The pharmaceutical industry is undergoing significant change. A decline in blockbuster drugs, eroding profit margins and changing customer preferences and demands present challenges, but also opportunities for pharma companies. Transformation will occur from R&D to Consumers.
It’s no secret that the pharma sector is behind when it comes to operating efficiently, especially in the mid-market pharma companies. Because for a long time, they didn’t have to and still made significant profits. But, today’s landscape is forcing pharma companies to re-evaluate their operations and many will look to new mergers or acquisitions, ways to improve their supply chain and collaborate across their organization – from R&D to manufacturing to the consumer. There are several areas of untapped opportunity when it comes to improving operational efficiency:
Many companies tout their lean or six sigma programs. Most pharma companies have programs like these in place and talk often of their focus on quality assurance. While these programs are important, the real question is what does it take to achieve 10% + productivity improvement year after year?
In our experience, the best way to achieve meaningful productivity improvements that are sustainable year after year is by rethinking your processes, redesigning layout and re-evaluating your systems. An integrated, engineered approach designed with your specific environment and constraints in mind is the key to future success. While engineered standards have long been in place in distribution centers, their application to both manufacturing as well as retail pharmacy operations can yield substantial productivity improvements – and savings.
Capacity constraints are a significant issue for pharmaceutical companies. Where once a company might manufacturer one blockbuster drug and simply a handful of others, today’s marketplace has forced many to up both the variety and total output of drugs manufactured. And this in turn has caused many pharmaceutical companies to look to third party manufacturers and countries where lower labor costs exist.
Pharmaceutical companies should consider their supply chain network carefully. Labor costs are but one factor to consider when shifting production to third parties and/or other countries. Quality, safety, delivery times and customer preferences are all directly impacted by these decisions. Also consider how you will manage demand? Or will a shortage result in losing customers to alternate drug therapies?
Quality and Compliance
Regulatory changes abound and any quality issues or recalls can be devastating to a pharmaceutical company’s reputation (not to mention the severe penalties for non-compliance). Quality needs to be an integral part of every process in your operations. Start by formalizing all of your processes. Review your document management and approvals – do you have automated approvals and workflow? Do your systems support your processes and make it easy for your employees to follow? Do you have an audit trail in case of audit?
Taking the time to put documentation, processes, training and reporting mechanisms in place now can avoid costly headaches (and penalties) down the road. Have you considered shifting your focus to a critical to quality-based culture rather than continuing as a compliance “risk management” culture? That is the only way for pharma companies to sustainably and cost-effectively operate.
Ultimately, a pharmaceutical company’s long term profitability depends on the organization’s readiness and willingness to undergo significant transformation. An end-to-end analysis of your organizations entire supply chain and operations can uncover significant savings and improvement opportunities for pharmaceutical companies ready for change. It can make the difference between surviving and thriving.
How can we approach this and what’s in it for the pharma industry? Profitability will come from total supply chain transformation and alliances with suppliers, with distributors and with customers. As with every transformation, the first step is to gather a clear vision of the future and the future state of performance. Then, leverage the new vision as foundation to start new and spur transformation activities through the alignment of strategic supply chain integration with key business processes and enablers. This will drive the required efforts to turn “concept” into “reality. Furthermore, system and business requirements employing the established design will need to be redesigned. I would like to end by saying that:
In business, what’s dangerous is not to evolve.