With cases topping one million globally, governments and health care agencies across the world are working to contain the spread of COVID-19 through several safety measures including the complete lockdown of high-risk countries. While this might prove effective in controlling the pandemic, enterprises across multiple industries are struggling to mitigate its growing impact on the supply chain.
Forced quarantine in manufacturing countries like China has significantly affected major industries including automotive, electronics, pharmaceuticals, and medical devices and supplies, highlighting the limitations in their existing supply chain models. The impact on the overarching life sciences industry is particularly acute, because it cuts across the entire ecosystem, and could potentially enable the spread of COVID-19 due to the diminishing supply of active pharmaceutical ingredients and medical supplies such as masks and hand sanitizers from the key supplier, China.
Despite acknowledging the risks of a single sourcing strategy, many organizations in the life sciences industry continue to work with a single supplier in low-cost regions like China and India to capitalize on their lower costs for labor and materials. This is risky in and of itself. And it also results in sub-contracting situations that lack transparency into the tier-2 and tier-3 suppliers, which further complicates risk management.
Here are our suggestions for how organizations in the life sciences industry can combat the global supply chain crisis:
- Move beyond traditional and short-term remedial measures and devise a long-term proactive strategy with risk mitigation measures in place, at least for tier-1 and tier-2 suppliers. For tier-3 suppliers and beyond, at the minimum understand the potential risks involved
- Establish a robust supplier monitoring system that maps sub-tier dependencies to ensure effective and efficient execution of risk mitigation strategies
- Invest in infrastructure and technology that ensures transparency across the global supply chain, and next-generation supply chain management software that leverages technologies such as machine learning, artificial intelligence, and data analytics to gain real-time visibility into the supply chain
- Develop predictive models that account for uncertainties and risk factors to realistically assess supply and demand and modify sourcing strategy as needed. These models can also help in running simulations to better define the associated impact, which in turn can serve as input for building comprehensive risk management programs
Despite the extra costs associated with building a proactive supply chain and qualifying multiple suppliers, doing so allows organizations to rapidly respond in pandemic-like situations, thereby reducing reliance on inventory management. Building an adaptable supply chain model that remains operational under any critical situation is the key to managing sourcing risk and avoiding global supply chain disruptions.