Booz offers 5 steps to reinvent supply chain

Booz & Co.'s pharma ops specialists have developed an easy-sounding 5-step plan to reinventing the supply chain. But be warned: This is not another of the "hire only the best!" cheerleading lists, and it's far from simple.

"The supply chain needs to play a central role in fueling revenue and profit growth," write three Booz & Co. execs in Strategy + Business. Supply chain design must be based on several nontraditional concepts, they say, including competition with low-cost generics, capitalizing on the higher margins of low-demand drugs, and managing the complexity of new sales channels.

Supply chains designed for high volumes and stock-out prevention are out, along with their "well under two [inventory turns] per month," according to the authors. The 6.7 turns of leading consumer goods companies is closer to what you need.

Here's the first step to reinventing the Big Pharma supply chain: Adopt tailored business streams; avoid the one-size-fits-all approach. Create a series of supply chains tailored to particular products, markets and customer groups.

Once you've done that, move on to step 2: Add flexibility to product design and packaging. Doing so will help you manage product demand volatility in low-margin drugs via pack-to-order strategies.

Take a break for lunch before tackling step 3: Reconfigure the supply chain footprint. "Drugmakers must consider a complete overhaul of their factory footprint based on careful forecasts of demand and product requirements, as well as production and logistics cost and lead-time trade-offs," the authors write.

When you're done reconfiguring, take the rest of the day off so in the morning you'll be fresh for step 4: Develop a "thoughtful make-versus-buy strategy" to create a network of third-party suppliers. You'll better handle demand dips by reducing procurement from a supplier rather than reducing capacity utilization.

Finally, step 5: Significantly improve planning capabilities. The current competitive environment requires successful product launches and the means to accommodate demand volatility and SKU proliferation.

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