Pharmaceutical distribution in the age of COVID-19: towards an efficient supply chain in 5 steps

Start of the COVID-19 pandemic brings the first challenges

February 2020: a flight to China carrying life-saving medication is cancelled, and it’s unclear at this point when flights will resume. The transport department is running on all cylinders and staying on top of the latest developments, trying frantically to find alternative solutions. Interim supply chain professional Marco van der Meulen, looking back on this period: ‘Even if there was a flight available, changing the reservation was tricky as the paperwork was all handled by China. It turned out we couldn’t change flights at short notice, so we had to keep searching. When DHL eventually found us an available flight, we changed the reservation right away. As we were able to get right on it and thanks to strong teamwork within the supply chain, the cargo ended up arriving in time. Unfortunately, the pandemic had only just begun at that point.’

Limited number of flights causes delivery problems

The high degree of dependence of passenger aircraft makes it challenging to deliver cargo on time, especially now that airlines are operating fewer flights and industry competition is fierce. The limited shelf life of many medications combined with reduced air traffic is wreaking havoc on inventory management. If medications are not delivered on time, they can no longer be used and need to be destroyed: this is a disaster scenario resulting in millions of euros in losses.

Need for an airtight supply chain in the pharmaceutical industry

Pressure to deliver goods on time in the pharmaceutical industry is so great because many medications are live-saving. For one, coronavirus vaccines will need to be distributed in the not-too-distant future, and a weak supply chain could be detrimental to their efficacy. There are several factors that present a major logistics challenge in this process, starting with the constant freezing temperature (CFT) at which medications must be kept and transported. Only a select number of airports provide the facilities required to accommodate these needs, and a highly integrated logistics chain is needed to continuously monitor these temperatures.

So what do pharmaceutical companies need to focus on over the next while in order to organize their supply chain and logistics operations as efficiently as possible? You can use the action plan below to guide you.

Step 1. Managing supply chain inventories

Check inventory levels across the supply chain and find out how long this stock will allow you to serve your customers.

What is in the pipeline right now? Example: closing stock which is currently undergoing quality assurance and will likely become available in the near future. Be sure to manage your raw materials reserves. Can suppliers continue to deliver as agreed during these unpredictable times? Prevent out-of-stocks of raw materials and keep liaising closely with them. Remember to regularly update the master data for the raw materials to ensure you order the correct quantities in time. Keep monitoring these variables so you can be proactive when faced with impending shortages. Are substitute products available for this customer? If so, how will the use of these products affect the supply chain?

Step 2. It’s all about the data

The key to effective supply chain management – now more than ever – is data that accurately forecasts customer demand, as this improves stability and reduces waste, including expiring stock. Calculate how you can serve the customer and what the impact will be on the supply chain. Prepare your vendors and suppliers for the changing demand by sharing this information with them. Additional orders in crisis situations tend not to be data-driven and result in overstocks of non-critical raw materials, which reduces both cash flow and capabilities.

Step 3. Optimizing capacity proactively

Check if your current processes are equipped to accommodate customer demand. If the answer is negative, explore ways of increasing your capacity – including production capacity, storage capacity and transport capacity, as these tend to be overlooked a lot of the time. Increased customer demand and distribution problems involving end products can compromise your operating processes. Use methodologies such as Lean Six Sigma in order to solve capacity problems – this will help you streamline your processes and improve their efficiency.

Step 4. Strategic partnerships

The coronavirus pandemic has shown for both suppliers and logistics partners that strong partners in the supply chain can determine the difference between success and failure. Single sourcing – purchasing materials from just one supplier – is too risky in the face of the current challenges. In order to facilitate the distribution of the coronavirus vaccine, logistics is vital to the cold chain, which is the system required to maintain a product within a specified low-temperature range during transit. We therefore recommend that you work closely with a specialized logistics service provider or 4PL specialist that can manage the entire supply chain. This partner should have access to a global network and be able to quickly pivot to alternative avenues in the face of unexpected challenges. Request this partner to increase their capabilities in both transport and storage in order to ensure business continuity.

Step 5. Process innovation

In the words of Winston Churchill: ‘Never let a good crisis go to waste.’ Now is the time to be innovative and engage in process improvement. There may be a need right now for new distribution models or even brand-new logistics concepts, including an extension of the customer push-pull point. In addition, there are various IT solutions available (including RPA) that allow you to focus more efficiently on activities that add customer value.

Need support?

Do you require assistance in efficiently organizing your supply chain and logistics? Our highly trained interim professionals can quickly step in if needed, and many of them have experience in the pharmaceutical industry. Feel free to contact us any time (no strings attached) – we’d like to help you find the best solution to your issue.