Industry Trends and Challenges
The Covid situation has underlined the importance of speedy development and manufacturing of drugs. Most companies prefer to outsource the manufacturing, packaging, and distribution activities in the life sciences industry. Manufacturing is done by Contract Manufacturing Organizations (CMO), packaging by Contract Packaging Organizations (CPO), while distribution is the responsibility of Third-Party Logistics (3PL) organizations. A report suggests that with the growing demand for generic medicines and biologics, the business' capital-intensive nature, and the complex manufacturing requirements, many pharmaceutical companies have identified the potential profitability in contracting with CMO for both clinical and commercial stage manufacturing. The CMO market is estimated to grow at 4% between 2020 and 2025. In comparison, the total global biopharmaceutical third-party logistics market size was estimated at USD 86.37 billion in 2018. It is estimated to augment at a CAGR of 4.9% over the forecast time of 2019-2025.
Challenges with Planning in Outsourced Supply Chain in Life Sciences Companies
The outsourcing business model gives cost efficiency; however, supply chain planning becomes crucial for effectively managing the operations. The ownership of inventory and the quality lie with the OEM, although OEM does not have any physical stocks. The goal is to satisfy the demand originating from different parts of the globe and at the same time maximize the profit. Reduction in the inventory and maximizing inventory turns is the key to success. For seamless working of the entire supply chain starting from vendors, CMO, CPO, 3PL, and distributors, the companies must have complete visibility of the whole supply chain. Central planning function thus becomes imperative for successfully managing the supply chain operations. Accurate information about quantity, quality, material statuses, shelf life, and expiry of ingredients and intermediates is mandatory for accurate planning. Lead times throughout the supply chain are also vital for meeting the schedules.
Things become complicated when the number of ingredients, intermediates, and SKUs increases. The labeling and packaging requirements are different in different countries. Additionally, an increase in the number of CMO, CPO, and 3PL further complicate things.
Oracle Cloud Supply Chain Planning offers a robust solution to address these challenges. With Oracle Cloud Supply Chain Planning, companies can plan for API procurement from the vendors and plan bulk and intermediate manufacturing at the CMO. Cloud Supply Chain Planning is also preparing for drugs from CMO to CPO for packaging and from CPO to 3PL for logistics and distributions. The solution is driven by maintaining the item master, the bills of material, sourcing rules, and bills of distribution. Sourcing rules and bills of distribution establishes the link between CMO to CPO to 3PL. The planning engine automatically calculates supply quantities after considering the inventory quantity, material status, expiration, shelf life of ingredients, intermediates, and products. Dates for procurement, manufacturing, and material movement are calculated based on the vendor lead times, manufacturing lead times, and transit shipment time between CMO, CPO, and 3PL. You can also configure exception rules with the help of which you can quickly pinpoint those items which require your attention. This saves a lot of planners time in adjusting the demand and supply.
Oracle Cloud Supply Chain Planning is ERP system agnostic. It is not necessary that to have Oracle Fusion as an ERP system. It can seamlessly work with other ERP systems as well.
Benefits of Oracle Supply Chain Planning for Life Sciences Industry
- Managing the complex supply chain: The planner gets complete visibility of the supply chain, including CMO, CPO, and 3PL. Instead of planning in silos for these contractors, planning is done to bring synergy to the entire supply chain.
- Improve on-time order fulfillment: The planning engine suggests ordering dates based on the lead times and transit times, ensuring that order fulfillment dates are honored.
- Accurate planning: The planner gets the visibility of inventory quantity, material statuses, usability shelf life, and expiry of all the material at CMO, CPO, and 3PL. This ensures that planned quantities are accurate.
Virtual manufacturing is the norm in the life sciences industry. Planning throughout the entire supply chain planning is a complex job. Oracle Supply Chain Planning addresses these complexities and arrives at a plan by considering inventory, material statuses, expiration, and lead times throughout the supply chain. This helps to optimize the inventory in the supply chain and maximize profitability.
About the Author
Amogh Dike, Senior Manager, Client Services
Amogh is SCM subject matter expert SME in Oracle COE of Jade Global. He is involved in development of industry specific solutions. He manages offshore delivery for enterprise applications for Oracle EBS and SaaS. He has 21 years of experience in Oracle EBS and Fusion applications. He also has 7 years of domain experience in Industrial Manufacturing and Auto Ancillary sector. He has done 15+ implementations in various industries.