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Going worldwide: a case for globalized supply chains

As a response to the current global pandemic, many countries have awoken to the fragility of domestic supply chains for drugs. For many, the natural instinct is to focus on re-shoring pharmaceutical production. But is this the right choice?

Pharmaceutical supply chains are large and complex systems which require finding the right formula in order to deliver quality products. Although globalized supply chains require a longer time to establish and launch, they withstand worldwide crises better absent political interference and with appropriate regulatory flexibility.

“The lean supply chains the industry cultivated over the past decades are not resilient to sudden shocks or issues with production caused by events like a pandemic.” says Shannon Flynn, writer for ReHack Magazine.

To ensure a stronger supply chain, it is necessary to go beyond market research, centralized production units, and quick fixes. Read below to learn the different ways in which pharmaceutical companies can benefit from globalizing their supply chain.

Benefits of globalized supply chains for the pharmaceutical industry

By relying on a network of partners in different locations, it is possible to improve the efficiency, scale, and quality of the supply chain. Finding the right balance between spend optimization and pharmaceutical quality is key according to Indrek Kaing, Business Development Manager at The J.Molner Company.

“By having our lab in Estonia, we are able to source talent from a broad region at a fair price while also offering our clients top analytical chemistry services,” he explained.

Another benefit is the possibility of improving supply and financial forecasts through digital tracking and differentiation of every process in the chain. The data produced can become a key production asset through new technologies such as AI and automated analysis, as Srini Rajamani—Vice President & Sector Head at Wipro Limiteddetails:

“By looking at the commercialization of one drug, for instance, and identifying similar variables in another, patient segmentation with real world data, companies can predict outcomes with a fairly high probability and reduce risk in the commercialization process,”

By creating a chain that is split across different locations, pharmaceutical businesses can carry out parallel processes and hasten the production processes of more than one product at a time. They can also find partners that have their own laboratories and facilities, instead of having to pay for building their own.

A recent article by the McKinsey Global Institute found out that delays are one of the biggest challenges that businesses need to overcome:

“Due to supply-chain issues, companies can expect a production line stop that is greater than one month approximately every 3.5 years,” the report concludes.

Companies can also use a globalized supply chain as a way to set quality checkpoints and feedback processes for each product production stage. This can facilitate the identification of areas of opportunity from formulation to shipping, and ease the implementation of solutions that result in faster delivery and lower prices. Valerie Van Hulle, global strategic marketing manager for digital at BASF, points out that technology is the driving force behind an efficient supply chain:

“Instead of waiting for emails, phone calls, and even paper mail, companies can instantly exchange quality and regulatory content, supply-chain data, and other critical data. This ability leads to better collaboration between suppliers and manufacturers and, ultimately, improved assurance of API quality,” Van Hulle explains.

The challenge of change

One of the biggest obstacles for globalizing the pharmaceutical industry is to have a reliable stream of quality products. Roomy Khan, technology consultant and Forbes writer, suggests government-mandated batch testing and manufacturing traceability as solutions to guarantee the quality of pharmaceutical products:

“To ensure the quality of drugs, a "last step" testing of the finished products should be performed in the regulatory jurisdiction where the product will be marketed and sold. Quality and efficacy certifications should be incorporated in the pharma supply chain to transparently position such drugs to the end consumer as "certified drugs,” she also suggests.

Currently, many pharmaceutical products rely on China for one or more active ingredients. This dependance can easily become a threat to supply:

“If U.S.-China tensions were to escalate over Taiwan, trade corridors and supply chains would be at risk of massive disruption—including the freighters expected to bring antibiotics to America’s hospitals and pharmacies,” argues Rosemary Gibson, author of China Rx. Regulators need to be aware of the risk of these country-level concentrations and put in place appropriate regulatory flexibility to allow for rapid changes in active pharmaceutical ingredients and other key components while safeguarding patients.

That being said, a globalized supply chain has the potential to integrate the best parts of the pharmaceutical industry of every country involved. According to Paul Krugman, economist and New York Times columnist, this was proven by the recent invention of COVID-19 inoculations:

“These miracle vaccines are incredibly complex products that would have been hard to develop and produce in any one country, even one as large as the United States. A global market made it possible to deliver all the specialized inputs that are saving thousands of lives,” he writes.

Although cloud computing and the ever-growing integration of technology has made worldwide supply chains possible, most of the pharmaceutical industry is still in the early adoption process of them. Worldwide supply chains are a clear opportunity for leading companies in the pharmaceutical sector that strive to offer quality products for their patients. Instead of centralizing their supply chain in a single location, companies should seek to create networks that are self-improving and also deliver excellent quality products to the market.

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