How Pharma Supply Chain Is Facing New Challenges?

How Pharma Supply Chain Is Facing New Challenges?

¬†Globalization is occurring at a rapid pace, and pharmaceutical companies aren’t resistant to it. The need for cost-effective drugs within the developed world and ensuring availability within the emerging markets ensures that medicines are manufactured in locations like India, China, etc. and are marketed the world over. This needs strong pharma supply chain capabilities, leveraged to the utmost. The recurring theme of reducing costs, improving inventory levels, and on-time performance is getting replaced by the necessity to support business growth, provide for multichannel distribution, and enter into new markets.

Whether the present supply chains are going to be ready to cater to the expectations now and within the future remains to be seen; however, winners during this scenario are going to be the organizations with the power to transform themselves rapidly.

The Pharmaceutical Supply Chains

Traditionally pharma supply chain was designed for big volumes, bulk delivery, and less than competitive lead times. Lean, flexible, cost-effective, customer-centric were rarely used the term to describe a supply chain.

Today’s pharmaceutical supply chains are complex, so the supply chains of Indian pharma companies. They supply to the domestic market, which in itself is complex, regulated markets just like the U.S. & EU and semi-regulated markets spread across Asia, CIS, Africa, and South America. They provide branded products and products contract manufactured for MNCs.

pharma supply chain | Karo Startup
Source: TechSling

They participate in these markets through distributors, agents, contract manufacturers, under revenue share, cost-plus, and other models. They supply APIs, solid dosages, injectable, and vaccines in large SKUs in frozen, cold, and room temperature cold chains. Additionally, the source having an oversized import content, materials required for R&D and also manage a network of contract manufacturers. The stakeholders in this set-up include B2B customers, distributors, retailers, multi-country regulators, contract manufacturers, staple suppliers, increasingly multi-channel distribution networks, and institutions.

However, a variety of political, economic, social, technological, and increasing environmental factors are reshaping how we view the pharma supply chain in the long run. Rapid changes in technology, regulations, healthcare services, and payment systems, patent expiries, etc. are forcing large scale changes across the supply chains. For businesses to reach such a scenario, supply chains are a critical differentiator.

Important Trends in Indian Pharma
Source: European Pharmaceutical Review

Let’s Focus on Some of the Important Trends in Indian Pharma.

1. Goods and Service Tax (GST)

With the arrival of GST, an input tax credit of IGST on interstate transactions would be available, and CST would be abolished. Companies have to be compelled to explore rationalization of the network of CFAs for possible gains across storage & handling costs, logistics cost & inventory. Companies are confined to find a way to reduce their manufacturing and stocking points without compromising on the service levels of the future as there’ll be sizable cost reduction opportunities. Leaders have already assessed the impact of GST on their pharma supply chain and have scripted their action plans for implementation.

GST on Pharma Industry | Karo Startup
Source: Maps of India

2. Advances in Technology

The domestic pharmaceutical distribution and retailing are fragmented (over 60,000 stockists, semi-stockists, and 600,000 retailers), unorganized with high opacity beyond the CFA stock points. Technology has made it possible for users to securely & swiftly access data across the enterprise. This data is getting used to create a strong Sales & Operations plan across crucial stakeholders, including contract manufacturers, branded and generic units, distributors, and retailers.

Advances in Technology on pharma industry | Karo Startup
Source: Assignment Studio

Pharma companies have started using technologies like radiofrequency identification (RFID), electronic data interchange, barcode scanners, and demand planning tools to optimize pharma supply chain performance. Companies are investing in analytics tools, adopting software like SAP, SAS to stay optimum inventories provide for the liquidation of stock, improve reach, and interconnectivity between manufacturing facilities, warehouses, and CFAs.

3. Industry 4.0

Current manufacturing technology leads to the production of batches of API or formulation and the new pharma supply chain. Batch production is inefficient because it leads to the loss of productive time in changeovers and quality and yield variations. However, the increasing adoption of continuous manufacturing technology is probably going to result in flow-through manufacturing, which may lead to significant benefits in inventory reduction, lead-time reduction, and better product assurance. Although commercial roll-out of those technologies might not be possible soon, companies need to be careful about applications.

4. Customer Centricity

With increased access to social media, it’s crucial to concentrate on what customers are saying, discern what they need, and meet their expectations. Winning is predicated on a deep understanding of customer buying behavior. Pharmaceutical companies, pharmacies, wholesalers & distributors are collaborating to provide value to the customer and exploring various social media strategies. The ability to directly serve critical homecare patients on the one hand and make medicines available to agricultural India is forcing pharma companies to check new distribution models for the pharma supply chain.

5. Sustainability

Issues like resource scarcity, global climate change, security, and new regulations bring backlight to the critical challenges that the industry will face in the coming years. Social responsibility/sustainability is increasingly becoming significant factors to judge for organizations not only in purchasing but also for the risk evaluation of crucial business decisions.

Sustainability on pharma industry | Karo Startup
Source: Pharma Times


For a prolonged time, pharmaceutical companies have enjoyed higher margins on the rear of innovative products. As a result, organizational supply chains were associated with an occasional priority as R&D sales were the bread-winners for them. However, with falling R&D productivity and increasing the rise of generics, the pharma supply chain is likely to mirror consumer products and technology supply chains increasingly. Companies have realized that supply chains could give them a competitive edge in the long run.

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