Building a resilient supply chain in the Life Sciences industry
May 31, 2019
May 31, 2019
In business, you can’t always avoid trouble of one sort or another, but you can learn to bounce back quickly. It’s what we mean by “resilience”—the ability of an organization to recover from difficulty, adapt to change and persevere in the face of unexpected disruption.1 Our particular focus here is on how Life Sciences companies can avoid or mitigate product availability disruption due to natural disasters such as hurricanes and earthquakes; and human-caused disasters such as compliance violations and product safety and quality issues. Accenture Strategy research shows that these kinds of disruptors can have a significant impact on product flow and stock price if a company is under-prepared.2
Natural disasters often disrupt global drug supply chains, and such disasters are becoming increasingly common, often with devastating human and business impact. Pharmaceutical supply chains are particularly vulnerable. In the United States, for example, 80 percent of active pharmaceutical ingredients are made outside the country.3 Market data suggests that supply chain disruptions caused by natural disasters can result in a 1 to 3 percent drop in share price.4
Predictable and preventable disasters—compliance violations, skills shortages, etc.—have wreaked similar havoc on product availability and can severely diminish consumer trust, which can have damaging impacts on future revenue. In fact, Accenture Strategy research on the impact of stakeholder trust shows that a life sciences company with $2B in revenue experiencing a trust-damaging incident has the potential to lose $170 million in future revenue growth.5 From a compliance perspective, share prices of pharmaceutical and medical device companies fall 15 percent on average after a major compliance violation.6
Market data suggests that supply chain disruptions caused by natural disasters can result in a 1 to 3 percent drop in share price.
To guard against the negative impacts of supply chain disruption, organizations should develop a framework to prepare, through surveillance and flexibility; respond, with quick communications and visibility; and recover, with a focus on rebuilding trust.
Life Sciences companies have an obligation to their patients to plan for events that might delay or disrupt product availability. While preparations can’t stop every disaster, natural or otherwise, they can help mitigate the impact and allow operations to continue to keep the life-saving medicines and devices in the hands of those who need them most.
1 Accenture Strategy, “Resilience: The key to growth in Life Sciences,” March 2018
2 Accenture Strategy analysis
3 Allie Nawrat,“ Are pharma supply chains ready for the next major disruption?,”Pharmaceutical Technology, December 2018
4 Accenture Strategy analysis
5 Our Competitive Agility Index found that Life Sciences companies that experienced a material loss of trust due to, for example, data breaches or environmental incidents, saw their Competitive Agility Index score drop by 2 points. For a $2B Life Sciences company this 2-point drop translates into a decline in revenue growth of 8.5 percent (or approximately $170 million) and a negative impact on EBITDA growth of 13.4 percent.
6Accenture Strategy analysis