Procurement divisions must work to counteract antibiotic supply chain challenges
An in-depth whitepaper by the Access to Medicine Foundation has highlighted the ongoing complexities surrounding fragile, antibiotic supply chains.
Alongside various challenges within the public and private healthcare sector, such as escalating costs and the lack of commercial incentives for pharmaceutical companies to ramp up production levels, the rise of antimicrobial resistance is leading to worldwide antibiotic shortages and subsequent outbreaks of disease.
Since 2015, a form of penicillin has been unavailable in 39 countries, including Australia, Canada, Germany, India and the United States, the paper has stated. Additionally, a study by the Centers for Disease Dynamics and Control found that global antibiotic consumption has increased by 65% in the past 15 years (from 21.1bn to 34.8bn defined daily doses).
Whilst so many stakeholders across the supply chain work against creeping cost pressures, a lack of visibility and accountability can lead to the production of poor quality medicines. The limited number of API manufacturers has also seen companies become unable to meet surges in demand.
Implementing three broad tactics: demand planning, uninterrupted supply and the strengthening of distribution, companies can boost efficiencies across the supply chain. This can filter into enhanced communication and collaboration between governments, policymakers, regulators, public health authorities, pharmacist associations, pharmaceutical companies amongst others.
By utilising demand planning, the use of consumption data will enable manufacturers to predict future demand and therefore counteract global shortages. GlaxoSmithKline (GSK) and Pfizer have both stated that long-term forecasting is used throughout their supply chain operations and are based on country-level demand data. GSK also collaborates with health organisations and health ministries.
By remaining responsive to all changes within the supply chain, procurement, local manufacturing, shortage mitigation and stock management are all put into sharp focus.
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Procurement divisions must work to counteract shortages and the procurement of poor quality products and resources – this is only possible by housing a world-class quality assurance division. Pooled procurement operations can also support the supply of high-quality medicines, reduce times and costs across the board and guarantee further demand predictability.
When local production is not feasible, whether economically, commercially or financially, companies must maintain a local supply; buffer stocks and remain agile in response to specific needs, the paper adds.
End-to-end visibility and adequate information flow in supply chains remains essential, and this is where companies have adopted a number of digital tools to improve forecasting, advance the development of products and services, support workers, improve stock management, monitor shortages and more, with the increased use of data analytics at the helm.
By promoting information sharing, companies can share expertise and house a more efficient, cost-effective and high-quality supply chain, as well as share best practices and promote innovation.
For example, Merck KGaA’s Accessibility Platform has amassed 13 industry partners, from Novartis, Roche and Sanofi, to the Vaccine Alliance, the Global Fund to Fight AIDS, Tuberculosis & Malaria (GFATM). The platform has enabled partners to tackle ongoing supply chain and delivery challenges from the ‘first mile’ (upstream) to the ‘last mile’ (downstream) and ‘second mile’ (capacity-building).
By completely transforming the antibiotic supply chain, new strategies for demand planning and forecasting can be implemented and global supply will be secured. However, this will require collaboration on a global scale from stakeholders and partners.
Through this, downstream supply chains will become enhanced, incentives can be put in place to further reshape the market, build resilience and increase competition across the chain.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”