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.