How Pharma Supply Chain Managers Should Approach Digital Transformation and Where Vendors Can Help Them
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Market Overview
Below is a list of market forecasts highlighting the pharma industry's digital transformation trend as they aim to improve their supply chains.
- As pharmaceutical companies look to develop deeper insights into their supply chains and provide more proactive signals upstream, investments in demand planning software are expected to increase across all four regions (North America, Europe, Asia-Pacific, and The Rest of World (RoW)).
- Mostly due to the lower levels of supply chain software adoption in comparison to Europe and North America, Asia-Pacific is expected to see the highest rate of growth in demand planning revenue at a Compound Annual Growth Rate (CAGR) of just under 17%, with the RoW second at a CAGR of 12.1%.
- By 2027, pharmaceutical demand planning software will generate US$980 million in revenue worldwide.
- In line with growing temperature-sensitive product development and consumption, cold chain tracking infrastructure is expected to sgrow steadily across all four regions. Both warehouse monitoring and reefer telematics will see continued investment, driven by regulatory pressure, distributors seeking to service the growing portion of the industry, and companies pursuing cost savings by reducing product loss.
- When assessing the market opportunity for digital transformation in the pharmaceutical industry, developing countries offer tremendous potential, but the lack of cold chain infrastructure must be addressed. For example, Africa represents nearly 25% of global vaccine demand, but a lack of cold chain equipment, reliable data, and monitoring capabilities continue to hinder the population’s access to lifesaving vaccines.
- By the end of 2023, pharmaceutical cold chain track & trace revenue will reach nearly US$94 billion—with warehouses accounting for US$92.1 billion in revenue and the reefer segment representing US$1.8 billion.
- ABI Research expects the revenue generated from pharmaceutical cold chain track & trace technologies in 2027 to be US$147.7 billion.
“Over the last 2 decades, the pharmaceutical industry has grown significantly both in terms of market size and globalization. With aging populations, new diseases, and innovative new methods for drug development, growth is expected to continue. Couple this with the rise in public attention following vaccine distribution during the COVID-19 pandemic and it is clear to see how pharmaceutical supply chains are increasingly turning to digital transformation for both resiliency and efficiency.” – Ryan Wiggin, Industry Analyst at ABI Research
The following sections offer recommendations for pharmaceutical companies digitally transforming their supply chain space, and tech vendors offering these solutions. The first three sections help pharma firms make their supply chain more resilient, followed by guidance for vendors offering the digital transformation technologies that make resilience possible.
Key Decision Items
Drive Internal Alignment to Ensure Effective Program Governance
According to a North Carolina State University study, “resiliency” was the top priority in pharmaceutical procurement and supply chain for C-Suite executives. However, for mid-level management, the number one and number two priorities were cost savings and on-time deliveries.
This misalignment on how to approach digital transformation can damage the establishment of long-term supply chain improvements and migrations toward new practices, as management levels are not coordinated in their approach. It should be noted that supply chain resilience is not exclusive of cost savings or on-time deliveries and needs to be incentivized for each business level to identify key pain points. Further, it needs to be coordinated on a transformative strategy that will foster longer-term operational efficiencies.
Attract Tech-Focused Talent through Opportunity and Targeted Collaboration
The increasing use of digital transformation technologies for the pharma supply chain, such as Artificial Intelligence (AI) and big data analytics, has created a requirement for a much broader skill set to be present within pharmaceutical companies. This trend is evidenced by a marked increase in job postings related to these two disciplines since 2021.
To fill the skill gap, pharmaceutical companies need to provide a work environment and opportunities that are attractive enough to bring talent over from big tech companies. Recent layoffs from companies like Amazon, Google, and Meta could present a key opportunity for the pharmaceutical industry to capture talent if companies can act fast. Or, as evidenced by GlaxoSmithKline’s (GSK) partnership with 23andMe, pharma companies can build strategic alliances with tech companies to leverage valuable databases and talent to advance new medicines (in this example, based on genetics).
Use Added Digital Infrastructure as a Competitive Differentiator
With growing price pressures in the pharmaceutical industry, digital transformation can provide the operational efficiencies and waste reduction means needed to reduce supply chain costs. This will facilitate the most competitive product prices.
But in addition to this, as multiple companies start providing the same drug at similar prices, customer buying decisions will begin to be driven by other factors, such as supply resilience and providing the best product visibility to the consumer. Digital solution adoption can be a crucial differentiator in tendering decisions and successful partnerships.
The next three sections offer strategic guidance for tech vendors that aim to capitalize on the digital transformation trend for pharma supply chains and want to smooth the process for clients.
Consider Market Differences When Targeting Digitalization Solutions
Different regulatory environments will drive a variance in technology adoption for pharmaceutical firms. Still, technology vendors also need to be aware of medical infrastructure differences and population dynamics that will significantly influence operational needs. In developing countries, especially, simple things, such as Internet access, road networks, and the number of medical facilities and pharmacies, will impact the level of e-commerce presence and access to certain medication.
For these reasons, tech vendors focusing on the pharma supply chain must target different solutions with these challenges in mind. For example, a handful of African countries are trialing the use of drones to deliver much-needed medical supplies to rural regions.
Offer Managed Services
Pharma companies will always want to focus much of their attention on product development and understanding consumer needs. Companies are, therefore, seeking to invest in digital transformation solutions through a single party that can provide the necessary hardware installation, software setup, system integration, and ongoing maintenance and upgrades.
Growth in Software-as-a-Service (SaaS) and Robotics-as-a-Service (RaaS) linked in with cloud-based platforms are part of this approach. These aaS solutions provide pharmaceuticals with a more trusted, ongoing service, rather than a one-time solution purchase that only tackles a single logistical pain point.
Provide Regulatory Compliance-Focused Solutions
Compliance with new pharmaceutical regulations can require both physical changes and system changes.
- Physical Changes: Two-Dimensional (2D) barcodes added to each asset, sensors added to loads to track product conditions, etc.
- System Changes: Centralized data management, automated reporting to authorities, etc.
These regulations add both cost and administration time to current operations for pharmaceutical manufacturers. Adopting digitalization solutions to keep both to a bare minimum becomes compulsory for pharmaceutical companies seeking to maintain competitive pricing and overall efficiency. Therefore, it’s imperative for vendors to develop solutions that focus on tackling these unavoidable pain points.
Key Market Players to Watch
Dig Deeper for the Full Picture
To better understand everything about the digitalization of the pharma supply chain, download ABI Research’s Digital Transformation of the Pharmaceutical Supply Chain research report. In this report, we walk you through the following:
- Pain points underlying pharma supply chain managers.
- Key enabling technologies and strategies for vendors and users to ease the digital transformation process.
- Emerging pharmaceutical industry and cold chain trends spurring the need for digital transformation.
- Future market forecasts for pharmaceutical industry revenue and investment in supply chain digitalization.
Not ready for the report yet? Check out our following Research Highlights:
- Expanding Supply Chain Tracking with Returnable Transport Assets (RTAs)
- How Digital Transformation Fits into the Food and Grocery Retail Supply Chain
This content is part of the company’s Supply Chain Management & Logistics Research Service.
Related Research
Report | 1Q 2023 | AN-5733
