Supply Chain Risk Management Blog

The positive case for supply chain resilience

Courier group Fedex and researchers at Frost & Sullivan have published an interesting report looking at the importance of supply chains to competiveness for medical device, pharma and biotech manufacturers, among others.

The study opens by noting the supply chain’s importance and also reports encouraging findings from a poll and interviews with 39 high-level healthcare industry executives. These showed 78% recognised that an effective supply chain would be vital to their company’s ability to compete in the next decade.

Despite this, however, the focus of strategic growth in healthcare companies has generally been on acquisitions, restructurings and, particularly, product development.

“[H]ealthcare products companies have sought to gain competitive advantage by leveraging R&D and technology to create superior products and by capitalizing on their marketing prowess… They have often neglected to create a more comprehensive solution for their customers that would plant the seeds for nurturing a true strategic relationship,” the report states.

This is where the supply chain could play a key role, it notes. Companies need to move beyond just thinking about the supply chain in terms of efficiencies; they should also consider its ability to drive growth through developing relationships.

All this reinforces old lessons: The pressure to reduce supply chain costs has in the past threatened, and at times undermined, resilience when applied in a manner that is not proportionate to the risk exposure. Cost reduction has meant closing plants, removing redundancy from the supply chain and reducing stock. Meanwhile, the industry’s focus on mergers and acquisitions hasn’t always helped either, being a contributory factor in a number of cases of drug shortages.

The point is that the cost savings of a leaner supply chain have to be set against the risks. They also have to be set against the competitive advantage gained from a well-publicised, generous finished stock policy for critical drugs that minimizes the risk of vulnerable patients being exposed to product shortages.

This is not an easy balance to strike, but the issue won’t go away. In fact, it’s almost certain to grow. Others have noted the potential impact on pharmaceutical supply chains of medical apps and technology recently introduced by volume providers such as Apple and Google. Furthermore, the growth of the home healthcare market is expected to see the pharmaceutical logistics market increase almost 10% a year to 2019, according to one recent analysis, as companies review their supply chains.

There are no easy answers, but the questions do at least make clear the importance of supply chain resilience – not just in terms of risk mitigation, but also as a potential driver for growth.

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