Supply chain management may finally be coming of age for many life sciences companies, reveals a PRTM Management Consultants' Global Supply Chain Trends 2008-2010 survey.
The study has found that most biopharmaceutical and medical device companies foresee an increase in the importance of product cost, while the focus on customer service and innovation remains quite high. This will present a challenge for many companies, since 66 per cent of the 27 life sciences company respondents believe that their supply chains were not initially developed in support of larger business goals, and now that those goals are shifting toward cost management, the need for more mature supply chains is increasing.
High product quality and the ability to meet market demand remain utmost importance to life sciences companies. Approximately 79 per cent of survey respondents consider product quality a key driver for their supply chain strategy, followed closely by customer service at 76 per cent. Product innovation is ranked third at 41 per cent. By 2010, however, over 93 per cent of these companies expect to see total landed product cost as having greater or equal importance. This is the most pronounced "focus area" trend discovered in the PRTM survey, predicting more focus on a well-balanced supply chain globalization strategy in the coming years.
There is also a growing trend in reducing the duration and costs associated with product development, which further drive efforts to minimize expenses. The survey data shows that life sciences companies are globalizing their supply chains to cut costs. Many companies have achieved savings by moving facilities to low-cost regions such as China and Central/Latin America, the top two areas for target globalization. India is also a major investment area for pharmaceutical sourcing. Survey respondents currently tend to globalize supply chain operations, but in the next several years, the single greatest increase in globalization will involve product development and new product introduction activities. The main driver of globalization and outsourcing will continue to be cost reduction which has decreased labour costs.
The PRTM survey respondents anticipate that reducing product costs and outsourcing will be of greater importance in 2010. Though there have been recent quality issues arising from production in low-cost countries, the majority of survey respondents indicate that these are minor or no issues.
As supply chain management practices continue to mature and improve, there are challenges that must be addressed as well. A lack of external partners capable of meeting standards is cited by more than 45 per cent of survey participants as being the biggest barrier to fully achieving globalization benefits. This is closely followed by regulatory compliance issues and the threat of intellectual property/technology loss. Until the industry identifies ways to successfully mitigate or resolve these challenges, companies will continue to reap less than the full benefit of their globalization efforts.