The tragic earthquake and tsunami in Japan in March rocketed supply-chain issues to a prominent position. Even the most sophisticated
supply-chain managers were caught off guard by the event, which caused the shutdown of many manufacturing sites due to earthquake
damage or power-supply interruptions.
What is striking about the impact of the Japan earthquake on the supply-chain is the widespread production disruptions caused
by supply interruptions of simple components. Automobile manufacturers were forced to shut down manufacturing operations at
plants around the world due to component shortages. For example, Ford halted shipments of some cars just because of a shortage
of certain paint pigments. Perhaps most famously, production of Apple's iPad2 was threatened by the shutdown of a supplier
in northeastern Japan making a connector costing just a few cents.
The automobile and electronics industries are known for their supply-chain sophistication, including their ability to source
components globally and have them delivered just-in-time to the manufacturing floor. The fact that their production would
be disrupted by such minor components speaks to just how complex effective supply-chain management really is.
Bio/pharma industry vulnerability
Reports so far suggest that the bio/pharmaceutical supply-chain has only been marginally affected by the events in Japan.
We have heard of only two interruptions. One was from a supplier of glycine, an ingredient in some common solid-dosage products,
which indicated that production may be shut down for up to 24 months. We also heard of disruptions in some supplies of gelatin
used in softgel capsules, for which alternative suppliers are readily available.
Nevertheless, the bio/pharmaceutical industry has not been without its own supply-chain difficulties in recent months. A major
fire destroyed a warehouse attached to Catalent's commercial packaging facility in Corby, United Kingdom, and problems stemming
from delamination in glass vials resulted in a number of injectable products being recalled from the market.
The pharmaceutical industry has done surprisingly little to protect itself from supply-chain interruptions. PharmSource recently
conducted a survey about a widely used component for solid-dosage drugs, which typically requires preformulation compatibility
testing, and found that few companies have exhibited the foresight to qualify second or third suppliers.
For component-assembly industries, such as automobiles or electronics that are relatively unregulated, the interruption in
the supply of a minor component will be disruptive and relatively short-lived. In most cases, it could be a matter of weeks
to redesign the component or have substitute suppliers step in for secondary supply. In the bio/pharmaceutical industry, however,
the long-term interruption of a minor component could be catastrophic. Even a relatively minor excipient can cause changes
in a product's characteristics, thereby requiring full preformulation analysis, stability testing, and testing of production
batches. Add to that the supplier qualification and regulatory-filing requirements, and the production time lost can be considerable.
This lack of advanced planning by bio/pharmaceutical companies is surprising because the potential costs are so high. An extended
period of lost production means lost sales and loss of market share to competitors that might never be regained.