As of 2018, the global pharmaceutical industry was spending approximately $150 billion every year on research and development — but sales and profits continue to decline. While many manufacturing companies have adopted technologies to innovate their shop floors and processes to increase sales and productivity, many pharmaceutical manufacturing companies are still behind in adoption.
Let’s take a look at the challenges the pharmaceutical manufacturing industry has been facing and where there are opportunities for growth.
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According to McKinsey research, traditional companies like pharmaceuticals have taken their time to fully capture the productivity and opportunity potential of new processes and digitization. Effective execution and management of digital processes can be challenging, but failure to invest in new processes may cause bigger risks. The products the industry makes (and needs coming down the pipeline) are requiring different manufacturing techniques than those of production years ago.
Cleanrooms are a crucial part of pharmaceutical and medical manufacturing. If the cleanroom design doesn't support the new processes and is not up to industry standards, it can cause major inefficiencies. By putting technical and procedural advances together with quality risk-based approaches, many industry leaders are improving process equipment systems, reducing capital and operating costs, and even product costs.
In addition, manual processes and spreadsheets are still prevalent in many pharmaceutical industry processes and this, unfortunately, may lead to guesswork, inaccurate data, and error-prone outcomes. Customer and vendor relationships may be affected and will likely move to competitors.
Pharmaceutical manufacturing companies who have invested in upgraded solutions benefited from better inventory management, solved data challenges, increased workforce productivity, optimized fulfillment processes, and improved customer and vendor experience.
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For years, the manufacturing supply chain has been shifting away from the paper-and-technology model of information management to an all-digital approach and now automating the supply chain is a shift that has gone from optional to essential. That’s because research shows that companies that embrace digital supply chains boost revenue by more than nine percent, market valuation more than 12 percent and profitability by over 26 percent.
But for the pharmaceutical industry, their supply chain is highly complex and more regulated than other industries. With multiple suppliers in multiple locations, strong collaborative relationships are necessary to supply chain success. But pharmaceuticals’ complex supply chain is challenged with the need to create end-to-end transparency — and digital transformation aims to bring it all together in one place.
Pharmaceutical manufacturers should shift to technology advancements that not only present a full picture of the supply chain but offer insight into cost savings opportunities and smart inventory solutions.
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For example, German pharmaceutical company Merck & Co, customized a supply chain digital solution that provided a unified dataset with real-time information on supply chain performance, stock-keeping units, and data collected from Merck’s ERP. Merck learned that logistic systems should not operate in a silo — a steady, transparent, and dynamic supply chain is key to manufacturing success. Thus, pharmaceuticals should seek digital solutions that connect their business to external factors, like environmental controls, regulations, and consumer behavior.
Failure to keep up with technological advances opens the door for non-traditional and new players in the industry to steal market shares from traditional pharmaceuticals. But some pharmaceutical manufacturing companies who experience legal, regulatory, or technology challenges every day see success after a company merger or acquisition. McKinsey notes that mergers and acquisitions can be a way of getting back into the race for companies that have fallen behind in digitization. In fact, in a 2019 Thomas small business manufacturing survey, 22.91% of business owners are planning on selling their company to an outside party.
Companies that undergo a merger or acquisition often inherit new or updated processes and technology systems, making them more agile and scalable for future growth. Especially in times of economic uncertainty, agility can be a particularly profitable strategy. Throughout history, many agile manufacturers shifted their production focus to meet federal government demands in times of national security or health crises.
Be Prepared:
Numerous forces are reshaping the way people do business. The first step to adopting new processes and technology is developing a strategic vision. Start small and create a plan to accelerate adoption as your business grows.
PWC recommends collaboration between all parties involved, including the supply chains for designing, manufacturing and distributing pharmaceuticals and medical devices plus those providing healthcare services. Integration and clear communication will help all parties see the full picture and help to plan ahead more accurately and cost-effectively. If they are planning something new or there are new regulations on the horizon, now is the time to know.
Pharmaceuticals should communicate those efforts throughout the internal business, from the labs to the factory floor to the executive level in order to harness the full potential of new processes and become digitized.
As the COVID-19 pandemic continues to disrupt and change the way pharmaceuticals do business, it’s more important than ever to leverage digital solutions to remain competitive and become agile in this ever-evolving landscape.
Thomas has been powering the manufacturing and industrial space for more than 120 years, so we understand first hand what it takes to innovate and continue to grow through economic and technological shifts. Visit our resources below to help you solve your manufacturing challenges:
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