When the storm comes

Hurricane Irma once again shows us the importance of mapping supply chain risks for the pharmaceuticals industry.

The storm has passed, but the effects will be felt for months to come. In the Florida Keys up to a quarter of homes in the low-lying islands are reported to have been destroyed. Many in the Caribbean have had it worse.

There will, as always, be lessons for industries, including pharma. Puerto Rico, for example, is a huge centre for pharma manufacturers – the fifth biggest in the world with more than 80 plants. It accounts for about a quarter of the country’s GDP.

The island was actually spared the worst of the hurricane, but still three died, 50,000 were left without water and 600,000 without power. The storm served once again to expose the fragility of the island’s infrastructure. Nor are hurricanes the only recent disruption to hit the island. Only at the start of the summer did it declare its outbreak of the Zika virus over, after it infected more than 40,000.

Weather risk: an unavoidable reality

It’s not just Puerto Rico, of course; Irma brought potential for disruption across the Caribbean, to Florida and on inland. And it’s not just Irma; it followed hard on the heels of hurricane Harvey.

The industry has got better in recent years at dealing with these events, not least because of government encouragement to avoid disruption to medical supplies that can exacerbate the tragedy. One of the untold stories of both hurricanes Harvey and Irma is the shortage of urgently needed medicines; untold, because the problem was largely avoided with some improved planning.

But we’ll be tested again. Yes, hurricane Irma was unusually strong, but we’ve seen storms this powerful – and perhaps more so – before. We’ll see them again. The role of climate change in developing such storms will continue to be debated. What’s unarguable is that pharma – and a wide range of other industries with global supply chains – will always be at risk of exposure.

Preparing in advance for real resilience

Modern technology is a big part of the answer to managing this risk. The information businesses and the public have on a hurricane’s trajectories and strength is unparalleled; they can now track it online in real-time. Combine that with modern software solutions and we can quickly map risks for at-a-glance understanding of exposures.

That’s always useful in directing emergency responses when the storm comes. It’s more useful, though, used to map exposures and build resilience through continuity plans before. The power of Irma may have been a surprise, but storms in the hurricane season are not. Fortunately, we have the tools to weather them well; we just need to make sure we use them.

Brexit and the pharmaceutical supply chain

There’s work to be done on all sides – not just by the negotiators – to prepare supply chains for a future outside the EU.

For anyone already sick of Brexit, Michael Barnier’s recent announcement won’t have been encouraging: “The hard work starts now,” the EU’s chief negotiator Michel Barnier told reporters – more than a year after the UK voted to leave.

It’s a big issue – and a particular challenges for some.

One is the pharmaceuticals industry, and a couple of days before Michel Barnier was urging the UK to knuckle down, leaders in the UK and EU pharmaceutical industry were issuing a warning to both Barnier and Britain’s Brexit Secretary David Davis of the risk to supplies of life-saving medicines.

“In the case of an unorderly withdrawal, there is a risk that all goods due to be moved between the UK and EU could be held either at border checks, in warehouses or manufacturing, and/or subject to extensive retesting requirements,” the letter warned.

And it’s not just the industry that’s worried. The week before, the UK’s health secretary and its business secretary called for continued co-operation with the European Medicines Agency after the UK left the EU – “in the interests of public health and safety”.

Preparing your supply chain

Hopefully, these warnings will have their desired effect, and arrangements – transitional or otherwise – will be in place when the negotiations finish. In that case, this will all be put down as a crisis averted or just another “scare story”, according to taste.

As we’ve noted before , though, whatever happens Brexit will be a game changer not just for pharma but for all businesses. The currency volatility we’ve already seen could well return as the deadline for negotiations gets nearer; the regulatory framework remains uncertain; and supply chains are going to have to get more complex – perhaps in the short-term, as contingencies are put in place, or in the long-term to deal with new realities.

Many companies have already made changes to their supply chains to make them more resilient to whatever results from the negotiations; many other are still looking but have at least gained an understanding of the risks they face and the vulnerabilities in their supplies. For any that haven’t made much progress, though, or those that haven’t even begun, the hard work truly does need to start now. Time is not on our side.

No lucky strike for supply chains

It’s a new year, but the problems for supply chains are much the same. Among them, increasingly, is industrial action.

