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Survey Report

Global Life Science Supply Chain Risk Report 2023

March 9, 2023

WTW surveyed 100 senior decision makers in leading life science companies globally, to understand their supply chain risks and challenges, their organization’s approach to risk management, and what future supply chains will look like.
Credit and Political Risk|Cyber Risk Management|Medioambiental|Marine
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Almost uniquely, the life science sector has emerged from the pandemic stronger than before.

Increased collaboration, new ways of working and novel technologies all accelerated progress to create a seismic shift in the industry which continues today.

But the disruption caused by the crisis also emphasized the complexity and potential vulnerability of the industry’s globalized supply chains, which could threaten progress in the coming years.

In our 2022 Global Life Science Survey, supply chain disruption emerged among the greatest risks to business success and biggest threat to achieving strategic objectives.

How are life science businesses adapting?

To find out how the industry is navigating this changing landscape, we surveyed 100 risk and supply chain leaders across the life science sector.

How do they see the supply chain landscape? How are they building resilience? What are the main challenges and risks they face? And what will the supply chains of the future look like?

Supply chain complexity brings greater risks

Our survey suggests life science businesses are worried about a range of supply chain risks, reflecting the length of production cycles, complexity of supplier ecosystems and increasing quality and safety requirements.

Wider external factors such as the economy, cyber security and supply chain sustainability are also top concerns.

Economic risks

Economic uncertainty emerged as the leading factor underlying supply chain risks in life science, ranked by 36% as being among their top concerns.

This is likely to reflect rapidly rising raw material costs, as well as fears that a recession could hit healthcare budgets. Supplier solvency was a top concern for 24%.

Product complexity and safety

Increased product complexity was the second biggest factor underlying supply chain risks, named by 33% as a top concern.

Increasingly specialized products can add levels of difficulty in sourcing, production and logistics, and increase quality and safety risks.

Critical shortages

Continuing shortages of raw materials (43%) topped the list of supply chain factors that will impact businesses over the next two years, followed by just-in-time operating models (38%).

Component or ingredient shortages was named by 33%.

160% Some life science raw material costs have increased by between 50% and 160% due to shortages, the conflict in Ukraine and inflation

Shortages are likely to continue through 2023 due to factors such as high energy costs, lack of labour, manufacturing disruption and increasing demand from hospitals.

Some life science raw material costs have increased by between 50% and 160% due to shortages, the conflict in Ukraine and inflation.1

Cyber risks

Cyber risks were believed to have the most profound effect on supply chains, rated by 35% as a high impact and 56% as medium.

Growing digitalization and automation increases the risks of cyber-attacks on suppliers. This can have knock-on impacts for their clients, including delays in ordering and delivery.

Climate and extreme weather

More than half (57%) placed climate change and environment among the top global trends affecting supply chain risks. This may reflect clustering of suppliers in higher-risk areas such as China and Puerto Rico, as well as pressure to meet emission reduction targets.

In our recent Global Life Science Survey, 44% of key decision makers ranked climate and extreme weather as the top external risk to business success in the next three to five years.

Sustainability

An impressive 85% agreed that sustainability of supply chain is a key goal in risk management. When asked about leading environmental risks, 70% ranked supply of natural resources among their top risks, followed by pollution, waste and recycling (64%).

Geopolitical risk

More than a third (36%) of life science businesses said geopolitical factors were among the top global trends affecting their supply chain risks.

Conflicts such as the crisis in Ukraine and tensions in the China Sea are causing real disruption and look set to loom even larger in the coming year.

With around 60% of active pharmaceutical ingredients (APIs) being produced in China, life science businesses may need to review their sourcing strategies to make sure they can withstand any future trade or shocks.

4 key findings

83% of businesses said they have made at least some improvements in their approach to supply chain management in response to the pandemic.

59% said developing a detailed understanding of their supplier networks was among the factors that would have the greatest impact on managing their risks.

74% cited a lack of insurance options to address their supply chain risks in the next 3 to 5 years.

64% agreed or strongly agreed that a lack of alternative suppliers impeded their ability to implement an effective dual or multi-source strategy.

On the road to supply chain resilience

In rising to the challenges of the pandemic, life science has advanced in many ways over the last few tears. But the industry’s supply chain challenges remain, from raw material shortages to a lack of labour impacting manufacturing and transportation.

Our survey shows that businesses are working with their key suppliers to overcome problems and considering a wide range of strategies to increase resilience.

However, they’re often hampered by an inability to get hold of detailed accurate data or achieve full visibility through the chain.

Firms are also facing increasing external risk factors, from extreme weather to geopolitical tensions, which can threaten production of key components and ingredients.

Working more closely with suppliers as partners can help companies understand their supply chains better and address these risks.

Diagnostic mapping and monitoring tools and analytics can help to visualize, quantify and assess risks across the chain and in specific locations.

WTW has an experienced team of experts with the tools and competencies to help clients understand their supply chain vulnerabilities and align their production with financial risk.

We can also help you manage and transfer risks for both property-related and pure economic losses, helping you build greater reliance against future shocks.

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To learn more, download your free survey report by completing the short form at the top of this page.

Footnote

1 Resilinc, Life Science Industry Special Report November 2022

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Healthcare Industry Leader - Australasia
WTW

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