Mitigating Risk in the Supply Chain - Pharmaceutical Technology

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Mitigating Risk in the Supply Chain
The author describes the importance of risk management and offers strategies for risk-management preparedness in supply chains.


Pharmaceutical Technology
Volume 34, pp. s22-s28

As supply complexity and associated risk continues to increase, more companies are recognizing the need to improve their procurement organizations and are engaging third-party assistance to upgrade their strategic sourcing and technology capabilities.


Risk-management preparedness
Sustainability. As corporate-reputation and brand-image disasters become more frequent, there are other issues that companies with global supply chains need to address. These broad concerns involve human rights (e.g., child labor, working conditions, unfair pay), global warming, and other environmental impacts. The pharmaceutical and biotechnology industries are also feeling the effects of animal-rights groups that want to ensure the ethical treatment of animals. Nongovernmental organizations (NGOs) play a role in influencing customers, shareholders, and investors. As with most ideologies designed to promote social change, adoption rates by corporations can be classified into three main groups: laggards, followers, and leaders, with the majority of companies acting as followers.


Diagnostic test for supply-chain risk mitigation
When it comes to embracing sustainability and green behavior in manufacturing and product specifications, several large corporations such as GlaxoSmithKline (London), Proctor & Gamble (Cincinnati), Diageo (London), and Unilever (London) achieved material cost savings, enhanced brand image, and generated increased demand for their products through innovative changes in primary and secondary packaging components. Examples include reducing corrugated box and cardboard carton-wall gauge, buying board and paper-based components from certified forests, using recycled board and paper, reducing wall thickness of polyethylene containers, and switching to up to 100% recycled polyethylene. These types of changes can reduce the amount of material used, increase the amount of material being recycled, and reduce the overall associated carbon footprint. There is a positive relationship between sustainability and green behavior in enhancing brand image and generating greater sales revenue as a result (3).

Responsible spending. The economic meltdown of 2009, the resulting attempts of government bailouts, the many government stimulus programs, and the healthcare overhaul serve to show how the changing environment led to closer examination of corporate spending and has placed an increased emphasis on responsible spending policies and practices. As sales have slumped, more companies have taken a serious look at how to buy goods and services in a way that reduces spending.

An example from outside the pharmaceutical and biotechnology industries is the luxury expenditure policy, which is imposed on companies receiving funding under the Troubled Asset Relief Program, commonly referred to as TARP or RCP, the federal program under which the US government purchased assets and equity from financial institutions to strengthen the financial sector. The guidelines set limits for entertainment or events, office and facility renovations, aviation or other transportation services, and other similar items, activities, or events. The pharmaceutical and biotechnology industries should take note. A similar scenario is conceivable as the government may take more responsibility for healthcare, and closer scrutiny will be paid to how discretionary budgets are spent. As a result, corporations are reevaluating policies and practices that govern how their goods and services are purchased.


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