Supply Chain Segmentation Is No Longer Optional for Pharma

With so much emphasis on the changing healthcare landscape, the pharmaceutical marketplace is rapidly evolving. Supply chains are getting longer and more complex, regulations are becoming more difficult to navigate, and customers are more discerning.

Across industries, many companies have spent the last several years focusing on external factors like marketing and branding, but not on their internal operations or supply chain relationships. According to one 2017 study, 38 percent of manufacturers were still using a static segmentation approach to their supply chains and 23 percent used a rule ofthumb approach, lacking any kind of data-driven methodology at all.

However, more and more firms are realizing they can reduce supply chain costs and better serve their customers through supply chain segmentation. Segmentation isn’t just the new norm in the pharmaceutical industry. Firms who wish to compete on a global scale will need to use this data to find new opportunities.

Pfizer Was Ahead of the Curve

Supply chain segmentation is nothing new in the Pharma industry. As far back as a decade ago, experts were sounding the alarm about changes coming to the industry.

"Changing compliance demands in sales and marketing, manufacturing, and research and development, as well as a shifting client base, and really, pharmaceutical manufacturers – and the supply chains in which they operate – have little choice except to change and adapt to the volatile environment in which they operate," wrote Jill Jusko, Senior Editor of IndustryWeek in 2008.

In response to these new demands, pharmaceutical giant Pfizer decided to tackle their supply chain problems early on. The company had originally segmented their supply chains geographically. Then, Pfizer moved to segmentation by customer type to reduce costs, serve their customer segments more effectively, and achieve efficiency on a global scale.

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Anthony J. Maddaluna, who was vice president of Pfizer Global Manufacturing (PGM) Strategy and Supply Network Transformation at the time, said the change was already a long time coming.

"For the longest time – and I think it's been the model for most pharmaceutical companies – it was always 'you sell what you make, you make what you sell,'" said Maddaluna. "What we're doing now is an active transformation to become a globally competitive supply network."

Leveraging Supply Chain Data

Segmentation allows supply chain managers to tailor supply chain policies to offer unique value propositions to each customer, thereby increasing sales and reducing operating costs. This concept worked well enough in 2008, but what can pharma companies do now to achieve these results? How do you determine the number of segments you need to reap these benefits?

The answer lies in leveraging data.

Most companies already have vast troves of data. But they struggle to turn that data into real business value. Furthermore, much of that data is siloed and inaccessible or is hindered by systems that don’t communicate.

With the right solution, innovative pharma companies can capture demand-related data at the POS level to anticipate market changes. They can even trace a product from one end of the supply chain to the other to gain visibility into their partners’ operations.

Naturally, pharma supply chain solutions can also help companies determine which and how many supply segments are needed, as well as how to segment them, in order to provide the best service to customers.

How Many Supply Chain Segments Do You Need?

Pharma companies rarely have just a single supply chain. Instead, they have multiple supply chains that are influenced by customer-driven factors like demand. A one-size-fits-all approach treats every supply chain the same.

To solve this, you can segment your supply chains by customer type and by product, or family of products, taking geographic factors into account as well. However, you must also consider how many supply chain segments you can support.

Ultimately, the number of supply chains you need will be unique to your company, but every company must define its supply chain segments based on performance. Too much segmentation may be too difficult to manage on an operational level, but not enough segmentation could lead to waste.

More Visibility into the Supply Chain

Supply chain segmentation is an ongoing process, and pharma companies may need to re-configure their segments quickly in response to market changes. With the right pharma supply chain solution, you can gain inventory visibility across your supply chain partners to make these changes happen.

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For more information about the future of supply chain management in pharma, check this year's LogiPharma Conference Agenda.