5 Challenges Facing the Pharmaceutical Supply Chain

The pharmaceutical supply chain is comprised of multiple stakeholders, including manufacturers, distributors, pharmacies, hospitals, and patients. These companies face increasing pressure from regulators to improve safety and quality systems, and this elevated scrutiny has created new problems and challenges. 

Keep reading to learn more about the top 5 challenges in the pharmaceutical supply chain and how to overcome them.

1. Delivery and Shipping Failures

On-time-in-full (OTIF) is a supply chain compliance measure developed by Wal-Mart in the late 2010s. OTIF gauges supplier performance by delivering exactly what the customer ordered promptly. Since its conception, many pharma companies have adopted OTIF standards to decrease the number of lost products. 

OTIF is difficult to coordinate due to a lack of visibility and unpredictable events. Natural disasters and travel delays can prevent on-time delivery. Real-time, end-to-end data visibility is the key to collaborating, managing, and delivering transit shipments. Unfortunately, this kind of data is rare and expensive.

2. Optimizing Inventory

Pharmaceutical distributors typically employ a just-in-time inventory management model. Medicines are expensive to produce and usually have a very short shelf life. The COVID-19 pandemic has shown that this model does not always work. The pandemic demonstrated that sudden changes in demand and uncertainty in the supply chain are not well supported by the JIT model. Finding the right balance between preparedness and JIT can be extremely difficult. Optimizing inventory based on historic demand while maintaining a sense of readiness will be an ongoing challenge for the pharmaceutical supply chain.

3. Overstocking

The pandemic revealed many challenges and inefficiencies in the global supply chain. One such challenge is overstocking in response to initial shortages. Pharmaceutical companies can lose millions of dollars in revenue and resources when manufacturers and distributors have more products than consumer demand. 

The high production values in pharmaceuticals make it one of the hardest-hit industries by overstocking. This overstocking is often caused by a lack of communication up and down the supply chain. Suppliers and distributors need constant contact to reduce lost products and revenue due to overstocking.

4. Lack of Visibility Down the Supply Chain

Lack of visibility in shipping can cause significant losses. Many medicines require specific refrigeration during storage and transportation. A deviation of one degree or exposure to water can cause the entire shipment to be lost. According to the quarter 1 2021 CDC data, 20% of COVID vaccine loss was due to cold chain issues. 

Keeping consistent temperatures during transit is extremely difficult. From breakdowns to refrigeration malfunctions to human error, many different things can go wrong in shipping medications and vaccines. Due to a broken down or delayed truck, replacement stock is expensive and often infeasible to produce. Without clear visibility and communication in the supply chain, it can be challenging to trace a problem to its source.

5. Regulations and Compliance

Pharmaceuticals is one of the most regulated industries. All levels of government, including international bodies, have guidelines and restrictions that pharmaceutical companies must comply with. Regulations include temperature restrictions in transit, packaging and labeling requirements, and handling guidelines. The USDA requires companies to collect and maintain a long list of data points, including location, temperature, humidity, and other tracking censors. The USDA requires pharmaceutical companies to keep track of data electronically on secure servers. Maintaining compliance with all the regulations set forth by different governmental agencies is a big challenge and headache.

Overcoming Challenges Facing the Pharmaceutical Supply Chain

Communication is key to facing challenges in the supply chain. Constant communication between distributors and suppliers can reduce the risk of overstocking. Communication between shipping and production can ensure that temperature and exposure regulations are followed. 

Facing challenges in the Pharmaceutical Supply Chain is inevitable, but it does not mean your company needs to face extreme loss. Reach out to Post Insurance today to get expert guidance and choose the best insurance policies for your business! 

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