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Key Drivers for 2015 Supply Chain Leaders: Enormous pressure will be put on supply chain leaders as a result of the reorganization of the pharmaceutical industry into specific health treatments and sectors, the shedding of lower-margin and higher-volume units, and pressure to maintain margins in their new "specialty focus." Not only will full regulatory compliance, track and trace, product integrity, and security be mandatory and expected, the implementation of operational best practices to cull historical risk buffers will drive success. Included in these best practices will be:
• Inventory Management: Not just the reduction of on-hand materials, WIP and finished goods, but also the adoption of better forecasting and planning tools, and the expansion of suppliers. This means finding secondary suppliers for most active pharmaceutical ingredients, components and other raw materials for manufacturing support, as well as a reduction in finished goods safety stock.
• Manufacturing Controls: Both internal and co-manufacturers/co-packagers and partners to not only improve quality and controls, but more importantly to improve process consistency to reduce batch failure rates. Strategic use of WIP multi-process steps to minimize stocking levels.
• Lean Continuous Improvement: Expansion of process control and evaluation that has been focused on quality now will shift to eliminating layers of overlapping steps built into the process to minimize risk. The new focus will be to eliminate non-value-added steps and replace them with process controls in all segments of the process from purchasing through distribution.
• Transportation: Security and controls have driven carrier selection and load size limitations that have been hidden by high margins. Freight optimization for LTL to TL is ripe for improvements; however, the impact of DIM weight pricing on parcel will be significant for all direct delivery players who ship scripts, med/surg, supplies, and other consumables. Packaging changes and minimum order sizes must be evaluated quickly.
• Logistics and 3PL Partners: Core competencies aside, the luxury of using 3PLs to manage many business functions is a cost center for most organizations. Evaluating those that provide value and understand cost pressures will determine who is truly a partner. If pharmaceutical/healthcare organizations are not in shared value partnerships, internal capabilities may need to be created or expanded to achieve operational goals.
Many industry supply chains will be turned inside out in 2015 as they work to become value centers vs. cost centers as the pharmaceutical landscape is redefined. In fact, many leading pharmaceutical supply chain leaders have been working on new strategies in 2013-2014, but the results will clearly be seen in the coming months from the most forward thinking organizations. Much like every year, optimizing the supply chain overall must be the singular target, starting with establishing a baseline, measuring performance, conducting analytics, assessing risk impacts, and being flexible to adapt to a changing world demand.
Rebuilding supply chains to fit new, more focused companies and product groupings must be based upon those specific product needs. But the ability to leverage best inventory management practices along with cost and process optimization that challenges traditional business approaches is what will drive supply chain leaders. Reducing inventory levels and obsolescence will generate huge savings, but require cutting-edge planning tools and multi-level sourcing options. Minimizing material warehousing, distribution and transportation costs must start with eliminating waste in process and practices and outdated thinking.
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