Increasing global competition and heightened customer expectations have for many years now encouraged enterprises in a variety
of industries to focus on, and invest in, effective operations management. In most industries, managers no longer have to
be convinced of the value of taking an integrated view of the design, analysis, and operation of their manufacturing, service,
and logistics operations. Indeed, in many industries, operational excellence and a sophisticated approach to supply-chain
risk management based on flexibility, efficiency, and advanced tools for logistics network optimization are no longer a competitive
advantage—they are necessary to compete.
Background
Consider, for example, the semiconductor industry. Thirty years ago, the semiconductor industry was a growing technology-focused
industry and, for the first time, was beginning to face cost pressures. For years, the industry had focused on superior technology,
and manufacturing was an afterthought. As long as the products were manufactured as they were envisioned by their inventors,
there was little need to pay attention to capacity utilization, operational efficiency, inventory levels, or risk management;
if you made them, profits would come.
However, as the semiconductor industry matured and competitive pressures grew, firms began to focus on operations, utilizing
resources effectively and efficiently, optimizing systems, and perhaps most importantly, dealing effectively with uncertainty
and risk. Significant advances in the science of operations were required to bring about these changes, and by working collaboratively
among themselves as well as with academia through organizations such as SEMATECH, semiconductor firms were able to make great
strides, pushing the state-of-the-art in semiconductor operations to new heights.
Figure 1: Respondents indicate their level of concern about key risk categories, where the scale ranges from 1 to 5, with
1 meaning not concerned, 3 meaning concerned, 5 meaning extremely concerned.
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Biopharmaceutical firms now find themselves in a similar position. As the biopharmaceutical industry enters its fourth decade,
it is entering a new, more mature phase. Revenue is growing, innovative business models and partnerships are being implemented,
and products are coming to market. At the same time, this new maturity brings "adult-sized responsibility" (1). Although the
science of biotechnology is advancing rapidly, with the promise of making an enormous impact on society, the operations, supply
chain, and logistics of biotechnology is not keeping pace. The ability of the industry to reach its potential requires systems
that can produce and deliver products safely, reliably, and cost effectively to patients, while also allowing biopharmaceutical
firms to successfully navigate the many risks inherent in the industry. It is becoming apparent that the biopharmaceutical
supply chain presents a unique set of operational challenges—demand is highly uncertain and dependent on the results of clinical
trials and competitors' actions; supply is highly uncertain; biological processes are complex and incompletely understood;
regulatory demands are significant and vary from region to region, including the existence of agencies in multiple jurisdictions
that add layers of complexity; contamination is difficult to detect and can have a significant impact; product failures can
cost lives; IP concerns are significant; and capacity is extremely expensive and requires long lead times to build or acquire.
