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    Adapting Pharmaceutical Companies’ Distribution and Supply Networks

    Innovation | Supply Chain Management

    Pharmaceutical companies have complex supply chains that are often not optimized to their full potential. Pharmaceutical materials must be closely monitored as they go through the pipeline, bringing a unique set of challenges. From source materials to distribution, the supply network must be carefully streamlined to produce the best results possible.


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    Furthermore, analyzes of the industry, like IMS Health reports, show a change in companies’ portfolio distribution. For many, the increase in generics on the market has created a short-term strategy defined by high volumes, low-cost products and low margins. Meanwhile, long-term strategies to switch to higher-value drugs are defined by lower volumes, high costs products and higher margins.

    The Journal of Translational Medicine indicates that the portfolio size of large pharmaceutical companies is also expanding, with top companies holding 150 to 200 drugs in development in 2016. Drug Discovery Today also emphasizes the changing markets these companies are distributing to. From 2005 to 2015, most companies expanded their portfolio with at least 25% of total revenue coming from Asia Pacific and emerging markets. As a result, pharmaceutical companies are sending more goods to more places. The way companies decide to adapt to these changes will undeniably dramatically impact their supply chain and distribution networks. So how should a pharmaceutical company approach supply and distribution chains?

    Mapping and Optimizing

    Before seeking out new suppliers or distribution carriers, pharmaceutical companies need to run a full analysis to understand how their worldwide distribution is mapped and what type of potential optimization we are actually talking about. Analyses usually help uncover different opportunities at regional distribution centers (RDC) and at the local level. This introduces different possible approaches and methodologies, each of which depends on local regulations.

    From here, the team can produce a first estimate of potential savings. However, there are benefits to this kind of project beyond just financial savings.

    A pilot implementation will serve as a real test once the business case is finalized. Indeed, the pilot is the opportunity to work through the feasibility of the project and guarantee that standards and distribution rules will be respected.

    RFQ, Contract, and Risk

    Once the supply and distribution routes are mapped, clients can begin the sourcing process to dig deeper and understand what each third-party logistics provider can offer. Sourcing teams can launch a full RFQ to select a provider. The RFQ process should aim to find a provider who can act as a partner, helping to design a full strategy that takes into account all workflows. This isn’t limited to physical movement of goods, but also digital and IT needs, from factory to end customer.

    Next, teams must take a close look at the quality management process, making sure it covers the whole distribution flow. They must take into account procedures, processes, and roles and responsibilities of each party. Contract managers must ensure clear rules are defined, specifically regarding product reception, batch recall, quarantine management and reverse logistics. This provides protection for the company and provides clear guidance should any problems arise later. The next step is to design a cadence for continuous risk assessment. This includes risk analysis, monitoring, corrective action plans and communication if needed.

    The project team will next map current flows and possible target flows with the 3PL provider. This process helps the team define changes in IT systems, develop EDI messages, identify manual messages to keep and amend, and ensure all parties share and understand the specifications and purpose of each message.

    Safety, Security, and Compliance

    To make sure product safety is guaranteed, consider warehousing conditions which should at minimum include regular audits of the premises, strict temperature monitoring and equipment obligations. The project team should also investigate tracking tools to guarantee product traceability at any time.

    Drug Supply Chain Security Act (DSCSA) was updated in 2017 to require compliance with FDA labeling guidelines. In Europe, the Falsified Medicines Directive requires all medicines to have proper labeling and tamperproof packaging.

    Teams also need to consider the human factors. Analyze staff qualifications and continuous staff training with a specific focus on safety and security requirements. For safety and control, JAGGAER suggests regular audits of the supplier’s premises and the elaboration of a monitoring plan to continuously control and check each critical step of the distribution process.

    A true partnership will give a full scope of possible implementation scenarios, taking into account make or buy analyses, externalization impacts, regional distribution center implementation requirements such as custom clearance, fiscal overview, possible mandatory documents needed by country… and foremost the best possible supplier to work with.

    There is still much to be done to help pharmaceutical companies reshape their supply chain to the industry’s changing environment. JAGGAER is here to help.

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