How to prepare, navigate and profit from the disruption ahead.
There are many headwinds that are impacting the Pharmaceutical Industry and in turn, your company and your supply chain. You would need to rethink your supply chain strategy and operating model to survive and thrive in the new world.
One thing is for certain, it’s not going to be business as usual! Are you ready?
Key Drivers of Change in the Healthcare Space
- Declining Revenues and Profits: The days of blockbuster drugs are over. The typical response from companies is to aggressively make up the declines through mergers and acquisitions. Driving value quickly requires rapid interrogation of acquired businesses with resulting pressure on the SC to assimilate and create a seamless value chain across the enterprise.
- Patient Centricity: Driven by social media, patients are having increasing influence in what and how care is delivered and administered. It is no longer simply about just supplying the drug, but about the provision of the treatment across the entire patient journey!
- Digitization: It is not just that the business is moving down this path, but the digitization of medical records is opening new ways to track, attract and retain patients apart from treatment compliance.
- Regulatory Environment: Health authorities around the world are becoming far more stringent in audits and taking tough actions on non-compliance. This is creating both demand and supply events for the players. If your competition is served a warning letter, they go out of the market for the period of remediation creating a demand spike for you and others. If any of your key suppliers are similarly served, you lose the source and will often result in major supply disruption until you can get the approval for a new source, which could take a long time.
- Growth from Emerging Markets: Supply chains are extending into geographies that have relatively poor infrastructure and, therefore, require new and enhanced capabilities to maintain a high level of service, product flow, and product safety.
- Tapped out Government Budgets: All governments and other care providers are looking at ways to contain costs and drug pricing to be their first port of call. More and more authorities are going for tenders or just plain legislating price controls. The former leads to demand spikes, up and down, when you win or lose a bid respectively. Together with stiff non-supply penalties this adds to the challenges for the SC.
- Outcome Based Reimbursement: More and more governments are basing the reimbursement of drug costs on treatment outcomes. Patient compliance and, availability of drugs on the shelf is one of the key determinants of successful treatments.
The Time to Change is Now
To be able to successfully deal with these Headwinds, Functional Responses will not be enough. You will need a business response to survive and thrive.
You will have to make some choices around your Operating Model:
- “Lean Consumption” vs. “Lean Production”?
- Proactive Supply Chains vs. Reactive Supply Chains
- Integrated End to End Supply Chains vs. Fragmented Functional Silos
- Total Solutions vs. Break Fixes
- Fire Prevention vs. Fire Fighting
- Business Led vs. CIO driven portfolio of Projects (Hana; Cloud; ERP etc.)
- Comprehensive Roadmap vs. “Bunch of Strategic Initiatives”
Making the Transformation
I know SC transformation is easier said than done! Based on the experience gained throughout my career, I recommend that you follow a simple, logical, top-down methodology:
First, analyze the impact of SC relative to
- The Evolution of the Industry and Competitive Landscape
- Your company’s Evolution including, the Business Model, Product Portfolio, Go to Market Model(s)
Second, answer some key questions to build your custom capabilities model:
- What will be “our space” in the future landscape?
- What will be our “value proposition”?
- What is our “Strategic Intent” (more than “vision”)?
- What capabilities are needed?
- What will success look like from capabilities?
With this you will be able to:
- Create a Capabilities Model, time phases with clear milestones
- Create your own “Playbook,” tailored to your Business Vision and responses to the key questions above
- Build the new Operating Model: consider the organization, people, and culture; process and work systems, technology and data
- Determine the technology architecture required to support and enable the new Operating Model
Set Yourself Up for Success
Supply chain transformation is hard. It involves complex cross-functional dependence and driving change without being in the position of power. An outstanding 70% of all efforts fail! Enable success by following the recommendations outline above, and by ensuring three key components are present: the right talent, a willing coalition, and clean, comprehensive Master Data.
Finally,…the wave is coming…get your surfboard in the water…NOW!
Atul Tandon brings over 30 years of experience as a global operations and general management executive with demonstrated capability in building and driving integrated supply chains to world class operational levels. He has extensive experience in conceiving and deploying transformational solutions through synchronizing the supply chain components, complemented by proven change management skills, and effectively leading the teams through the transition phrases. Most recently, Atul has been responsible for creating truly integrated, global, supply chains for Watson, BMS and Mylan – including deployment of world class Supply Chain Technology Platforms.