LONDON, August 3, 2023 – Two thirds (64%) of companies in the life sciences industry strongly agreed that a lack of alternative supply options has impeded their ability to implement an effective dual multi-source strategy. That’s according to a new report by WTW, a leading global advisory, broking, and solutions company (NASDAQ:WTW).
Unlike many other industries, 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 emphasised the complexity and potential vulnerability of the industry’s globalised supply chains, which could threaten progress in the coming years, including over-dependence on single source suppliers and manufacturing eco-systems in higher-risk locations.
Shortages of components, labour, specialist warehousing and reliable production capacity were harder to find and, in some cases, led to failure to supply, potential breaches of contract and reputational harm.
As a result, two-thirds (64%) of respondents in the survey said their exposures related to supply chain risk were higher or much higher than expected over the last two years — though their business may not have suffered an immediate loss as they switched available capacity to meet high demand during the pandemic.
Additionally, three quarters (74%) of life science businesses cited a lack of insurance options to address their supply chain risks in the next three to five years. While 57% placed climate change and environment among the top global trends affecting supply chain risks.
Experiences and learnings from the crisis have motivated businesses to increase resilience against future shocks. In fact, 83% of businesses in the life sciences industry said they have made at least some improvements in their approach to supply chain management in response to the pandemic.
Looking at the greatest opportunities to improve supply chain management, 59% said developing a detailed understanding of their supplier networks was among the factors that would have the greatest impact on managing their risks. The result suggests firms want to work with their tier one and two suppliers to refine their sourcing strategies and find ways to increase resilience further along the chain, rather than switching key suppliers. This is understandable given the time and effort it can take to get regulatory and customer approval for new partners in life science – as well as the scarcity of suitable suppliers.
Neil Emerson, WTW Life Science Practice Leader GB commented “The pandemic exposed the vulnerabilities and inefficiencies in life science supply chains so that boards and regulators could no longer ignore them.
“Companies and governments are now trying to rebalance supply chains to avoid further shocks and maintain supplies of medicines and devices. Some are looking to near-shore or onshore supply, use local ‘in-geography’ manufacturing or diversify with multiple sources. Others are continuing to outsource but leverage the knowledge and relationships of specialist supply chain management partners. However, the scope for action is limited in the short-term because of the time it takes to approve new suppliers for medicines and medical devices.
“Other strategies include taking production back inhouse, adopting a just-in-case approach to inventory and acquiring interests in supplier companies to gain more control over supply chains. Some companies have even bought suppliers who were at risk of going out of business to ensure continuity of supply of critical components. Many are using technology, such as supply chain mapping software and artificial intelligence (AI) to help them better understand their supply chains and make informed decisions.”
“The pandemic exposed the vulnerabilities and inefficiencies in life science supply chains so that boards and regulators could no longer ignore them.”
Neil Emerson | WTW Life Science Practice Leader GB
WTW’s 2023 Global Life Sciences Supply Chain Risk report took place between November-December 2022, across Europe, North America, Asia-Pacific and Latin America, surveying 100 senior decision makers, including risk managers, supply and logistics managers and CEOs.
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