Sunday, May 31, 2009

Supply Chain Dynamics

Cutting-edge systems strengthen the pharma production supply chain

The pharmaceutical industry is a $500 billion global business that requires the tightest, safest, and most efficient supply chain possible, to produce the highest quality drugs on time for distribution wherever they are needed. Modern pharmaceutical products rely on ingredients and material from across the globe. Supply chains can quickly become hopelessly entangled if they are not properly established and organized, set up for maximum efficiency, tracked, and logistically sound.

An analysis of how that can best be accomplished must begin with a look at the requirements of the drug manufacturing process itself, and how the supply chain has traditionally served that process. The inescapable conclusion is that traditional supply methods are no longer adequate for the industry to meet competitive needs and regulatory requirements. Online technology offers the necessary solution -- but only if that technology is properly structured to meet pharma manufacturing's needs.

Production Old and New

Pharmaceutical production was born in the pharmacy. Until the start of the Second World War, pharmacists were still mixing powders and vials, and making tablets in their own pharmacies for delivery to customers. As drug production became a factory process, much of the equipment and supply infrastructure developed was merely an expanded version of what had served pharmacies. For example, the equipment for mixing chemicals at primary manufacturing sites was simply a larger version of the small v-shaped mixers once used in the pharmacy for the same purpose.

Today's manufacturing needs are far more complex. Guidelines established by the FDA and other regulatory agencies for cGMP (current Good Manufacturing Practice) in the production of pharmaceuticals include requirements as they affect raw materials, in-process goods, packaging, labeling and finished goods as well as the manufacturing, testing, documentation and product release processes. The production of pharmaceutical products requires validating for the FDA every aspect of the receiving, analysis, storage and handling of drug actives, excipients and other raw materials. And ensuring cGMP compliance to those standards must be integrated with the normal considerations between supplier and manufacturer. These include demand forecasting, stock levels, production plans, maximum and minimum inventory levels, reorder points and order quantities.

Supply Chain Requirements

The supply chain needs for pharmaceutical manufacturing are thus both complex and delicate. A standard supply chain helps take raw materials and turn them into finished products by linking together nodes of production and shipping goods in the most efficient way possible to bring materials from the supplier to the manufacturer. A pharmaceutical supply chain goes beyond that to require total quality in handling and care.

Pharmaceutical companies simply cannot rely on supply sources that use antiquated methods of shipment. For example, it is unacceptable for chemicals or excipients to expire before the manufacturing process takes place, because their shipment was delayed or they were not shipped with proper temperature and humidity control. Additionally, every state has its own license requirements and timetables for what can come in or out of the pharma production plant, and when this must happen. License requirements and special storage needs present one of the greatest challenges for both suppliers and third-party logistics partners assigned to build and implement supply chains strong enough to withstand the hardest knocks and unexpected events.

Worst-Case Scenarios

Given the global sourcing of most drug manufacturers, an inefficient supply chain can create unnecessary storage and demurrage charges at ship terminals and airports, caused by information snags, missing or ill prepared shipping documents, and inappropriate cargo routing. The resulting cost penalties can dramatically add to the already high price of pharmaceutical products by creating huge and unexpected hidden costs. Poor quality of materials and inadequate packaging can lead to wholesale product destruction, and poor or incomplete documents can result in delayed shipments. Such messiness when it comes to vendor responsibilities can lead to goods being rejected out of hand during border crossings, customs delays, cargo loss, and outright theft -- all of which cost money. Switching cargo to airfreight or expedited airfreight services as a last-ditch effort to solve the problem of incompetence and poor preparation may avert total disaster, but only at a steep price.

Not understanding the marketplace can also have dramatic repercussions at every stage of the building the supply chain. Those pharmaceutical manufacturers purchasing from overseas suppliers must coordinate closely with those responsible for shipping the goods to ensure they are intimately familiar with the customs rules and regulations of every country through which freight will pass, in addition to understanding the associated service parameters and costs. A lack of understanding about the freight marketplace can prohibit the import of vendor shipments or -- more likely -- add unanticipated customs costs, and possible exam fees. Additionally, a company can incur unanticipated freight costs or surcharges as a result of improper or inefficient routing of cargo.

