Digitizing the Biopharmaceutical Supply Chain Improves Resilience

Biopharmaceutical Supply Chain Challenges

Pernenkil notes that many companies and clients look at the supply chain as before and after COVID.

“Before COVID, there were gradual yet tectonic shifts in the pharmaceutical and biopharma value chains around more niche and specialized therapies.”

“Post-pandemic, some of the challenges that transformed into those existing challenges were exacerbated by the fact that supply chains became constrained,” he continued. “Different parts of the world were cut off from each other for various reasons and factors.”

The resources that supply chains traditionally relied on were no longer accessible.

Beyond the barriers associated with the structural limitations of the pandemic, inflation has prompted many challenges for pharmaceutical companies. Large companies that have generally been resistant to gross margin challenges have not had the same resilience with the ongoing inflation rate.

“[Those companies] were suddenly feeling the pinch on the gross margin because the cost of goods sold was going up almost in some cases by 50% under those inflationary pressures,” Pernenkil said. “Combined with the overarching geopolitical, the supply chain strain has driven a lot of biopharmaceutical supply chains to rethink, redesign, realign how they deliver safe, efficacious therapies to patients.”

Supply Chain Networks

Supply chains generally imply linear supply systems or procedures; however, Pernenkil notes that supply chains are transforming and functioning as webs or networks. Multiple factors have driven that transformation, predominantly the rapid evolution of the underlying digital infrastructure in healthcare, including computational power, cloud storage, and more emerging trends.

Defining Digitization

When prompted to describe the facets of digitization, Pernenkil revealed, “What we mean by digitalization is that translation of all those activities executed on a digital backbone. This also means there are elements of data, analytics, and visibility alongside other elements.”

Visualization

He noted that digitization delivers value across multiple areas of the pharmaceutical supply chain. One of the primary benefits of digitization is its ability to unlock performance by increasing supply chain visibility.

“Visibility is one of the immediate advantages of digitization and how value gets created. Digitization brings a level of resiliency to the table, primarily because the visibility creates a line of sight to what actions [companies] can take. By virtue of those actions, they can build resiliency in end-to-end value chains.”

Harmony

“The second [benefit] is it harmonizes how things are being done across various aspects of our company, our clients' value chains, and supply chains,” Pernenkil added.

Looking across supply chains, they are constructed in various ways based on geographic, legacy, or other particular reasons, meaning the end-to-end supply chains are very diverse. While diversity across the supply chain can offer multiple benefits, harmonizing these diverse components allows companies to unlock a higher performance potential.

Asset Efficiency

“The third is what we typically call asset efficiency,” explained Pernenkil, defining another benefit of digitizing supply chains. “For a given investment, [companies can] squeeze more out of the asset.”

Digitization allows companies to churn out more safe, efficacious pharmaceutical products, enabling asset efficiency and turns.

Establishing Digitized Supply Chains

Many companies have already begun digitizing their supply chains, yielding benefits from early adoption and the visibility, harmony, and asset efficiency delivered by digitized supply chains.

“There's an incredible amount of diversity and depth of investments that our pharmaceutical clients have taken upon their stride. About a third of them have already been on this journey,” noted Pernenkil, referencing data from the 105 survey respondents.

He revealed that 20% of those companies have already deployed supply chain digitization at scale, emphasizing that these are not proof-of-concept applications. Instead, the respondents explained that they have achieved end-to-end digitization and delivered value.

“There are still companies that are along in the journey that have not yet achieved that scale or delivery at that scale,” he added.

Regardless of the company’s size or capabilities, it needs to understand its competitive advantage well. That competitive advantage becomes the company’s value proposition. 

“The most mature pharmaceutical companies can make these choices and invest appropriately on the highest value scale capabilities to generate the return they want from these investments,” Pernenkil noted.

However, even smaller, emerging companies can scale digitization successfully by understanding their competitive advantage.

He provided an example: "There was an emerging therapy company that we were working with. The basis of their competitive advantage was this novel emerging therapy based on a platform technology that essentially cures a certain condition in children. If that is the basis of their asset — their platform — what really becomes important is the manufacturing process used to make that product.”

Digitizing the manufacturing process offers an advantage by minimizing the risk of error and product loss.

Digitization Benefits

Beyond enhancing product yields and minimizing error, survey respondents revealed multiple other anticipated or fully and partially realized benefits, including improved risk sensing that allows them to avoid supply chain disruptions, warehouse operations efficiency, improved compliance, cost-effective sourcing decisions, increased collaboration and data-sharing with partners and suppliers, improved workforce safety, productivity, and performance, reduced material wastage and inventory costs, and insights into process success or failures.

Overall, as more parts of the healthcare industry incorporate digital tools, it is critical for biopharmaceutical companies to adapt and digitize within the company to establish more resilient, future-proof supply chains.