The new wave of change in pharma operations
During COVID, the pharma industry rallied almost overnight, and operations leaders realised companies were capable of massive, rapid change – something that hadn't hitherto been associated with the pharma sector.
Now their next task is to build on that to make a new set of changes that will drive recovery and shape the new normal. These changes will be happening both within companies and industry-wide. For example, at the industry level, network strategy has shifted focus from landed costs to the cost of location risk after some hard lessons learned. Supply chains need to become smoother and more sustainable – more patient-centric and less dependent on manufacturers in distant locations.
At the company level, operational resilience and workforce agility will be the new focus, as well as more transparency through data analytics and automations. There'll also be changes to be made at the government and regulatory level. Shifts at all of these levels will be key to the pharma sector's recovery.
The new focus on resilience and agility could create disruptions itself as operating models change.
Companies will be reassessing their risk tolerance, strategies and overall network footprint to manage risks across networks and supply chains. Strategies might include geographic diversification, dual sourcing, and keeping more excess stock in reserve.
Contract manufacturing will feel the impact of these changes, and last-mile production and postponement may see growth. Supply chains will become more local, which means areas of limited supply will need filling in, and more agile procurement companies may emerge.
Data analysis will help provide transparency and agility and mitigate risk in supply chains, while automating warehouses and manufacturing processes will increase data availability and reduce reliance on humans, which will come in handy if humans go into lockdown again.
Speaking of lockdown, the move towards remote work will affect pharma too and may provide a means to offset the cost of being more cautious around supply chains. New skills will also be needed as production becomes more automated, and workers will need upskilling.
At an industry level, the key focuses will be network optimisation, patient-centricity, and managing the new demands on capacity and efficiency.
Network optimisation will be more about balancing cost with risk, creating fundamental shifts in the industry footprint and moving production-supply capacity closer to home.
Increasing excess capacity will also help to mitigate risk, meaning we may see extra investment in some types of products. Supply chains will become more patient-centric as more digital patient data becomes available and patients demand more services online.
Both patients and customers will expect increased transparency and information in supply chains. Our concept of a pharmacy may also change, bringing massive changes to customer-acquisition costs and potentially spawning new business-delivery models and new partnerships.
The emergence of new technologies will also create seismic shifts, with mRNA technology seeing rapid acceleration after its use in COVID vaccines. The industry will need to find new ways to rapidly increase its capacity for these technologies, including repurposing existing capacity and adopting continuous manufacturing.
Governments and regulators will be key stakeholders in the pharma industry’s recovery after becoming more involved in crisis response during COVID. Four out of five pharma companies surveyed worldwide report more government involvement in key markets.
Collaboration between companies that are usually competitors has changed the landscape during COVID and seems set to continue in some form, which could affect the role of governments and regulators in overseeing the industry.
However, COVID has also brought intense public scrutiny to the industry, meaning governments and regulators will need to be more proactive in situations where pharma companies are seen as falling short.
This increased regulatory attention could manifest in various ways. Governments could set higher minimum safety stocks and heavier penalties for stockouts. They could require companies to have flexible capacity for key medications and products, which would drive a renewed focus on SKU standardization. Governments may also involve themselves in private companies and introduce stronger regulation of operators’ access to products.
Preparing for recovery
COVID has underlined how important the pharma industry is to all humanity. As pharma leaders navigate the next stage of their crisis response, they will need to consider all these questions and the implications for their companies as they build more resilience and adapt to the post-COVID world.