Pivoting pharmaceutical supply chains – Creating the future with “Sensible Manufacturing”
Pharmaceutical supply chains are under tremendous pressure, as pharmaceutical companies are increasingly required to focus on the patient and demands from various stakeholders are on the rise. To survive, adapt and thrive, we are convinced that pharmaceutical supply chains need to take a bold step forward and establish what we at A.T. Kearney call a Pivoting Supply Chain with one of the key capability sets creating a “Sensible Factory” approach.
Until recently, no one would have dared to question the role of manufacturing. It was straightforward: to supply products on time in high quality at a low cost. But today, the role of the factory is starting to blur. For example: Is a new factory built in a country because it is the most efficient way to serve local customers, or is that factory a strategic signal to competitors and regulators about a commitment to the region? And is a factory with an annexed R&D center a way to share overhead, or is it a tool for spurring innovation?
Because of this blur in the role of the factory, and because of the strong push to make existing factories more digital, companies must take a sensible approach to their choices about digitalization. Choices should be designed to make the most of existing investments but also get the installed base up to speed with digital. Because of this, we argue for creating a factory of the future using a sensible approach – e.g. building a “sensible” factory.
Managing the traditional trade-off in manufacturing between costs, service and quality will not be enough to stay competitive. Companies must integrate new technology while also achieving a deeper level of business integration by adapting and flexing their processes, organizations and workflow to deliver on the roles that manufacturing can and must play.
Three areas of capability need to be established in the production phase: Strategy & enablement, future factory and “sensible” digitization.
Strategy & enablement – To deliver on shorter production lead times, create customer intimacy and have the required flexibility, pharmaceutical companies need to consider a number of strategic measures. They include: re-localization, rethinking make vs. buy decisions, and moving to a circular operating model, where several players inside and outside the plant contribute to delivery in a coordinated fashion. Another strategic measure is using postponement, or holding off on decisions about when to move on to the next stage of production.
Some companies are making production more flexible by shifting away from locations where only one product is made and toward the ability to produce in multiple locations.
With such flexible production registrations, companies can allocate their production across the network in ways that reduce costs and improve service by selecting a particular plant for a particular drug at a particular time, or through the choice of a contract manufacturer.
Another idea: Pharma leaders have established test facilities to explore continuous manufacturing, which has the potential to bring down production lead times from several hundred days to a matter of weeks. This will also help reduce costs and the required capital.
Future factory – As companies look beyond legacy assets and consider the future factory and what it will deliver to the business, it’s important to think about the implications of manufacturing in a digital world on the size, shape, and location of factories.
The traditional factory is becoming more connected, automated, and open, with workers, customers, and suppliers all having more real-time transparency, for instance about the status of an order. Members of the ecosystem have access to tools that can help them identify and resolve problems early, such as problems with the supply of raw materials, or bottlenecks that are impacting production.
This information can be fed into the digital planning twin of the ecosystem so that users can simulate different options for rectifying the problems.
In general, the shift from mass-produced, homogenous products to products, services and experiences that are personalized and address a patient’s individual expectations will bring about drastic changes for production.
For instance, 3D printing of drugs will open a whole new frontier of production that will fundamentally change network setups by allowing smaller batch sizes to be produced closer to the point of consumption, for instance at hospitals.
With all these changes, the workforce capabilities also need to adjust. For instance, blue collar workers will move away from more repetitive tasks toward more challenging ones, while qualified manufacturing personnel will need more systems knowledge and the ability to cooperate with co-bots and apply advanced technologies.
Sensible digitization – As mentioned earlier, sensible digitization means using a deep understanding of the business to make sure tools introduced solve real problems and will be used to their full potential.
In some cases, the traditional way of producing makes most sense – e.g. in cases where the human worker is more effective than the robot.
Companies need to create a vision for the future factory, remembering that existing assets will not become obsolete from one day to the next. Companies that are interested in emerging manufacturing technologies must resist the temptation to see them as a cure-all. This starts with an understanding of key pain points, historical challenges, and business requirements before applying advanced Industry 4.0 tools, such as process automation, the Internet of Things, artificial intelligence, machine learning, augmented reality, robotics, and 3D printing.
With our A.T. Kearney expertise we help to shape your future supply chain. Sensible manufacturing is a milestone on the way to establish a truly Pivoting Supply Chain.
Also read previous articles of our series:
- Pivoting pharmaceutical supply chains in a digital world
- Pivoting pharmaceutical supply chains - Autonomous planning with real world data