What might well be the most important supply chain in the world today is also one of the most backward, when it comes to automating key processes.
The life science supply chain gave us the vaccines that are now rolling out on a global basis to combat COVID-19, not to mention any number of other drugs and cures for various diseases over the years. But the sector’s success masks serious deficiencies in the link between manufacturers and scientists in the lab.
Relatively few members of the general public had paid much attention to the life science research industry before the coronavirus pandemic, says Florian Wegener, co-founder and chief executive officer of Zageno Inc., an online marketplace of life science products. That’s despite the existence of a $130bn market — what Wegener calls “a very large niche industry.”
Also unknown to the public is a salient fact: “The supply chain in this industry is broken,” declares Wegener. While responsible for countless medical and scientific breakthroughs, the business of life science research presents “a great façade,” behind which is an antiquated system or ordering and fulfillment.
In North America today, says Wegener, 20% of all orders for lab supplies are still placed by phone, and another 20% by fax. Buyers must page through huge paper catalogs, and suppliers lag far behind in the development of e-commerce capabilities. Most don’t even have a presence on the web.
“From the supplier perspective, it’s very expensive to serve this market,” Wegener says, noting that at least 30 cents out of every dollar of suppliers’ revenue goes into the sales force, and another 5 cents into customer service. And that latter function isn’t what an online retail shopper might envision. “Customer service teams” are mostly call centers that take orders over the phone.
All of which adds up to big headaches for the scientists and lab bench researchers whose jobs rely on ready access to supplies. Thanks to the inefficiencies of the ordering process, they lose between four to six hours per week just setting up experiments, according to Wegener.
He sees the dilemma as presenting three big challenges for the lab scientist looking to purchase product. One is inadequate or even non-existent search capability. Two is the inability to access neutral information on product performance. And three is a lack of transparency in pricing.
Meanwhile, the biotechnology industry is booming. “Every quarter is a record,” says Wegener. “Last year, we saw $80 billion going into startups. This quarter alone, it’s $28 billion.” Which makes it all the more painful that products are hard to get, expensive and non-transparent.
The complexity of the industry is staggering. Zageno’s automated marketplace offers access to more than 25 million SKUs, Wegener says. Moderna, Inc., which manufactures of one of the most successful COVID-19 vaccines, relies on more than 3,000 suppliers to build the one product.
Given the structure of the biotech industry, the fragmented nature of its supply chain is perhaps understandable. Most innovations come from smaller companies, of which there are thousands in North America alone, often backed by venture capital. They conduct the lion’s share of research and development on behalf of the pharmaceutical giants. “Very few big blockbusters have been invented within big pharma companies,” says Wegener. “It all comes from these little labs.”
So think of countless small buyers trying to match their needs with countless suppliers, who still market, process and fulfill orders manually. And up to now, there’s been little appetite for reform. The problem, says Wegener, is that researchers in the lab, who support a high-margin industry, give scant thought to product cost. In a survey of 3,600 scientists, that criterion didn’t appear among their top ten concerns.
With the arrival of COVID-19, such attitudes are ripe for change. The general public now has a far higher appreciation for the importance of life science research. (Given the historical inefficiencies that plague the industry, it’s even more remarkable that the COVID-19 vaccines were brought to market so quickly.)
But even with the success of an automated ordering platform like Zageno, coupled with growing public awareness, there’s still plenty of room for improvement. From an end-customer perspective, around 10% of the products needed for COVID-19 research are on backorder, Wegener says. One of Zageno’s customers, a lab based in the United Kingdom with a few hundred scientists, was on the verge of shutting down because of long wait times for receiving product. Zageno was able to prevent that catastrophe at the last moment by digitally relaying an urgent call for product to its thousands of suppliers, from which it sources directly.
One can only wonder how much faster a COVID-19 vaccine might have been developed, had the life science supply chain been fully automated a year ago. But Wegener is hopeful about the sector’s future prospects for streamlining the ordering process. “COVID-19 has shaken us like an earthquake,” he says. “It has underlined the need for a digital transformation of the industry.”
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