Supply-Chain Transformation: Strategic Necessity for the Life Sciences

New supply-chain challenges are forcing companies to act in different ways to secure product safety.
Mar 02, 2011

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Fueled by the discovery and commercialization of blockbuster drugs, life-sciences companies have for decades enjoyed profitability and growth. Seemingly immune to the challenges faced by other industries, including the clothing and apparel, electronics, and automotive industries, companies in the life sciences have enjoyed ongoing investment, enabling the formation of new entities in the evolving biotech sector.

These halcyon days for the life-sciences industry are over. The combination of the expiration of patents for high-revenue products, failure of products within the discovery pipeline, and the global economic decline has cast a cloud of doom. Mergers, acquisitions, and consolidation are symptomatic of these issues and have created challenges for stakeholders and constituents, not the least of which is the pressure to reduce cost, improve cash performance, and either consolidate facilities or outsource manufacturing and other functional areas. Emerging economies in the BRIC nations (Brazil, Russia, India, and China) as well as their satellite "factory states," are harvesting the benefits of this shift in operational focus, with industrial areas mushrooming up seemingly overnight to provide factories and human resources to meet the growing demand for so-called offshore manufacturing. Recognition of the importance of mastering a global network of operations, many components of which are now run by external parties through an ongoing trend to outsource perceived noncore functions, has placed a spotlight on the teams and leaders responsible for delivering quality products and services.

New business models elevate supply chain

As sources of supply and demand change, so must business strategies for the manufacture and distribution of life-science products. Supply-chain management, once considered a mere support function, is a crucial component of today's outsourcing environment. Executive suites have opened their doors to the focus, and many leadership teams now focus on supply- chain issues.

During the past decade, leading global companies have recognized the importance of supply-chain management, creating cross-functional teams to integrate their supply and demand operations. There are many examples within the electronics industry of companies that have created collaborative supply-chain environments facilitated by the combination of industry best practices at the process level and powered by information technology. Building on the foundation of "inter-enterprise" collaboration, facilitated by the adoption of a single technology platform (e.g., large scale entreprise resource planning systems), this model has been extended to include external players, delivering on the promise of the extended virtual enterprise.

Until now, buffered from the economic necessity to take such actions, life-sciences companies have been slow to follow. The increased requirement to reduce cost, complexity, and risk, however, has created a compelling case for collaboration across the global network of suppliers and third-party logistics providers and customers. Many companies are taking advantage of the capabilities of new partners—contract manufacturing provides a good option as new products find their way to market—especially in emerging economies. Outsourced relationship models should build upon the regional knowledge of the contract manufacturing or logistics providers to create a sustainable supply-chain network to meet current and evolving needs.

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