Clarkston hosted our latest Life Sciences Executive Exchange in the San Francisco Bay Area recently. Business and IT leaders from local biotech companies, as well as academic representation from UC Berkeley, joined Clarkston for an evening of networking, dinner, and a lively discussion around biopharmaceutical supply chain.
Biopharma supply chain is unique compared to other industries, even other life sciences groups like pharma and medical devices. One primary difference is the relaxed position on inventory measurements and increased focus on service levels. Thus, the primary discussion of the evening was if and when this supply chain focus, or lack thereof, may change for the industry.
Biopharma has good reason to focus on the availability of product, as often the inventory carrying cost is negligible compared to the potential for revenue loss of a product shortage. With this perspective comes space constraints, which carries a material cost and supply chain impact, creating a greater constraint on inventory. Validating new facility space is certainly not easy, so medium- to long-term planning becomes a key focus. Products must also be managed for expiration dates making sure that they enter the supply chain with ample time for sufficient shelf life. Because inventory is not tightly controlled, this often leads to many write-downs for products that could have been sold.
Although the prioritization of the industry today is around service levels, there seems to be an influx of supply chain leaders coming from outside the biopharmaceutical world. Current biopharma supply chain metrics like inventory levels, inventory turns, write-down, carrying costs, etc, are obviously well outside the boundaries of what these professionals would deem acceptable in their previous lives. So, perhaps with this new outside perspective and the continued maturation of biopharma operations, over time we should expect a shift in focus from product availability at all costs to some level of supply chain efficiency.