The FDA has confirmed the nationwide “shortage situation for intravenous (IV) solutions,” particularly 0.9% sodium chloride injection (i.e., saline) used to provide patients with the necessary fluids for hydration and other conditions.

The shortage has been triggered by a range of factors including a reported increased demand by hospitals, potentially related to the flu season.” This saline solution shortage is the latest of many drug shortages occurring over the past few years. Late last year the FDA passed a strategic plan to address drug shortages, which included requiring manufacturers to notify the FDA at least six months in advance of any production shut down.

Although this should alleviate some unforeseen shortages, it will not prepare the supply system for unpredictable demand. In the case of the IV saline solution, the alarms first went off in November of last year, and we may go into February with an even more precarious situation. For some solutions, it may be March before we see a full inventory recovery. The market in the US is served by Baxter (45%), Hospira (45%) and B. Braun (10%) and all three said they’re working at full capacity.

From a pure supply chain stand, this is a typical case of delayed demand signal response from peak demand at the point of consumption (IV solution administrated to patients at the hospital), all the way back to the manufacturer. More technically, this is a case of the bullwhip effect.

Over the last several years, supply chain inventory reduction has been an area of focus for pharmaceutical companies. They have been able to reduce stock and maintain service levels, but spikes such us this one uncover significant deficiencies in safety stock calculations. But most importantly, this specific case outlines gaps in demand sensing, alternative replenishment and agile response throughout the value chain. Outside of the current shortage, what the news fails to mention is that this latent demand signal will result in a higher supply of IV than needed in future months. In addition, the fact that all manufacturers are working at full capacity also implies that other drugs are NOT being produced.

The entire system will continue to play catch up until demand dwindles.

Saline solution is not a new blockbuster drug, or a complex molecule with elaborate manufacturing steps. Like other pharmaceutical products, it goes through stringent quality checks to ensure the percentages of its composition meet standard requirements, but its process is simple when compared with other drugs. Its simplicity highlights a more crucial flaw: older supply chains compensated for traditional demand and high buffers of inventory, and the archaic sense and response mechanisms throughout the pharmaceutical supply chain are inadequate. So when the flu season is worse than expected, and one of the manufacturers shuts down for two weeks, it brings the entire system to its knees.

Here are a few questions to assess if your system is ready for the next spike:

• Have you reduced inventory levels during the last few years without improving your demand visibility downstream, closer to consumption?
• Have you identified alternative agile supply mechanisms that allow you to offset lower safety stocks?
• Have you looked into postponement strategies that allow you to respond from inventory rather than from raw materials?
• Have you worked with wholesale distribution and hospitals to improve demand consumption and inventory level visibility?
• Have you identified alternative manufacturing mechanisms and built in flexibility to respond to demand unpredictability more quickly?

If most of the answers to the questions above are “no,” your company could be scrambling through the next drug shortage. If most of the answers were “yes,” you’re in route to a more agile supply chain, giving you a competitive advantage in the marketplace.