I read Bob Ferrari's July 22, 2011 blog on Supply Chain Matters titled Pharmaceutical and Drug Supply Chains are Failing – Why?? with great interest. For quite some time, I've felt that the complexities of the Pharmaceutical global supply chains were greater than the capabilities of those companies to control. Many factors contribute to this hypothesis, including offshored sources of supply from low-cost countries, mega mergers and acquisitions, major reductions in support staff (300,000 pharma workers laid off in the past decade) driving overall morale to new lows, margin reductions from declining NA market and a host of others.
Just think of the pressures to cut cost in the $40B/yr. pharmaceutical behemoths. Many have promised the city and the street 10% annual growth -- that's $4B each year in new revenue. That's really hard to do from the top line when billion dollar "blockbusters" are few and far between. It's really a model from the past. Yes, there is a huge potential in new paying customers from a growing global middle class population but this has definitely been slowed by the global economic malaise of the past couple years. So big Pharma is continuing to rely on major cost cutting initiatives.
Having worked in the industry for many years, I'm one of the first to agree that there was certainly plenty to cut! There were and still are huge inefficiencies throughout Pharma and plenty of opportunity to reduce cost. But it has to be done in a way that doesn't just cut parts of organizations. The really smart executioners of these strategies need to make sure that the "parts they cut doesn't affect the performance of the whole."
I recently wrote an article for Pharmaceutical Technology Magazine, where I discuss my concerns about the inherent complexities of Pharmaceutical 3rd Party Contract Manufacturing Networks. I talk about a best practice that I believe big Pharma should embrace called Collaborative Optimization that I've learned through my association with AT Kearney Procurement and Analytic Solutions. Collaborative Optimization is a great process to use for complex categories of spend when you want to optimize the "parts" to make the most cost effective and risk adverse "whole." Check out the full article here.