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Top 11 Priorities in 2011 for Pharmaceuticals, Biotech, and Medical Products

Thu, 01/13/2011 - 7:13am

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Pharmaceutical, biotech, medical products and other related healthcare sectors continue to blend into a more unified industry as mergers and acquisitions blur the lines between organizations. This translates into expanded supply chain challenges and increased pressure to become experts in multi-channel and multi-national strategy.

Therefore, it is particularly important to have a strong set of priorities on which to focus in 2011. How will industry leaders adapt to uncertainty? How will rapidly changing requirements to support new markets and channels affect the supply chain? Furthermore, how will different products, customer requirements and regulatory compliance issues impact profitable growth? Breaking them down, the Top 11 priorities for pharmaceutical and related industries are:

1. Uncertainty: The Great Recession is over and the Health Care Bill is law, but the understanding of the “New Norm” in this industry is still unclear. What we do know is that Uncertainty is Certain and organizations must implement agile processes that allow them to move forward regardless of the business climate. Respond to uncertainty by making it an ally in achieving profitable growth. (Read more about how companies are dealing with uncertainty in this executive briefing from the Tompkins Supply Chain Consortium.)

2. Inventory/SIOP: Some companies have reduced inventory not by improving their Process-People-Technology (P-P-T) related to inventory, but by slashing inventory. In 2011, Sales, Inventory & Operations Planning (SIOP) must be brought to a whole new level to both enhance inventory turns while improving customer service. SIOP processes should be designed to facilitate inventory acquisition and allow deployment decisions that mediate the conflicts between planning, manufacturing and sales.

3. Tax Effective Supply Chains: As companies quickly evolve into true global players, it has become clear that the Effective Tax Rate (ETR) is just as important as inventory, transportation and operations costs in the supply chain. The ETR is the indicator of all the taxes a company pays based on the countries within which it operates, the size of the operations, the tax rates of those countries, and of course, the import/export duties and taxes for its goods movement. Create tax effective supply chains that benefit your entire network.

4. Security and Brand Protection: Since product integrity and quality is so important, a huge priority is protecting products throughout their lifecycle from tampering, theft, and counterfeiting. Develop a highly secure, worldwide supply chain profile to protect your organization’s brand while improving financial performance. Anticipate new and more complex trading partner and global regulatory security challenges in order to ensure supply chain visibility and control.

5. Patent Expiration and Generics: Global pharmaceutical companies will be impacted by the loss of patents on blockbuster products during 2011-2013, as well as the growth of generics. Whether you implement generic strategies within your organization or choose to diversify by acquiring generic companies, these come with supply chain issues often not associated with brand products. Make sure that you build a distributor relationship that can handle growth and volume change, has domain expertise, and supports lean supply chain operations as multiple generic options of the same product appear and margins are squeezed.

6. Regulatory: With more frequent recalls expected, the FDA’s scrutiny of drug and medical device approval will rise in all markets. At the same time, regulations do not appear to be moving any closer to a true, workable global standard. The use of country-specific partners will become more critical in 2011 for avoiding unnecessary and costly market related mistakes.

7. Service Supply Chain: Robust supply chain processes are needed to deal with product recalls, and expired and recalled product disposition, as well as support of spare parts for expensive diagnostic equipment. Due to regulatory requirements and limited outsourcing options, it may be challenging at times to find the right strategic partner. Having solid service supply chain processes in place now will help avoid costly corrective actions later.

8. Mergers and Acquisitions: The need for profitable growth and expansion in emerging markets is fueling M&A deals. While emerging markets are heavily weighted towards China and India, many acquisitions will occur not only to buy geographical coverage, but also to buy distribution channels. It is essential to bring supply chain executives into the M&A strategy early in both financial and strategic deals to ensure smooth supply chain integration of new geographies or distribution networks.

9. E-Pedigree: Several countries already have requirements in place for serialized e-pedigree, and others are in the process of adopting their own. California e-Pedigree requirements due to come online in 2015 will have a significant impact across global supply chains. Ensuring traceability and product authentication at every change of custody point within the supply chain presents manufacturing and distribution operations with significant cost challenges. Focus on developing, testing and implementing solutions in pharmaceutical and medical equipment labeling, packaging, processing and handing.

10. Market Channel Expansion: The blending of multiple product markets – all with different packaging, shipping, security, and tracking requirements – will greatly challenge supply integration in the coming year. The winners here will be those companies that understand how to maintain specific product and customer delivery and segregation rules while effectively leveraging shared facilities.

11. Lean/Efficiency: The pharmaceutical industry is placing an even greater emphasis on the performance of their supply chains today. Focus on lean initiatives that take waste out of supply chain processes by reducing costly process steps that do not add value to the product for healthcare provider customers and consumers.

Global borders will continue to melt away in pharmaceutical, biotech and medical product organizations. Executives in these industries will need to figure out how to integrate multiple supply chains or face the challenge of managing multiple, non-optimized supply chain units. Of course each new acquisition – whether already acquired, identified, or a future target – should be part of the strategy established in coming year. Establish and follow a strategy that is flexible, expandable, and globally dynamic.

 Article provided by Tompkins Associates. For more information click here .

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