Coronavirus Is a Wake-Up Call for Supply Chain Management
As procurement teams struggle to cope with the COVID-19 global pandemic, most have been trying to keep up with the news about global response measures and have been working diligently to secure raw materials and components and protect supply lines. However, vital information is often not available or accessible across their global teams. As a result, their response to the disruption has been reactive and uncoordinated, and the impact of the crisis is hitting many of their companies’ full force.
In contrast, a small minority of companies that invested in mapping their supply networks before the pandemic emerged better prepared. They have better visibility into the structure of their supply chains. Instead of scrambling at the last minute, they have a lot of information at their fingertips within minutes of potential disruption. They know exactly which suppliers, sites, parts, and products are at risk, which allows them to put themselves first in line to secure constrained inventory and capacity at alternate sites.
Despite numerous supply-chain upheavals inflicted by disasters in the past decade — including the eruption of a volcano in Iceland, the Japanese earthquake and tsunami, Thailand floods, and Hurricanes Maria and Harvey — most companies still found themselves unprepared for the COVID-19 pandemic. Seventy percent of 300 respondents to a survey conducted by Resilinc in late January and early February, immediately following the COVID-19 outbreak in China, said they were still in data collection and assessment mode, manually trying to identify which of their suppliers had a site in the specific locked-down regions of China. There are a number of reasons for this problem — and potential solutions.
Coronavirus and the pharmaceutical supply chain
With the COVID-19 pandemic affecting industries across the globe, European Pharmaceutical Review’s Hannah Balfour explored the latest reports and spoke to J.P. Duffy, a Reed Smith Partner, to assess how the outbreak is affecting the global pharmaceutical supply chain. Among the problems for pharmaceutical supply chains during this pandemic are the restrictions and impact of COVID-19 on two of the largest global producers of active pharmaceutical ingredients (APIs) and generics.
Since the outbreak started in China and lockdowns were imposed, supply from their manufacturing facilities has reduced. The true extent has been difficult to quantify as limited numbers of the typical workforce have been able to return to work. A recent letter sent by Medicines for Europe revealed that the Chinese powers expect large manufacturing facilities to be fully operational soon, although smaller producers may continue to struggle for some time. Duffy stated that “most companies feel that they are relatively well-positioned to weather short-term disruption. This is because many publicly traded companies have six months to a year of stockpiles; however, if restrictions continue for an extended period of time, especially if people in China cannot get back into the factories to work, eventually supply chain shortages will start to disrupt everyone.”
What can pharma do to limit the impact on the supply chain?
Duffy suggested that because of the “incredibly fluid situation… companies need to constantly monitor these issues and assess their possible impact for the immediate future, as well as the more medium- and longer-term impacts. Companies must think around corners and anticipate problems before they become larger immediate issues”.
US prescription drug supply chains face a coronavirus stress test
The United States’ vital prescription drug supply chains could bend as the coronavirus outbreak highlights the global pharmaceutical system’s fragility, but they probably won’t break, experts said. Health organizations are advising patients to secure 30- or 90-day supplies of maintenance medications. Some insurance companies are allowing early refills. But experts say Americans don’t need to worry yet – those recommendations are largely so that patients will have their medicines if they can’t go to the pharmacy and so they can maintain social distancing. “If you’re in the US, you have a trustworthy and reliable supply of medicines. That hasn’t changed in the last two months,” said Ronald Piervincenzi, the CEO of US Pharmacopeia, an independent not-for-profit organization that develops medicine standards.
US lawmakers have for years been aware of the regulatory system’s knowledge gaps about drug supplies. They highlighted the problems as recently as October in a House committee hearing. Several legislators earlier this month proposed measures aimed at preventing shortages.
COVID-19 – global supply chains
The COVID–19 Country Vulnerability Index brings together data and expertise from 200 economists, country risk analysts and life sciences experts, to help organizations anticipate emerging risks due to the COVID-19 outbreak around the world.
Vulnerability among large, developed countries, including Japan, Italy and Spain results primarily from demographic variables including percent of the population living in dense urban areas and particular age group structures that trend towards elderly populations. At the same time, the risk is mitigated in most developed countries by strong healthcare sectors and well organized centralized crisis response infrastructures.
How to manage your pharmaceutical logistics in difficult times
It is advisable to have a risk management framework in place that focuses on the evaluation of potential issues arising from the loss of a supply chain partner or location. Having alternate supply arrangements reduces potential disruption while ensuring adequate stockpiles provides a buffer against temporary turbulence. The UK government has requested pharmaceutical suppliers to undertake such risk assessments; explicitly exploring the risk of disruption to global supply chains. Fortunately, the contingency stockpile of medical supplies and raw materials created to buffer the UK’s exit from the EU is providing some stability for domestic manufacturers and supply chains.
In the US, the FDA continues to closely monitor the supply chain in response to the COVID-19 outbreak. As part of these efforts, the FDA has asked more than 180 human drug manufacturers to evaluate their entire supply chains, including APIs manufactured in China. Biocair’s emergency response team has already created fluid contingency plans, working to ensure that it continues to meet customer demand, despite the substantial disruption to international air travel. Protective clothing and extensive hygiene regimes for individuals, stringent quarantine measures and careful monitoring of all movements and transits are allowing safe movement of pharmaceuticals even in the most demanding circumstances.