Missed deadlines, launches, production runs, and promotions can destroy a company's reputation and cause untold chaos for vendors who must explain to customers that the system has all gone wrong, perhaps causing them to lose business forever. Information control is king when it comes to creating a supply chain that self-cleans: correct information can eliminate calling backwards and forwards from a supply chain node, chasing suppliers, forwarders, shipping lines and truckers, and generally spending hours in a day making sure that the whole line is informed about delays or problems.

Mission-Critical Factors

The fundamental need for quality and performance in the drug manufacturing supply chain centers on creating a process for identifying best practices in transportation, stocking, and quality of compliance (particularly temperature and humidity controls), so that suppliers and shippers understand what is expected of them. This also includes installing processes for computation of cross-border tariffs, and excise taxes, as well as for compliance with regulatory and licensing requirements.

Even a supply chain that seems like it is running well could be crippled by a storm or a political disruption in an offshore supplier. A pharmaceutical manufacturer must always know the status of mission critical factors in its supply chain, even as it leaves the nuts and bolts of freight management to outside interests. That means knowing what has been shipped, what is in transit, what is due to be shipped, where freight is in the cycle, and how the shipment is performing against the stated timetable.

A lack of information is the most preventable, and most costly, problem when it comes to shipping freight. This lack of information can refer to incomplete or missing data about the status of shipments, an inability to retrieve data when needed, or an inability to adequately integrate systems. This can cause a colossal amount of wasted time and energy spent chasing information which ought to be readily available, and lead to a systemic inability to identify and correct problems.

For this reason, electronic tracking protocols are more important then ever when it comes to the pharmaceutical supply chain. When a company knows where its goods are and why they are there, it adds much needed transparency to a process that can quickly become opaque and convoluted, as materials and packaging shuttle back and forth among multi-tiered markets. This is particularly the case where the temptation toward misconduct and fraud, created by the rising prices of drugs at the consumer end, too often produces delayed or "missing" shipments.

Comprehensive Solution

Cutting-edge electronic systems for ensuring that supplies are delivered on time and with proper quality require that the freight forwarding agency have a comprehensive electronic tracking protocol. This means that a company is able to track freight as it moves across the world, reducing the pressure on the drug manufacturer's traffic department, and improving both efficiency and cost effectiveness.

The ideal program will show what has been shipped, what is in transit, what is due to be shipped, where goods are in the cycle, and how the shipment is performing against the manufacturer's timetable. Via links to the freight shipper's own information, customers should be able to cross-check and validate progress and timings of shipments. The entire system should be password-protected, and encrypted for added security. Finally, the system should be interactive, allowing the customer to authorize and initiate both the original transaction and any subsequent amendments, with the system providing written confirmation of such authorization.

The system will also:

  • Alert manufacturers automatically that certain key milestones have occurred, such as loading, sailing, arrival, and delivery -- and also warn about exceptions that are causing delays
  • Transmit specific customized reports via email at certain convenient times and intervals according to a manufacturer's request.
  • Provide online and real time updates on where a shipment is and what it consists of, right down to individual item descriptions, quantities, and SKU codes.
  • Enable users to employ "real world" search criteria such as vendor or consignee identities, country of origin, and destination.
  • Work with and display both estimated and actual departure and arrival dates.

Controlling the Future

By using electronic tracking systems to thoroughly check every link of a supply chain and make sure it holds, a company can save colossal amounts of time, energy, and resources, and eliminate the high, hidden cost of inefficiency. With such a mechanism in place, a pharmaceutical manufacturer will be able to test its supply links, make sure each one is doing what it is supposed to do, and will continue to hold as long as necessary. Electronic tracking is also a tremendous advantage that helps ensure both regulatory compliance and marketplace flexibility. In today's era of biologics, increased orphan drug support, and genetic medicine, customized production requirements are the rule. The future of drug manufacturing rests in the hands of those who are able to employ supply solutions that support production tailored to meet the specific needs of distributors, retailers and consumers

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