The last 2 years of extraordinary change and challenge have thrown into sharp focus the huge benefits that contract manufacturing organisations (CMOs) have brought to the uninterrupted supply of pharmaceutical goods and services for their clients.
Today, it is beyond doubt that the closer engagement of brands and retailers with CMOs has been recognised and become firmly established for many as a permanent and essential part of their forward business planning.
CMOs have confronted and overcome a host of challenges for clients, from material/logistics shortages and supply chain disruption to staffing issues and additional legislative constraints; they have delivered solutions in the most difficult trading climate seen for many decades.
The effects of the pandemic, Brexit and the consequential impact on supply chains for all sectors of commerce in the last 2 years have been long discussed, assessed and analysed. And although they should not be understated or consigned to history, there was hope that the industry had, perhaps, seen the worst of these troubles.
However, owing to further market challenges, including staffing, the maintained growth in e-commerce and inflationary pressures, the true extent of their impact is only now being felt by CMOs. The combined effect of these challenges is conspiring to add weeks, months and even sometimes longer to traditional supply chains.
Extended delays are being reported across the entire span of supplies, from foil, card, paper and plastics to ingredients and other components; but, BCMPA members have already researched and sourced effective, invaluable alternatives for clients to overcome them.
Ian Robinson, Business Development Director at Chester Medical Solutions, notes the extent of these shortages: “Delays exist throughout many of the directly and indirectly sourced components used within our business, even extending to ingredients for the drug products themselves.”
“Although we are mitigating these issues by holding larger stocks and working closely with our clients in terms of forecasting to minimise the impact of the delays (ultimately protecting product supply), they are showing little sign of improving — with lead times on items such as paper stretching from 4 weeks to more than 6 months in some cases. Lead times on certain films and foils have almost doubled.”
Contingencies and relationships
The hugely increased reliance of brands and retailers on strong effective support and guidance from CMOs, developed during the last 2 years, is manifesting itself in all parts of the production and delivery process … and none more clearly than within the pharmaceutical sector. Whereas every effort is being made to minimise delays, BCMPA members are also working closely with clients to continue to explore alternative solutions to the many challenges.
Gareth Lewis, Managing Director of PharmaPac, has seen robust growth in the collaborative development of effective substitutions: “We are working with our customers and suppliers to ensure that patient needs are met. We are constantly reviewing packaging base materials that are more readily available and that are potentially suitable to meet the product specification and needs of the brand owners."
"For example, variations on board grade parameters, backing materials, etc., for products is constantly under consideration.” Clearly, shorter supply chains, improved forward planning and frank conversations have been needed.
Andy Causer, Director of Sales at Wasdell Group, adds: “Managing expectations through dialogue has been key to overcoming this intense period of supply chain challenges. Extended lead times, unit price increases, global distribution challenges, resource management (owing to self-isolation) and remote working have all had to be factored into collaborative conversations to arrive at best-case solutions.”
The COVID effect
One of the key contributors to the continuation of supply chain issues is the extraordinary demand for COVID-related items, including testing kits, being placed on a supply chain of materials that’s already strained by increased e-commerce needs and shortages of materials, labour and logistics services.
Causer notes: “The global effect of the pandemic on the supply chain has been immense. The almost instant surge in e-commerce (both general and COVID-related) created a bow wave of demand for board material, causing supply and demand issues almost overnight.”
“The outcome of this was lead times increasing by 250% in many cases (an unbelievable 2 weeks to 2 months) and, although those lead times are slowly contracting, forecasts of a return to steady state lead times could be as far away as quarter four of this year.”
Robinson concurs: “The virus has driven up demand for both directly associated COVID products, and general health items as well-being awareness has increased amongst the population. The sheer volume of COVID-related packaging required has severely compromised an already shrinking raw materials pool. Material availability has been universally impacted across Europe and the rest of the world. In addition, workforce unavailability within our suppliers’ workforces has further complicated the finding of effective solutions.”
Continuing trends
There seems little doubt amongst CMOs in the pharmaceutical sector that the surge in e-commerce seen during lockdowns will remain a constant as customers continue to value the ease, convenience and variety that has been developed.
Lewis sees this established new requirement as continuing to affect lead times: “Supply of materials, especially packaging, continues to require an increased level of management and day-to-day monitoring. Lead times and costs are remaining volatile in a market with demand outstripping supply in various sectors, including cartons and labels, but with the management of safety stocks and strong relationships with clients, the effect has been minimised within our operation.”
Supply chain issues notwithstanding, the sector has witnessed a surge in demand for new lines as both established clients and entrepreneurs seek to make the most of the growth in direct-to-customer (D2C) e-commerce.
Causer expects this trend to continue: “Our customer base is a mix of established pharmaceutical clients, SMEs and new businesses, and it has been our support for the latter two that has posed the greatest challenge.”
“Their models are very reactive to consumer demand but come with the risk of exposure to high inventory commitments. We have built a reputation based on flexibility and agility in this area; our relationship with suppliers has improved our ability to be reactive during the initial stages of development and supply more accurate data forecasts for our customers. This is a complete sea-change to some suppliers’ daily business and, although challenging, they recognise the value of collaboration to provide solutions for clients.”
The future landscape
Although the initial effects of COVID are beginning to settle to more manageable levels, its presence in the pharmaceutical sector will continue to contribute to the wider, more general stresses on the supply chain, both in terms of packaging materials and product ingredients. However, the closer and more collaborative relationships developed with clients in the last few years by BCMPA members has led to effective supply solutions continuing for them.
This new pragmatism in respect of lead times and demand forecasting, together with the identification and sourcing of alternative materials, has enabled third-party CMOs to provide certainty in an uncertain landscape. Indeed, taking a pragmatic approach is going to be even more essential in the future.
As can be seen by recent events in Ukraine, the need for adaptive solutions increases almost daily. In addition to the calamitous human impact of this conflict, the significant shocks it will have on many supply chains, much of which are yet to be fully understood, demonstrate that agility, flexibility and collaborative thinking will be crucial.
By working together, BCMPA members and the outsourcing sector as a whole will be doing everything possible to continue to provide effective third-party outcomes for customers that deliver the pharmaceutical goods that today’s world needs.
