Pharmaceutical supply chains have a number of unique characteristics that affect the nature and severity of supply chain risks in the sector. First, while their upstream supply chains tend to be relatively simple, with few plants and a small number of suppliers, they are often concentrated, with one or two main plants supplying the whole world’s demand for some key products – an obvious choke point.
Second, the industry has highly stringent logistics quality requirements. Bio-pharmaceutical products, for example, which are expected to account for nearly half of the value of the top 100 global pharmaceutical products by 2020, require temperature management and control, often in a narrow range, throughout the entire supply chain from manufacturer to patient – a supply chain with multiple providers from truckers and carriers through forwarders and agents to distributors and pharmacies, and one that serves increasingly remote areas of our globe.
Third, the high value and “lifestyle” nature of pharmaceutical products has contributed to counterfeiting, making supply chain security and product identification key concerns in the sector.
These complexities have driven the life sciences sector to develop highly refined logistics approaches with dedicated infrastructure and cold chain services managing the ambient temperature at key steps of the supply chain, specialized thermal packaging, and advanced technologies including near-real-time or just-in-time (JIT) temperature logging and monitoring to identify temperature excursions during transportation and enable intervention.
At the same time, high inventory levels are being reduced and, increasingly, total cost approaches are being developed, including cost of transportation, thermal packaging, customs, taxes, working capital, cost of non-availability of product, storage, and returns, as well as the cost of quality and the risk of theft, loss and damage. Smart manufacturers and providers also operate adequately differentiated supply chains for specific products, geographies and channels.