Since the 1990s we have witnessed an era of hyper-globalisation, and with it the formation of the global supply chain we know today.
Since its creation, the global supply chain has faced several challenges driven by uncertainty which have caused the chain to suffer. Covid-19 is no different – it threatens to bring businesses and manufacturing to a standstill due to containment measures that had been put in place. For example, in China, industrial production had fallen by 13.5% in January and February, compared to the previous year.
Combating hurdles and delays
While the production, shipment and delivery of pharmaceuticals is being prioritised over that of any other goods, this does not mean pharmaceutical companies are without issues. Most, if not all, supply chains have a bottleneck, whether they are onshore or offshore. The key is to have effective contingency plans in place to combat hurdles.
In most cases, especially in the case of pharmaceutical companies, supply chains are developed in a way that is so robust that they can survive the level of disruption we are seeing today. These measures could be as simple as keeping emergency stock on hand, or dual sourcing to overcome any slowdown in manufacturing or the delivery of raw materials.
These quick and flexible responses are essential to the pharmaceutical industry and it is something I have seen repeatedly in practice throughout my career. For example, picking the right suppliers paired with a solid communication process allowed my team to increase production of a product quickly in response to the swine flu outbreak. Due to the long and heavily regulated supply chains that come with the development of a pharmaceutical product, it is common practice to stockpile resources in case of a situation such as Covid-19.
Multiple chains for less disruption
Dealing with bottlenecks can be even more problematic when we add in physical overseas distance, especially when a business relies on one region for a significant portion of its manufacturing. Despite this, many pharmaceutical companies have been steadily moving the manufacturing and development of their products to countries like China and India in order to cut costs, resulting in these countries becoming the largest global producers of active pharmaceutical ingredients (APIs). This has resulted in breaks in several supply chains and exposed weaknesses in some businesses when dealing with a global shock.
Covid-19 is undoubtedly going to leave its mark, in the same way as any other global crisis, and perhaps a key takeaway for businesses should be to spread production across different markets and chains to help limit the impact of disruption. Another option, which I have witnessed to be efficient in my current position, is to use for example a UK-based supplier but with global operations and manufacturers on offshore sites. This creates a system of multi-sourcing through one supplier but with strong offshore interests to mitigate against the risk of relying on a site in one country.
The power of local supply chains
While a product may be manufactured in one country, it may have to be moved elsewhere for packaging and labelling before it is marketable to the consumer. This is where the benefits of having a product that is for example ‘made in Britain’ really show. Strong local supply chains and connections have helped to simplify the manufacturing process of complex respiratory devices which are some of the most difficult to develop. Despite still being hit with staff shortages and social distancing measures, these problems do not coincide with cross-border issues and delays, as the physical distance between production stages are miniscule in comparison to having part of the process carried out in China or India.
Identify weak points
Every company should regularly review and monitor their processes, contracts and licenses in order to really understand where the weak points are, before a crisis hits. This will help to determine where you need to double up on supplies or perhaps where you look to open a new factory for a particular stage of production to mitigate against the impact of a crisis in the future.
It could be that Covid-19 results in an increase in the use of highly automated processes which can run with fewer people, as businesses monitor social-distancing policies. In my experience, while automated processes are difficult to get going and require a lot more investment, they are more efficient when running at high volume. However, this is exclusive to products with long lifecycles, such as pharmaceutical products, which last for generations with very little change.
☛ Andrew Walker is chief technology officer at Kind Consumer Ltd