The Pharmaceutical Supply Chain: Supplier Management, Cost Reduction and Beyond (Part 4)

In the first three posts in this series (Part 1, Part 2, and Part 3), I examined a number of scenarios that PWC suggests may comprise the life sciences supply chain of the future (in these, I also couldn't resist offering my own more procurement-focused take as well). I now want to share PWC's final supply chain scenario, described as "the profit centre," which requires a radical departure from examining the supply chain as a "cost centre" and instead places it front and center in overall corporate strategy. Even within R&D, this model radically changes the role of suppliers and the supply chain through restructuring that "promotes innovation" including the "splitting [of] development functions into separate therapeutic franchises with the power to make sourcing decisions themselves."

This model will require number of elemental transformations within procurement and operations including creating a new type of "flexible asset base to support multiple methods of manufacturing; substantial investment in infrastructure and management resources to build a global network of service providers; and robust demand and capacity forecasting." At the same time, PWC suggests it will also require a new ability to manage both internal and external partners based on "clearly defined service levels an rigorous governance." This model will require procurement and operations teams to entirely reorient themselves as services providers to a range of different internal stakeholders and businesses, combining elements of policy and data management centralization and shared service delivery with radically decentralized -- both inside and outside the organization -- execution.

Few procurement organizations I know of in pharmaceutical are remotely ready for this challenge. From a lack of standardized cross-company controls and systems to manage all aspects of supplier information, quality, performance and risk today to a focus on strategic sourcing 101 (e.g., supplier rationalization, negotiation, savings implementation) rather than designing multi-tier sourcing, vendor management and supply chain models with an eye to data stewardship, flexibility and virtualization, life sciences procurement and operations professionals will face significant hurdles as they move to embrace the business model that PWC outlines. Outside of pharma, the failure of Dell, an historic supply chain innovator by any standard, to successfully manage and innovate with its supply chain in a very similar environment can -- and should -- serve as a warning lesson for all considering attempting this model can be from a procurement perspective.

Jason Busch

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