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Unleashing Supply Chain Performance: Exploring Postponement Strategy in Pharma Manufacturing

A Comprehensive Guide to Enhancing Responsiveness and Efficiency in the Pharmaceutical Supply Chain

4 mins read

Key Takeaways:

  1. Postponement is a supply chain strategy that enables rapid customization of products in response to changing market conditions, reducing lead times and minimizing waste.
  2. While postponement has been successfully implemented in industries like electronics and automotive, its use in pharmaceutical manufacturing has been relatively rare.
  3. Postponement models can significantly improve on-time, in-full (OTIF) performance metrics, reduce lead times, and decrease stock inventory in the pharmaceutical sector.
  4. High-value, low-volume medicines with short shelf lives, such as cell and gene therapies and rare disease medicines, are particularly suitable for postponement strategies.
  5. Implementing postponement requires careful analysis of customer requirements, identification of decoupling points in the manufacturing process, and consideration of the best partners and IT systems.
  6. Organizations must design responsive and resilient supply chain networks, balancing factors such as OTIF performance, lead time, working capital, and automation levels.
  7. Leveraging third-party expertise and logistics service providers can support the successful implementation of postponement strategies.
  8. Packaging simplification, standardization of labeling information, and regulatory compliance are crucial elements of designing an effective postponement network.
  9. Accurate master and transaction data, supported by robust IT systems, are essential for the successful execution of postponement strategies.
  10. Evaluating financial returns, developing an implementation plan, and dedicating project resources are vital steps in adopting and executing a postponement strategy in pharma manufacturing.

Introduction

In an era of rapidly changing market dynamics, pharmaceutical manufacturers are under increasing pressure to enhance their supply chain performance. The implementation of effective supply chain strategies is critical to meet patient-centric demands, reduce costs, and optimize working capital. This comprehensive guide explores the concept of postponement as a vital supply chain strategy and its application in the pharmaceutical industry. We will delve into the benefits, challenges, and considerations associated with adopting a postponement approach, offering valuable insights to pharmaceutical executives and professionals seeking to unlock the next level of performance in their organizations.

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Understanding Postponement: A Make-to-Order Tactic

Postponement is a supply chain strategy that diverges from traditional make-to-forecast approaches. It involves rapidly customizing products from nearly complete stocks, often in close proximity to customers. This make-to-order tactic enables manufacturers to reduce lead times, lower working capital, and minimize waste. Prominent companies like Dell and Toyota have successfully implemented postponement strategies to maintain low inventories, shorten lead times, and meet specific customer requirements.

However, while postponement has proven effective in industries like electronics and automotive, its adoption in pharmaceutical manufacturing has been relatively rare. Nonetheless, there is a growing need for postponement in the pharmaceutical sector, driven by increasing demand for patient-centric supply chains and the rise of high-value, small-patient population medicines. Moreover, manufacturers are continually seeking cost-cutting measures and ways to optimize working capital.

The Solution for Pharma: Postponement Models

Postponement models offer significant benefits to pharmaceutical manufacturers. They improve on-time, in-full (OTIF) performance metrics, reduce lead times, and decrease stock inventory. Postponement is particularly suitable for high-value, low-volume medicines with short shelf lives, such as cell and gene therapies and rare disease medicines. Some pharma manufacturers have also successfully applied postponement in consumer business contexts, such as supplying e-retailers.

Implementing postponement in pharma manufacturing requires addressing several key questions and considerations. Pharma executives often seek answers to queries such as the relevance and benefits of postponement, the optimal location for implementation (central or key markets), the decoupling points in the manufacturing process, in-house development versus outsourcing, product simplification strategies, suitable partners for collaboration, necessary adaptations to operational performance management, and potential changes to sales and operations planning governance and processes.

To answer these questions and make informed decisions, leaders must understand the complexity inherent in employing postponement strategies. This complexity arises from multiple factors, including customer requirements, product characteristics, manufacturing processes, and financial flows. Cross-functional engagement, structured analysis, and a robust approach are essential for successful implementation.

Designing a Pharma Postponement Model

In a postponement model, products are held in semi-finished states and finalized based on market demand, such as customer orders or newly published regulations. To effectively design a postponement strategy in the pharmaceutical sector, lean production methods and flexible materials management play a crucial role in supporting the final stages of postponement. Robust and nimble IT systems are also necessary to ensure seamless customization.

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Several options exist for performing postponement in pharma manufacturing, including utilizing logistics providers or conducting it in-house. The choice depends on factors such as complexity, capabilities, and risk appetite. Rationale and complexity analysis are vital at the outset, ensuring a clear understanding of how postponement can address potential challenges. This involves considering customer expectations, product characteristics, and mapping out manufacturing steps to identify decoupling points.

Designing a responsive and resilient postponement network involves balancing factors such as OTIF performance, lead time, working capital, CAPEX or OPEX considerations, and automation levels. Scenarios can be developed and assessed to determine optimal hub locations and the appropriate level of automation. Third-party expertise, such as contract management organizations and logistics service providers, can provide valuable insights into transportation modes, cost per product, lead time optimization, and working capital implications.

Simplifying Packaging and Ensuring Regulatory Compliance

Packaging simplification and standardization play a crucial role in the effectiveness of a postponement network. By standardizing text, symbols, and languages, organizations can increase flexibility and optimize asset utilization within the postponement setup. Regulatory compliance is of utmost importance in the pharmaceutical industry, particularly when it comes to new material numbers, re-registrations, and changes to product-specific information on labels or blisters.

As new lines are set up or production equipment is moved, quality approvals must be obtained to ensure compliance and accuracy. The choice between in-house investment or outsourcing for printing labels and preparing them for final delivery depends on factors such as CAPEX versus OPEX considerations.

Accurate master and transaction data are vital for the successful execution of a postponement strategy. Robust master data processes and IT systems are necessary to support the capture of various distribution categories within the new network. Different order points may be required to differentiate between finished products and bright stock. Ensuring 100% accuracy in data is crucial for effective execution.

Financial Returns and Execution

Evaluating financial returns is a crucial step in adopting a postponement strategy. Organizations should evaluate multiple network options in terms of OPEX and CAPEX considerations, as well as key criteria like speed to market, scalability, and ease of implementation. Once a suitable option is agreed upon, leaders can develop a detailed implementation plan that considers third-party collaborations, technology testing and purchasing, technical transfers, data improvement, regulatory changes, and other relevant factors. Dedicated project resources, including project management organizations and tracking tools, should be allocated to ensure successful execution.

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Conclusion

Postponement presents a significant opportunity for pharmaceutical manufacturers to enhance their supply chain performance. By implementing postponement strategies, pharma companies can improve on-time delivery, reduce lead times, and optimize inventory levels. However, the successful adoption of postponement requires careful analysis, design, and execution. By considering factors such as customer requirements, decoupling points, packaging simplification, and regulatory compliance, organizations can build responsive and resilient supply chain networks.

Third-party expertise and collaboration with logistics service providers can further support the implementation of postponement strategies. Accurate data management, robust IT systems, and cross-functional engagement are critical elements in ensuring the success of a postponement strategy. By carefully evaluating financial returns, developing an implementation plan, and dedicating resources, pharmaceutical manufacturers can unlock the benefits of postponement and achieve the next level of supply chain performance.


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