Strategic Sourcing Focuses on Risk Mitigation

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology-03-02-2010, Volume 34, Issue 3

Pharmaceutical companies and their suppliers share approaches in risk mitigation in sourcing and ways to optimize the outsourced relationship.

Managing risk is crucial in effective supply-chain practices, particularly for the pharmaceutical industry for which product quality is of paramount importance. The Pharmaceutical Supply Chain Initiative (PSCI), which was formed in 2006, is a program created by a group of pharmaceutical companies to support responsible supply-chain practices of pharmaceutical industry suppliers, a critical issue as drug companies elongate their supply chains geographically and increase their levels of external development and manufacturing.

The principles of PSCI

After launching in 2006, PSCI implemented the Pharmaceutical Industry Principles for Responsible Supply Chain Management in late 2007. These principles specify responsible business practices throughout the pharmaceutical industry's supply chain in the following areas: ethics; labor; health, safety, and the environment; and related management systems. The activities of PSCI are facilitated by the Business for Social Responsibility, a corporate-social-responsibility association consisting of 250 member companies. PSCI consists of 12 pharmaceutical companies: Abbott Laboratories (Abbott Park, IL), AstraZeneca (London), Bristol-Myers Squibb (New York), Eli Lilly (Indianapolis, IN), GlaxoSmithKline (London), Johnson & Johnson (New Brunswick, NJ), Merck & Co. (Whitehouse Station, NJ), Novartis (Basel), Novo Nordisk (Bagsvaerd, Denmark), Pfizer (New York), Roche (Basel), and Shire Pharmaceuticals (Dublin, Ireland).


The goal of PSCI is to apply the Responsible Supply Chain Management principles to achieve better social, economic, and environmental outcomes for all those involved in the pharmaceutical supply chain. One of the functions of PSCI is to help companies mitigate risk in supplier relations and supply-chain practices through a structured set of principles and an assessment program.

The elements of PSCI are fundamental to standard business practices, particularly in Western countries, and therefore serve as requisite for all suppliers, including suppliers from emerging markets. By joining PSCI, pharmaceutical companies agree to follow the principles in their own practices as well as work with suppliers that follow those principles.

Elements of PSCI principles

The elements of the ethics program include business integrity and fair competition, identification of concerns, and animal welfare. Under the labor elements, suppliers are obliged to uphold the human rights of workers and to treat them with dignity and respect. These labor elements include: freely chosen employment; proper use of child labor and young workers; nondiscrimination; fair treatment; wages, benefits, and working hours; and freedom of association.

The elements of health, safety, and environmental consideration under PSCI are of particular importance to the pharmaceutical industry given the chemical and biological production at its facilities and the handling of chemicals, biologicals, and related materials. The health and safety elements include: worker protection; process safety; emergency preparedness and responses; and hazard information. PSCI also obliges suppliers to operate in an environmentally responsible and efficient way and to minimize the adverse impact on the environment. Suppliers are encouraged to conserve natural resources, to avoid the use of hazardous materials where possible, and to reuse and recycle product when possible. Overall, these environmental elements include environmental authorizations, waste and emissions, and spills and releases.

The successful execution of any system relies on management support and a concomitant structure to ensure adherence and participation. The management-systems of the PSCI system include: commitment and accountability; legal and customer requirements; risk management; documentation; training and competency; and continual improvement.

Going forward, PSCI as an organization is focused on continuing improvement with two key focuses. Firstly, to develop standard screening tools to improve consistency and depth of implementation across the supply base, and secondly, to develop training for suppliers on the PSCI principles.