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How Supply Chain Orchestration Can Help Prevent Drug Shortages

By April 11, 2024Uncategorized

Drug shortages strike fear into people’s hearts. If you’re a patient in need of a particular drug for a critical health condition, you fear not being able to get access to the medicine you need. If you’re a pharmaceutical company, you fear the hit to your business, both headlines and bottom line. It takes enormous investments in R&D to produce successful drugs. Facing pressure to both ensure access and capture profits before the patent window expires, companies are loathe to lose sales. Makers of weight loss drugs are looking out a big picture window of patented opportunity right now, but this rosy view is blocked by supply chain challenges. Supply chain orchestration brings critical activities of supply chain management into one connected, holistic process so the parts of the chain can work together and get the right medications to the right places at the right time, ensuring patient health and corporate viability. Orchestrating all the pieces concurrently can help prevent stockouts and maintain competitive advantage.

What role can supply chain play in preventing stockouts? While most drug shortages impact generics in areas like oncology and anti-infectives, weight loss drugs are capturing headlines today for the challenges many patients have in filling these prescriptions. They are lauded for their efficacy in helping patients lose weight, which improves health overall, and are relatively safe, making them attractive. The World Obesity Federation estimates that 2.7 billion people are obese or overweight, so the target market is substantial. But the very attractiveness of this treatment to patients has meant that demand far exceeds supply, prompting drug shortages and commentary in the annual reports of their makers. So how can supply chain orchestration help? I’ll describe three of the top areas: seamless collaboration, improved forecast accuracy embedded in the supply chain workflow, and disruption response.

Manufacturers of these weight loss drugs face a multi-headed hydra of the three c’s: coverage, competition and capacity. The cost of the treatment and use for weight loss makes insurance coverage complicated, and the attractiveness of the market means many competitors are nipping at their heels. But I’ll focus on capacity, since that is the supply chain lever. Supplies of the active pharmaceutical ingredient (API) semaglutide and the injector pens that dispense it are both scarce. Active trials are underway to deliver the medication orally, which would be easier and cheaper to make, administer and deliver, but no regulatory approvals have yet been achieved. And while this would ease production and cold chain distribution challenges, the pill form would require as much as 20x the API, which is already in short supply. So companies are tinkering with their supply chains in all kinds of ways, such as investing in new manufacturing capacity, buying a contract manufacturer, and adjusting how much they make of which dose to support those just starting treatment, but none of these paths are overnight fixes.

Supply chain orchestration enables seamless collaboration

All this tinkering undoubtedly involves effort from across the supply chain, from sales to procurement to manufacturing to distribution and more. Historically these roles are siloed, focused on their own functional metrics. Yet the solutions to a multi-headed hydra necessitate working together, which concurrency facilitates. Synchronizing people, processes, and data is core to concurrency, so that the supply chain can be rebalanced to affect what is happening, with the impact of any change being immediately reflected across the entire network at once. Supply chain orchestration means the various nodes can plan together instead of sequentially.

One global pharmaceutical company refers to this as the “whoosh” effect, because switching out the walls between siloes from opaque to clear meant that suddenly everyone could see the same information at the same time, which makes collaboration much easier. Planning together allows companies to reduce excess inventory that builds up when they plan sequentially. It also fosters the creativity needed to quickly consider alternatives, like those the weight loss makers are employing. Asking these what-if questions entails assessing the impact on multiple areas, such as packaging, production, inventory, distribution, and of course customers. No one wants to be trapped in a conference room waiting for hours as various teams to dash out to run some numbers on an idea, so the ability to run scenarios iteratively together is only possible with the instant results concurrency delivers as part of supply chain orchestration.

AI-powered forecasting narrows gaps between supply and demand

“We should have forecasted better, which we did not,” Novo Chief Executive Lars Fruergaard Jørgensen told the Wall Street Journal not long after launch. “Had we forecasted that, we would have built a different supply chain.” In that one statement he encapsulates the need for supply chain orchestration. Too often forecasting is an exercise is done by a demand planner, who tosses it over the fence to someone else to fulfill. Far more effective is a forecast embedded in a supply chain system transparent to all, so that everyone across the supply chain can synchronize to the commitment immediately. And when the data needed for the forecast is not dependent on waiting for run-time but instead available in real time, planners can know that they have the most current information at their fingertips, giving them them confidence they are making the “right” choice. That immediacy of information affords agility to adjust the supply chain as needed, rebalancing as soon as something changes, which it most certainly will.

Forecasting for new drugs isn’t easy, and it is unlikely anyone could have predicted what a runaway success these weight loss drugs were, but one thing that might have narrowed the gap is demand sensing, which uses AI to add external signals to sales history to predict future demand. Pharmaceutical companies don’t have point of sale data, because it’s a B2B world, but prescription data is available that could be used as an external signal. Given the prominence of social media in driving demand for these medicines, from TikTok to Reddit, sentiment could be another signal to evaluate. I’m not expert on this market, but planners who work with these drugs are. Their domain expertise would be key to selecting signals for consideration. And as we work to democratize AI, that expertise in their world and their data is what they need, not technical proficiency. It is possible for AI to be built around planners, not by them.

Responding to disruption together

One thing we learned during the pandemic was that few supply chains had the resilience they needed to respond quickly. Has that changed? PwC’s 2023 Digital Trends in Supply Chain Survey found tepid interest in resilience, which at was a lower priority for investment (cited by 23%) than increasing efficiency (58%) or reducing costs (54%). In the current economic climate this may be understandable, but are you ready for a cyber security attack, cold chain loss, labor strike, quality incident, or whatever else the universe next delivers your way?

If a labor strike were to shut down a key port for your shipments, supply chain orchestration would enable you not only to run scenarios to choose the best alternatives but choose those plans down to the route and the carrier level. And in this day and age, when sustainability is an increasing consideration, the greenness of the options can be a factor calculated into your plan. Whatever change you make can ensure your shipment arrives but also be automatically fed back into your plan so that supply and demand are kept in sync.

Every supply chain expects disruptions, but global biopharmaceutical company Ipsen makes drugs for rare diseases, oncology, and neurology, not markets that expect demand spikes. They had just set a stretch goal of zero stockouts when the pandemic hit, certainly the mother of all disruptions no one expected. But in spite of demand spikes of up to 70% in some of their markets, where physicians were very concerned about patient access, they still achieved their goal in 2020 of zero stockouts, without buffering with excess inventory. They did this with supply chain orchestration, which allowed them to look across their network and reposition inventory with precision by virtue of having full transparency at their fingertips to where inventory was in storage or in transit and where it was below demand. With this insight they targeted their limited manufacturing capacity exactly where it was needed.

Runaway demand for drugs is hard to predict and even harder to manage, but not impossible. Supply chain orchestration can’t solve all problems, but it can maximize the ability of the supply chain to respond to any problem by marshalling all the resources to work together concurrently. When people’s health is at risk, that’s a goal worth fighting for!

Polly Mitchell-Guthrie is the VP of Industry Outreach and Thought Leadership at Kinaxis, the leader in empowering people to make confident supply chain decisions. Previously she served in roles as director of Analytical Consulting Services at the University of North Carolina Health Care System, senior manager of the Advanced Analytics Customer Liaison Group in SAS’ Research and Development Division, and Director of the SAS Global Academic Program.

Mitchell-Guthrie has an MBA from the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill, where she also received her BA in political science as a Morehead Scholar. She has been active in many roles within INFORMS (the Institute for Operations Research and Management Sciences), including serving as the chair and vice chair of the Analytics Certification Board and secretary of the Analytics Society.

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