Agility in our supply chains and collaborative Private-Partnership engagements: the new norm?

Supply Chain

The importance and relevance of public-private collaborations have certainly been tested by COVID-19.

Policy-makers have a key role to play in anticipating and absorbing these abnormal crises and should reflect on which areas of the healthcare supply chain would be less affected during such outbreak.  Partnerships with market suppliers is one of the answers towards mitigating this impact.  Agility, velocity, business continuity and value for money shall be compared by contractual agreements based on different levels of collaboration.

However, the limitation with such exercise is that most public sector procurement agencies have an obligation to prove value for money in their procurement approach. Unfortunately, this cannot always be indisputably evidenced in the short term and in periods of normalcy preceding an exogen shock. At times, Public buyers have been blamed for overstocking necessary medical supplies in anticipation of pandemics.

In turn, the Private sector will always have a tendency to focus on short to mid-term profitability while relying on the public sector to assist shall a pandemic arise.  It is therefore essential to strengthen and nurture the Private-Public relationship to foster sustainable growth while having plans in place to respond to disasters. COVID-19 has shown the limits of these two sectors operating in isolation.

AnthonyIt now becomes obvious that business continuity and Public Health have to be treated in symbiosis and in complete alignment. On the  one hand, Private buyers shall demonstrate their ability to find new solutions to overcome severe market conditions, by showing willingness to take risks and responsibilities. On the other hand, the Public sector shall provide a regulatory framework that encourages the companies to increase their disaster-management capabilities while partnering with them to combat such extraordinary events.

Resilience of our Healthcare supply chains and growth in the sector will also lie in striking the right balance between local supply chain networks and global lean manufacturing. For decades, the industry has been pushed to apply lean six sigma principles to foster efficiency and profitability. Pharmaceuticals and medical consumables manufacturers have transformed their supply chains into complex global manufacturing networks involving contract manufacturing, white labelling and other centralised manufacturing strategies on the account that that it would ultimately benefit the patients thanks to a better affordability of the supplies.

The recent events lead to think that there are perhaps better operating models. When the COVID-19 started, business continuity of these manufacturers was jeopardised, international logistics was saturated, and healthcare wholesalers were incapacitated to meet and plan a rising demand. One could argue that such pandemic happens once in a lifetime and that it would not be relevant to change the designs of the supply chains on a permanent basis to make them more agile.

Nevertheless, independently from the current pandemic, the Healthcare industry is undergoing a profound structural change shifting from a patient focus to a clinical outcome focus. In order to meet the demands of a fast-evolving marketplace, the pharmaceutical supply chains in particular, will need to undergo a radical overhaul and become more agile as the product cycle will shorten dramatically. With the introduction of Artificial Intelligence and predictive analytics tools, clinicians have now better insights into treatment efficacies. Most likely, effective drugs will be in-demand and the lesser ones will be swiftly substituted thus leading to an increased velocity in the product cycle of many of the supplies.

In light of this, many indicators tend to show that the Healthcare sector and in particular the pharmaceutical one will have to build Agile supply chains incorporating lean principles rather than building Lean supply chain with Agile principles to respond to exogen shocks.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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