Digital Supply Chain: From Necessary Evil to Profit Center


The life sciences supply chain is coming of age as companies start to embrace it as a business enabler, alongside research and development and commercial. In the past, the supply chain was viewed merely as the delivery arm of the other two major functions in the value chain – or a necessary evil.

By Rick Ruiz, Partner, CSC Life Sciences

That’s not to say that the important role the supply chain plays in bringing products to market was overlooked, but rather that the business did not regard this as a value-add. Rather, the function and its activities were considered a cost center with very little return to the company beyond the mandatory quality aspect enforced by strict regulatory requirements.

The goal has always been to get product out to the market in the most efficient, effective and safe way possible. To achieve these goals, all parts of the supply chain have been scrutinized for cost improvements, cost savings, inventory enhancements and delivery time take-outs.

In the past, real improvements in these areas eluded companies, but today significant advances in process and IT are creating new opportunities for a dramatic overhaul of the supply chain. Undoubtedly, many of these opportunities are born of necessity, given the many significant changes and challenges the industry has undergone: the decline of the blockbuster and the move toward personalized medicine; the growing need to deliver products to tier 2 and tier 3 countries; ever-tightening regulatory requirements; and a massive increase in mergers and acquisitions that has required companies to manage a patchwork of disparate systems.

But these factors – need and opportunity – have led to a major, if subtle dynamic at many companies: a move from an inside-out business model to an outside-in model. Simply put, in the traditional inside-out model, companies handled all supply chain activities inside the four walls of the company. They owned the supply chain – from the procurement and acceptance of raw materials to the manufacturing of finished goods to the delivery of product to the point of disbursement.

This inside-out model worked in the blockbuster era and when delivery was fairly tightly focused on tier 1 countries.

With the many changes to the life sciences and broader healthcare environment, the outside-in model has evolved, where much of the supply chain is pushed beyond the four walls, and is supported by a complex ecosystem of partners working together in a virtual supply chain. This model allows for greater global reach, drives down internal costs to the company, leverages the specialty of each partner and results in a change in the cost-center model. In fact, the change has been so sweeping that supply chains are now expected to be profit centers.

Gaining Value beyond Compliance

While the various activities within the supply chain are dispersed amongst partners, it is still necessary to keep a close eye on the entire supply chain since safety and quality are still the responsibility of the license holder. As such the ability to have transparency and visibility throughout the supply chain is critical, but equally it’s a differentiator for the business.

shutterstock_256141096The combination of regulatory requirements such as serialization/track & trace, Unique Device Identifier (UDI) and the evolving Identification of Medicinal Products (IDMP), combined with advanced technology such as the Internet of Things (IoT), has resulted in a tsunami of detailed data that provides not only insights on what is happening within the supply chain but, more importantly, what is transpiring at the point of distribution and disbursement.

Taking a page out of the retail market, pharma companies are tapping into this wealth of data to not only get visibility into operations but to gain insights into the critical end-point – be that a patient, consumer, pharmacy or hospital.

These insights now make the supply chain a much more valuable asset beyond simply delivering finished goods to market. For example, companies can use this data to gain insights on product quality and shelf life, inventory status, inventory returns, invoice fraud, product diversion, and a host of other critical aspects that help to ensure the efficiency and profitability of the product.

Today, the supply chain has become a vital a part of the ability to deliver quality and affordable drugs to all markets and patients worldwide.

To learn more about the coming supply chain transformation  listen to the on-demand recording of our Digital Supply Chain webinar.

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