December drew comparisons with the Winter of Discontent with strikes or threats by Post Office staff, train and tube drivers, airport workers, and even Argos delivery drivers. With the tube strikes this week, that discontent has followed us into 2017.

As others have noted, comparisons with the 1970s are overplayed. It actually became harder for unions to take legal strike action in the UK last year, for example, with the passing of the Trade Union Act in May. Unions now require a ballot turnout of at least 50% for industrial action – and 40% support of all eligible to vote when it comes to vital public services such as health, education, transport, border security and the fire brigade.

Nevertheless, recent activity does suggest something of a resurgence in the UK following a near-record low in the number of days lost to industrial action in 2015. The action we’ve seen also has significant impacts. Academics estimate the Southern Rail strikes alone have cost the UK £300 million. The tube strikes this week may even cost the same, according to some of the higher estimates.

Moreover, while levels of UK industrial action have trended downward in the last few decades and remain modest, they’re much higher elsewhere, including in some of our near neighbours. France, Denmark, Norway, Belgium (which saw a particularly high number of strikes last year), Spain, Finland and Ireland have all lost anything from double to seven times the number of days as the UK to action in recent years. If businesses are not directly affected themselves, others in their supply chain may well be.

All of which is simply a reminder that industrial action remains a key threat to the supply chain. Businesses need to build in resilience and redundancy to account for it, and to do that, they need to have an accurate view of their exposures.

Time to get serious on supply chain cyber risks

The new Cyber Highway service makes it easier than ever for businesses to start to asses the cyber security of their suppliers. It’s an opportunity more need to take.

Cyber is rising up the supply chain. Last month former Home Secretary David Blunkett launched the Cyber Highway, a new website through which business can check whether suppliers are certified under the Cyber Essentials scheme.

The scheme promotes basic standards of “cyber hygiene” to protect against common risks such as hackers and malware infections. Businesses can have a self-assessment questionnaire independently reviewed by an external certifying body to gain a Cyber Essentials badge or have an external body actually do the tests for a Cyber Essentials Plus badge.

For central government, all contracts handling personal information or providing certain ICT products and services have required certification with the standard since October 2014. Two years on, the new Cyber Highway site makes it easy for private sector businesses to effectively apply the same standard. They can now track suppliers' progress towards Cyber Essentials certification in real-time.

It’s hoped this will, in turn, prompt more businesses to sign up to the scheme and work to achieve certification – vital following the vote for Brexit, according to Blunkett.

“It is more important than ever, post-Brexit, for businesses to hold an internationally-accepted certification, as competition increases and an extra level of cyber-resilience is required,” he said at the launch.

Opens doors: Risks from suppliers, vendors and customers

There’s also a couple of other reasons to welcome such moves.

One is that many big security breaches can be traced back to attackers exploiting vulnerabilities of suppliers.

That might mean criminals targeting businesses’ raw materials suppliers or just service providers. The data breach at US retailer Target, which in 2013 had 40 million customer details stolen and leaked, remains perhaps the prime example of the latter. That attack was the result of network credentials stolen from its refrigeration, heating and air-conditioning subcontractor.

The second reason to welcome initiatives like the Cyber Highway is related to this: Many businesses still seem to be complacent about this aspect of their supply chain risk.

A recent survey by insurance brokers Marsh found that only a quarter of UK large and medium-sized corporations assess their supply chains for cyber risks. As the report notes: “[T]he overwhelming majority of companies are leaving themselves exposed to third parties, from service providers to customers.”

Anything that gives businesses the tools to start changing this can only be a move in the right direction.

Supply Chain Impact of Water Shortages

Whilst the December snowfalls have taken their toll on the UK’s ability to deliver Christmas goodies, the impact of the thaw is creating further disruption for many companies. The water shortage in Northern Ireland is continuing to affect a huge number of home owners, but how are businesses coping across the area?

For manufacturing sectors such as food, pharmaceuticals and chemicals, water can be a critical dependency in many ways:

Perhaps your next supply chain risk assessment, should give some thought to the following:

It isn’t simply a winter problem. Water rationing in dry spells has the potential to cause disruptions that could go on for even longer.