This blog is part of InfoDesk’s latest series which explores the state of the life science supply chain in light of COVID-19. You can read our other blogs here or download the latest InfoGraphic here.
A vast number of industry professionals are concerned about life sciences supply chain disruptions resulting directly from the COVID-19 pandemic. Both consumer news and business publications have frequently covered the shortages of raw materials, supplies, drugs, and diagnostics within the last few months. In addition, a number of analysts have proposed ideas for next steps on how the industry can gauge the potential threat and, ultimately, combat this supply chain challenge. In this blog, we take a closer look at the life sciences supply chain disruption that has already occurred and what actions are necessary to mitigate any further impact, specifically for Research and Development (R&D) groups moving forward.
Concerns over R&D Supply Chain Disruption
Various consultancies have confirmed that supply disruption is a concern for life science R&D facilities. IBISWorld, a market research firm, created a handy chart of hundreds of industries, providing “grades” supply disruption vulnerability. Specifically, IBISWorld highlights that scientific R&D in the U.S has a high exposure to supply chain disruption, but that they are not alone in this challenge with Germany’s research and development activities within the biotechnology sector also flagged as being at high risk of supply chain disruptions.
Deloitte and S&P also agree with this concern, stating that life sciences R&D facilities may experience supply challenges, maintaining that the issue isn’t only a concern for existing drugs and devices on the market. S&P Global stated in a summary of their COVID-19 coverage, that supply chain challenges and general travel/quarantine issues may disrupt healthcare and pharmaceutical R&D. Whereas Deloitte stated:
“If the current COVID-19 pandemic lasts for a medium/long span of time, it may impact the supply of active material and ingredients (mainly from China), as well as the import and export of pharmaceuticals. There is also the potential for negative impacts of both a medium- and longer-term nature on R&D and manufacturing activities.”
Examples of R&D Supply Chain Disruption
A number of stories have circulated in the media highlighting supply chain disruptions including marketed drugs, COVID-19 tests, and personal protective equipment. Whilst the news has been less frequent and reports of disruption more sporadic, the R&D segment hasn’t been exempt. One such institution having supply issues is the U.S. federal government. A recent Congressional Research Service report indicated that life science research staff were reporting shortages of supplies such as RNA extraction kits, pipette tips, reagents, and protective equipment. The report went further to describe that even if the supplies can be accessed, the prices are sometimes rapidly increasing.
Within the private sector, Porton Pharma Solutions, a China-based company, reported that they experienced supply shortages for their reagents and catalysts because they came from Europe (which had pandemic-associated supply disruptions). The company also stated that they had logistics delays and have had to wait longer than normal for various laboratory supplies.
Actions Being Taken for Mitigating Supply Chain Disruptions
Companies within the life sciences industry have already begun to enact internal policies, procedures, and activities to counteract the negative effects of a disrupted supply chain. In an interview with Armand Ajdari, the head of R&D at Saint-Gobain, which has a life sciences business unit, he stated that the workload of the R&D division of the company is reduced due to assorted pandemic-related disruptions, and some company facilities are now busy investigating alternatives for raw materials. They have even started to use 3D technology to make their own masks and visors for R&D staff.
MilliporeSigma, a company that provides supplies for life science R&D facilities, stated:
“We have mobilized a global task force to actively evaluate the overall supply chain of both our products and key raw materials suppliers to mitigate any potential disruption.”
As earnings season ends for Q1 2020, some life sciences companies are acknowledging the importance of a solid supply chain and are noting their actions in fortifying it. Even companies that have not experienced any supply chain disruption are feeling compelled to confirm that solidity. For example, in the financial reporting of both Gilead and Pfizer, it is clearly stated to stakeholders that they hadn’t been affected by supply chain disruptions within any segment of their organizations.
Analyst Guidance on Managing Supply Chain Risk
Executives within the life sciences R&D segment are in search of answers for mitigating and even reversing the threats of supply chain disruption. Various experts have weighed in on the potential best practices, providing ideas of how the industry may secure their incoming raw materials and supplies.
KPMG provides various ideas on how to better ensure continuous and steady supply chains. They suggested actions like performing a thorough inventory assessment to pinpoint supply weaknesses; having contingency plans in place; utilizing suppliers outside of China and maintaining good communication with existing suppliers that show no signs of supply disruption in order to consider increasing purchasing from those entities.
SpendEdge agrees with KPMG that ensuring a healthy supply chain flow is a multifaceted process. They also believe that all aspects of life science may experience moderate to high levels of supply disruption. They discuss various ideas on how to manage risk to supply chains such as developing relationships with alternative supply companies; creating custom procurement mitigation plans; attempting to source locally; having technology that tracks real-time supply procurement; reviewing existing contracts for any beneficial revisions that could be implemented and confirming that all shipments are viewable/trackable.
Here are some quick tips for managing supply chain risk:
There are many options for the path forward for concerned stakeholders within the R&D divisions of worldwide life sciences institutions. It is critical that the insights that have been, and are yet to be learned, are shared freely and accessed easily by those required to develop their organization’s strategy on how to respond to the crisis. With the proper planning, communication, and collaboration, the R&D segment can remain strong in the face of this current challenge and have the knowledge and experience to ensure stability for the future.