Expanding supply chains for emerging pharma companies
This article was first published in SupplyChainBrain
Analyst Insight: Emerging pharmaceutical companies are a vital source of product innovation and breakthrough treatments for the pharmaceutical industry. These companies often evolve in an agile fashion, bringing together scientific invention and rapid commercialization of supply chain operations to support new products. As industry trends and regulatory changes dramatically alter the speed and path to market for new treatments, these evolving companies need to take a fresh look at their current and future supply chains.
A fundamental challenge for emerging and maturing pharmaceutical companies is striking a balance between growth and investment. This requires pharma companies to examine their existing decisions and investments to understand whether a similar path or structure will meet their future needs. With this perspective, companies can develop a vision for the future, understand the potential options available, and evaluate those options through a structured investment framework.
Aligning on strategic vision. Determining future supply chain needs starts with reviewing and understanding the company’s current state strategy, policies, structures, processes and challenges. This evaluation informs the strategic vision for the supply chain and its alignment with the overall direction of the organization. The vision should include the objectives of the supply chain and outcomes that the supply chain should achieve over the next five to 10 years, such as speed to patient, cost efficiency, service levels and resiliency.
Understanding potential strategic options. Once there’s alignment on the strategic vision, there needs to be an understanding and evaluation of structural (insourcing), operational (process change) and advanced capability (digital twin) opportunities available to support the company’s growth portfolio over the next decade.
For emerging pharmaceutical companies, the ability to meet future demand is critical, so structural opportunities like insourcing, co-investing or outsourcing to a contract manufacturing organization (CMO) are often prioritized. Insourcing gives these companies greater flexibility and control over their production; however, without an experienced partner, it may require five years or more to conduct a greenfield investment. Outsourcing production to a CMO allows these companies to hand off production to an experienced partner with less upfront cost than a greenfield investment, albeit at the expense of control and flexibility of production. Co-investing options range from reserved capacity at a CMO with limited control and flexibility, to a joint build or expansion with a CMO partner that gives the company greater control and flexibility, but comes with a larger upfront cost.
Operational opportunities such as vendor management should be continuously reviewed for cost efficiency and flexibility benefits. These are often short-term and less capital-intensive opportunities yet are vital for continuous improvement in a dynamic supply chain environment.
Advanced capabilities such as workflow automation, flexible production, and digital twin support overall efficiency and flexibility and should be incorporated as future initiatives.
Evaluating strategy options and investment sizing. Once the options for future supply chain have been identified and prioritized, value validation should be completed. Rough order of magnitude diligence must be completed to estimate upfront cost, operating cost, and value drivers associated with the various structural investment opportunities. Aligning leadership and key stakeholders to the synthesized roadmap and strategic vision requires this analysis of the financial implications of recommended opportunities.
Outlook: Enabling a successful supply chain is a challenging task for emerging pharmaceutical companies. However, effective planning for this unpredictable future can save these companies from a reactionary state during commercialization. Although components of the roadmap will certainly change, creating a strategic vision and framework from which to build as new factors come into play will support these companies in their pursuit of speed to patients, changing service level, flexibility and cost efficiency priorities.