On October 4, EY released its assessment on the state of global pharmaceutical supply chains, focused on supply chain vulnerabilities, complexity challenges, and the future of supply chain visibility.
 
With recent global disruptions, there is a need for enhanced resilience in pharmaceutical supply chains. Despite stabilization in the global supply chain environment, challenges persist due to prolonged delivery times and increased costs associated with inflation and interest rates.
 
The assessment points out the need for improved visibility in the supply chain for efficient response to disruptions and cost management, along with addressing intricacy challenges of the multi-tiered nature of the pharma supply chain.
 
Companies are increasingly focusing on digital solutions that offer real-time alerts and insights, fostering proactive risk management. EY’s Olaf Zweig and Derron Stark provide further context and comment on pharma’s global supply chain landscape. –KB 
 
Contract Pharma: What are the main challenges that persist impacting pharmaceutical supply chains?
 
Pharmaceutical supply chains are still affected by high ongoing costs (resulting from high inflation and interest rates driving up the cost of working capital) and have additional cost concerns given the likelihood of upcoming regulatory changes such as the US Inflation Reduction Act (IRA) cutting drug prices. 
 
The bigger picture is that the global operating environment is still in the midst of a major potential transition, with governments and regional trading blocs increasingly concerned with securing regional supply potentially even at the cost of prioritizing localization over the globalized supply chain model that has evolved in the past three decades. At present, delivery times have yet to return to pre-pandemic levels, with multiple disruptions ongoing, and the overall situation is one of flux and uncertainty which companies are forced to navigate.
 
Contract Pharma: How might these challenges be overcome?
 
Localization is one possible answer to the challenge of improving supply chain resilience, with the industry looking at a potential pullback from fully globalized supply chains towards more hybrid models involving a mix of local, regional, and global sites. However, onshoring is just one aspect of the range of strategies for boosting resilience. 
 
Interpreting supply chain resilience as a composite of several factors, including better operational efficiency and reliability, agility and speed to market, and greater control over risk exposure, companies and policymakers have several possible levers for improving their performance. Among these possibilities are new supply chain models using some local and some global elements, such as “hub and spoke” models and potential collaborations between companies including initiatives such as joint warehousing or jointly run procurement clearing warehouses. 
 
One of the most promising approaches is to improve supply chain resilience, using digital technologies to enhance companies’ visibility into their upstream supplier base and downstream customer base. Better visibility could improve the industry’s ability to predict and respond to shocks, disruptions, and changing market signals, anticipate and mitigate delays and price increases and overall better understand and reduce the risk exposure across their supply chains.
 
Contract Pharma: What can the pharmaceutical industry learn from other industries?
 
Remaining with the subject of supply chain visibility (as noted, only one of many possible levers for enhancing resilience, but nonetheless a relevant and important field), digitally-enhanced supply chain visibility is yet to reach its full maturity and potential in any sector, though the consumer retail industry, for example, has long been a leader in the field. More recently, pharmaceutical companies have had the example of peer companies in the aerospace and automotive industries, which have used digital tools for a range of supply chain visibility enhancements, including better supplier screening and due diligence, risk monitoring and management and multi-tier network mapping. 
 
None of these industries have yet to fully resolve the structural challenges of managing highly complex supply networks, and solutions will need to involve not only better data but better analytical tools (including AI) to scan, assess and filter the information and devise possible responses. Companies will also need to establish proper governance around these data to enable faster and more effective decision-making. Initiatives to improve supply chain visibility are in their early stages, but better visibility will ultimately become a keystone of pharmaceutical supply chains of the future, which will incorporate automation, AI and end-to-end process integration. As such, improving visibility should be a priority for most pharmaceutical companies as they look to create a more resilient future.
 
Views expressed in this article are those of the author and do not necessarily represent the views of Ernst & Young LLP or other members of the global EY organization.
 

Derron R. Stark, EY-Parthenon Managing Director, Strategy and Transactions, Ernst & Young LLP
Derron is the EY-Parthenon Managing Director in Strategy and Transactions. He helps clients build supply chain resiliency to make certain that critical medicine and equipment are always accessible. Derron integrates client perspectives with his relevant experience to deliver success. He strives to demonstrate the strong values and principles that guide scientists in their work.
 
Olaf Zweig, EY-Parthenon Partner, Life Sciences, EY-Parthenon GmbH
Olaf leads the health sciences and wellness sector of EY-Parthenon in Europe. He is helping companies to transform within a changing and increasingly digitized health ecosystem. His experience covers strategy-based transformation and improvement programs, supply chain management and resilience, and production network (internal and external) strategies.