Optimising the Pharma Supply Chain

Ryan Ching

Last updated: May 12, 2023
Ryan Ching Slimstock

As COVID-19 tests healthcare systems across the globe, there is no doubt that the pandemic will revolutionise the pharmaceutical industry. One of the challenges is inventory management. During this period, many items such as surgical masks, sanitisers, thermometers, disinfectants and essential medicines are flying of the shelves. Consequently, phramacies can not replenish fast enough to keep up with spiraling demand.

In the world of pharmaceuticals, the impact of stock outs is much greater compared to other industries. Revenues and profits are definitely affected. However, for pharmaceuticals, inventory issues endanger lives. The COVID-19 pandemic forced both businesses and governments to open their eyes to the importance of supply chain strategies and inventory management processes.

As How Ti Hwei, president of the Singapore Association of Pharmaceutical Industries1 highlights: “Companies and governments around the world are building large inventories of active pharmaceutical ingredients (APIs) and drugs to ensure supplies of medicine remain uninterrupted.”

Yet, building large inventories to achieve and maintain high service levels is one thing. However, building high levels of inventories as a consequence of a lack of control or out of fear of stock outs is a different situation entirely.

Getting stock just right

Offering the right service level has always been one of the main objectives of supply chains: even more so for the pharmaceuticals industry. Stock shortages can lead to many life-and-death situations. While expecting 100% availability, supply chain leaders understand that this is neither an achievable nor beneficial target to aim for.

Given the risk of obsolescence and cost of holding inventory, holding excess stock can have a hugely adverse impact on profit margins and unnecessarily tie up valuable working capital. As a result, there is a need to balance service with working capital and operational inventory cost.

To provide the desired service level while protecting against fluctuations in demand, the correct buffer or safety stock must be calculated for every product. Slimstock’s inventory optimization solution, Slim4, has powerful capabilities that enable businesses to continuously optimise inventories every day through:

  • Automatically applying service levels based upon ABC and the business rules in place.
  • Dynamically recalculating safety stock based on fluctuations in demand and lead times
  • Taking into account delivery times, optimal order quantities, shelf lives and order frequencies

The right strategy for every phase

Launching a new pharmaceutical product into the market can cost billions of dollars and time in research and development. Technological advancements, a globally competitive environment, and an ever-changing regulatory world mean that life cycle management must be taken seriously. This is so that proactive and preventive actions can be taken sooner.

Effective Product Lifecycle Management is all about adopting the right strategy at every phase. However, given that no two product lifecycles are ever the same, inventory levels must be managed carefully to maximise availability during the introduction, growth, and mature phases while minimising waste because of shelf life expiration. Slim4 helps businesses stay ahead of product lifecycles by:

  • Applying business rules to adopt either a defensive or aggressive approach during the launch phase that fits the company overall strategy
  • Remaining responsive by automatically establishing a forecast after initial sales of new items
  • Optimising margins and inventory costs for mature items
  • Notifying planners when sales start to fall at the end of the product lifecycle
  • Gaining insight into different phase-out scenarios and decreasing inventory levels accordingly

How to get started?

Given the market size and growth of the industry, it is surprising how businesses in this sector still depend on manual inventory systems. Considering the complexities of pharmaceutical inventories, manually tracking and making decisions based on gut feelings are bound to lead to errors. To gain the insights required to balance service and cost, supply chain teams need a more sophisticated and data-driven inventory solution.

Founded in 1993 and with more than 1,000 customers globally, Slimstock is without doubt the market leader in inventory optimization. Let us help you reach your inventory planning goals to get the right stock at the right place and at the right time. To learn more about our software, click here to find out more about how our solution can help you.

1 https://www.businesstimes.com.sg/consumer/pharmaceutical-exports-a-rare-bright-spot-for-singapore-economy

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