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From Our CEO

Coronavirus Outbreak Amplifies Pharmaceutical Supply Chain Risk

By ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE

The number of reported Coronavirus cases has surged to more than 10,000, with the death toll rising to 213. The New York Times’ Chris Buckley, chief China correspondent, reports from the epicenter of the outbreak: “It may be difficult to envisage just how thoroughly people have retreated from the streets and from public life. ... A lot of them wonder how long the shutdown can last. Even now, people are worrying about the jobs they may lose, the businesses that will close.”

Buckley goes on to say that many of those he talks with “erupt with a kind of anger and exasperation” over the fact that they had no idea how dangerous the pathogen was until their cities — including Wuhan, Shanghai, Suzhou, Huanggang and more — were literally shutting down.

As the virus extends across China and unnerves the rest of the world, pharmaceutical supply chains seem to be experiencing the greatest impact. According to the FDA, China has 15% of the world’s facilities manufacturing active pharmaceutical ingredients for 370 essential drugs.

Michael Osterholm, director of the Center for Infectious Disease Research at the University of Minnesota, delivered a stern warning to health care and pharmaceutical supply chain organizations on CNBC’s The Exchange: “Many of the critical products we use every day, such as medicines and medical devices, are actually manufactured in China’s areas being shut down. … Every company that has any manufacturing capacity in China right now better be looking very carefully at their supply chains.”

Osterholm emphasized that the outbreak is going to have an impact on the global supply of critical products “within days to weeks.”

Rosemary Gibson, a health care and patient safety expert at bioethics nonprofit The Hastings Center, says reliance on ingredients from China is worrisome. In her book, China Rx: Exposing the Risks of America’s Dependence on China for Medicine, she writes: “All it takes is for one ingredient plant to cause a problem in the near term. The production of some medicines depends on one supplier. This is why long supply chains for critical products should be rethought. … If you have a supply chain concentrated in a single country, no matter what country it is, that’s a risk of epic proportions.”

A wide range of risks

Reginaldo Montague, CFPIM, CSCP, writes in SCM Now magazine: “The pharmaceutical supply chain stretches around the world like a rubber band wrapped around a ball. The smallest fault in any segment of that rubber band challenges the integrity of the whole and could lead to catastrophic failure of the entire system.”

He explains that, not long ago, the drug supply chain was more localized and therefore far less complex. However, now that active ingredients are sourced from multiple global organizations, the pharmaceutical supply chain contains a wide range of risk profiles.

ASCM’s Risk Management Certificate is a comprehensive, forward-looking program that will enable you develop a powerful supply chain risk mitigation strategy for your business. The education explores how to effectively assess risk, explains governance and compliance, provides an enterprise risk management framework, defines proper organizational structures, and much more.

Take the first step toward earning your certificate and mastering supply chain risk management today.

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