Supply Chain and Manufacturing: How to Turn COVID-19 Challenges into 2021 Opportunities

This article was originally published in the April 2021 issue of Life Science Leader magazine.

Since the onset of the COVID-19 pandemic last year, life sciences companies have been pushed to research, develop and manufacture COVID-19 vaccines and therapeutics at record speed. At the same time, it’s vitally important that we continue producing treatments for other diseases like cancer, diabetes and heart disease. For life science companies, this high demand has put pressure on their manufacturing capacity and supply chains. In fact, according to BDO’s Life Sciences CFO Outlook Survey, 61% of life sciences CFOs say they are identifying alternative or backup suppliers in 2021. While there are no quick and easy fixes to overcoming these supply chain and manufacturing challenges, they do present opportunities for modernizing supply chains and manufacturing capabilities and ensuring resilience, not just for the remainder of the pandemic, but for the years ahead.

 

Supply Chain and Manufacturing Challenges Presented by COVID-19

Tight supply chains

One of the biggest challenges life science companies are facing is tight supply chains. Raw materials and components are being used up almost immediately as manufacturers race to produce COVID-19 vaccines and therapies. Major vendors are trying to prioritize where to send materials, especially as COVID-19 vaccines take priority following the US federal government invoking the Defense Production Act to improve availability of materials. Production timelines for therapies and vaccines that rely on the same raw materials as COVID-19 vaccines may therefore be delayed or extended.

Given the tightening of supply chains in the industry, companies could face real trouble if they experience further disruptions, such as a facility getting shut down due to a COVID outbreak among their staff or a natural disaster.

 

Talent shortages and social distancing

While running a facility at three shifts for seven days a week might help companies ramp up production, particularly for high-demand COVID-19 vaccines and therapeutics, finding enough skilled workers to run these shifts can be a challenge. On top of the skilled labor force shortage, facilities must comply with social distancing measures by providing sufficient PPE and ensuring workers can maintain six feet of distance. This might impact the number of employees working in a facility at a given time. Not following social distancing measures in production facilities will ultimately prove costly because a COVID-19 outbreak among employees could shut down a manufacturing facility for weeks.

 

Drug shortages and liquidity challenges

The pandemic has revealed a health-care dilemma that’s been recurring for at least the past two decades: recurring shortages of dozens of essential drugs, especially injectable generics, required to treat a range of acute conditions and chronic diseases — from infections to cancers. The problem is the result of significant offshoring of the production of generic drugs and ingredients, principally to India and China, in search of lower costs. It’s a supply chain issue that now has national security implications.

In addition to the shortages of many key drugs, the prioritization of COVID-19 products has delayed production of certain non-COVID drugs and therapeutics. Smaller companies with early phase products may expect a financial pay-out when products go to clinic. If production gets pushed back due to COVID-19 prioritization and their products are delayed, these smaller companies may be low on cash, but still on the hook for fixed costs.

 

Supply Chain and Manufacturing Opportunities in Response to COVID-19 Challenges

Invest in digital transformation to shore up your supply chain

According to BDO’s recent Life Sciences CFO survey, CFOs say their top business strategy for 2021 is digital transformation. These CFOs are on the right track, as investing in digital solutions can give you more visibility into supply chains both upstream and downstream, including availability of material.

Digital transformation can feel daunting for many companies, but it doesn’t have to be. One way to start is by conducting a supply chain risk assessment, which is already on the agenda for 57% of CFOs, according to the survey. A risk assessment can help you see any potential weak links in a supply chain. Following the assessment, you can invest in digital solutions and adopt a targeted approach.

 

Have back-up suppliers and alternate facility operators

It can be difficult to secure back-up suppliers in the life sciences industry due to the regulations that require companies to show materials are equivalent when changing a supplier. However, having alternative suppliers is a crucial step to keeping your supply chain stable. According to BDO’s survey, identifying alternative or backup suppliers will be the top supply chain strategy for life sciences CFOs in 2021.

 

Leverage data to address capacity concerns

It’s no secret that life sciences organizations are stretched when it comes to accessing sufficient manufacturing capacity. With directives to produce COVID-19 products at scale, along with the need to continue to produce non-COVID products, it can be challenging to find capacity to meet demand. Capacity challenges are affecting subsectors differently; BDO’s survey found that the subsector struggling the most with production capacity is medical equipment and medical supplies manufacturing.

With data analytics, you can have a better window into your manufacturing processes to see where there might be surge capacity you can leverage to meet demand. Having access to the right databases and analytics can provide detailed information on biomanufacturing capacity, supply and demand. This data can help you understand the types of capacity available and allow your organization to better forecast what products are competing for capacity. You can then adjust your manufacturing strategy as needed.

 

Supply chain and manufacturing investments will strengthen your organization now, and post-pandemic

Making supply chain investments, conducting a risk assessment, investing in digital solutions and leveraging data analytics will not only help your organization weather the remainder of the pandemic, but also give greater visibility into and control over your supply chain as you prepare your company to shift production to meet evolving healthcare priorities even after the pandemic. Identifying alternate suppliers now will also help in the long run by preparing your organization to pivot more easily when future supply chain disruptions, whether due to COVID or other events, affect your manufacturing process. While it may be tempting to push off supply chain investments until a more certain economic environment emerges, now is the moment to focus on your supply chain for a more resilient future.