-tiered, multi-enterprise supply chains. To capture pertinent data at every stage of production, pharma must connect to the CMO’s manufacturing execution system (MES). This allows for very precise factory transaction visibility, allowing you to track material flows, lot genealogy and related parameters such as yields and test results. This is critical information that will allow you to trace your production. This requirement is essential for any serialization initiative.

Re-plan quickly across the network. It is also important to quickly respond to changes in demand and supply. Companies can view the entire supply chain from start to finish with business networks. Traditional planning systems are slow to solve problems and lack decision-support capabilities. Instead, they can suggest alternate scenarios and manage trade-offs. These tools enable rapid evaluation of new information, be it a supply disruption and an unexpected demand change. You can also easily compare different plans to choose the best one. The business network then shares the new plan with all supply chain partners.

Better manage distribution. Pharma companies increasingly rely on outside partners for transport, warehousing, and other value-added service. To ensure product availability, it is important to manage distribution partners. This requires a complete inventory visibility from downstream and sophisticated inventory strategies. Proactive management is the ability to allocate to different channels in order to profitably and optimally deliver the right products to customers. It also means making reliable delivery commitments. This is crucial when you are competing for shelf space in pharmacies and drugstore chains.

Supply chain operation network

The new strategies draw on the expertise of the consumer product companies, but also take into consideration the unique needs of the pharmaceutical industry. The best setup is a cloud-based network that allows end-to-end visibility, collaboration and coordination among supply chain partners. This network can be combined with dedicated decision support applications that leverage this data. These are some of the many benefits:

Current, end-to–end visibility of supply chains – ‘One version of the truth’ shared by all partners
CMOs must be fully controlled for quality and traceability.
Higher availability on-the-shelf, usually with lower inventories
Smarter channel allocations lead to higher market share and better margins.

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