Supply chain leadership will be critical to leading optimization, to control costs and to maintain a safe, secure market delivery system. The pharmaceutical industry has been very aggressive in creating true global supply chains. As a part of this global expansion, companies are learning they cannot “copy and paste” the same supply chain solutions across every market. No matter where they are on the globe, organizations have to customize their strategies and solutions to meet the needs of the marketplace. In 2014, supply chain cost optimization will be a driving factor in entry and reconfiguration decisions such as:
- Network Configuration: Eliminating unnecessary and duplicate operations, while minimizing transportation, will generate significant changes that will have to be balanced against political pressures in key markets.
- Logistics and Third-Party Logistics Partners: Understanding what the right number and blend of partners is for each market must be based on both global standards and local capabilities. It also needs to focus on cost reduction without sacrificing quality.
- Manufacturing: Quality starts with material management and ensuring the proper storage and handling of materials and work in progress (WIP) is maintained throughout the production cycle. Segregation of clean and dirty process steps should happen every time a material is moved. Reducing cross-contamination is a function of material and WIP flow.
- Inventory Management: Reduction of on-hand materials, WIP, and finished goods will generate greater savings than all other initiatives combined. Conducting an in-depth inventory gap assessment will clearly identify opportunities and excesses driven by overlapping safety stock, quality lead time, and limited supply risk aversion inventory in the system.
Many of these decisions and subsequent changes will impact the entire supply chain, and must be made as part of a cohesive strategy to generate sustainable improvements.
We can also expect to see the implications of the Affordable Care Act roll out. This is the year that major changes will begin to impact the marketplace, but unfortunately, it appears no one fully understands what that impact will be for the healthcare industry. What was estimated at an additional 40 to 65 million insured patients may end up being less in the short-term due to costs and implementation glitches. But pressure to lower drug and treatment costs is not going away.
Optimizing the supply chain overall must be the goal. Successfully doing so is an art form of combining performance metrics, analytics, risk assessment, and internal versus external options on a daily basis. A strong set of operational tools, facilities, systems and awareness of future possibilities is key to allowing supply chain professionals to manage and control spend without compromising product integrity, as well as adapting daily to new regulations, global demands and unplanned network interruptions.
Cost, quality, safety and innovation are equally critical to achieving excellence in 2014. Emerging markets will continue to demand the best treatments at the lowest cost, favor their own providers, and become more sophisticated business partners. At the same time, established markets will demand even higher standards and grapple with controlling healthcare expenditures. Organizations must take the first step by establishing the current condition of the supply chain and developing a road map to overcome gaps and capture opportunities.