What lessons can Pharma firms learn from KFC’s supply chain mishap?
Kentucky Fried Chicken (KFC), the global fried chicken chain has stirred much commotion in the media last March with its supply chain mishap. They altered their distribution arrangements which resulted in a lack of supply of fresh chicken to majority of its stores in the UK. This has led to the temporary closure of 900 outlets which resulted in a backlash from its consumers.
With swift crisis management that was made promptly, KFC apologised through a landing page that gave customers the ability to check on the status of the nearest KFC outlet.
Photo credit: https://www.kfc.co.uk/crossed-the-road
This incident is an example of a lax in effective risk management, along with supply chain and distribution management. It also foreshadows the increasing need for customer services to work closely with the supply chain management team.
While the direct impact was only experienced in the UK, media coverages that went viral on the internet made it a global sensation. The repercussions would have been detrimental to its brand and reputation as one of the leading fast-food chains in the world should immediate actions not be taken.
This is extremely relevant to the pharmaceutical industry where it is possible to face similar supply chain management and distribution issues. These challenges often stem from the pressure of inventory management, storage of drugs and forecasting of demand for drugs in the consumer market.
What are some of the issues pharmaceutical firms face in supply chain today?
Part of inventory control is the process of managing inventories at the lowest possible cost. The pharmacy first decides how much inventory investment to make, followed by the timing to reorder, and the quantities needed to meet customer demands.
The challenge lies in the balancing of supply and demand while minimising inventory investments and procurement costs. Pharmaceutical firms tend to face shortages or excess in supplies due to uncertainty of market demand. As a highly volatile sector, it faces frequent speculations of mergers and acquisitions. As a result, this causes much uncertainty for existing drugs as demand in the market remains unpredictable.
As the nature of drugs are highly complex, there are also various uncertainties in the ability to extend the protected lifespan of drugs. This is especially prominent when establishing the pipeline of new drugs. Factors that need to be considered include determining the drugs that would be successful in trials, along with its dosage and optimal treatment regime.
Ultimately, inventory management and distribution require planning. From the assessment of demand to the aggregation of appropriate distribution centres, forecasts need to be made carefully to ensure no shortages.
Storage and warehouse management
Storage and warehouse management is one other extremely challenging area. This can be in terms of temperature control and even shipment of products.
One of the most intricate and demanding supply chain management is cold chain logistics. Cold chain refers to the maintenance of specific temperature bands under which drugs and drug accessories are stored and transported. Due to its rigorous temperature requirements and energy dependence, management becomes a challenge. This is especially so in the management of highly sensitive drugs as it can lead to a reduced quality of drugs.
Manufacturers within supply chain are likely to experience a continual increase of costs associated with temperature sensitive transportation. This is due to additional qualification and validation protocols that have emerged. In Asia, custom clearance is mandatory while transporting products from country to country. Since delays in customs are more than likely, it is crucial for pharmaceutical companies to have packaging that can last for a longer period of time.
This highlights the importance of taking the right precautions to ensure the supply chain is optimal and running.
Key learning points
The key to optimal inventory control: Better predictive abilities to project consumer demand.
An efficient and productive supply chain can enhance credibility and reinforce branding of an organisation
Pharmaceutical firms need to start strategising ways in which they can safeguard themselves from incurring losses.
Unlike fried chicken, drugs and vaccines are products that are crucial to the lives of many, and any mishap in supply chain can be life-threatening to the masses
Customer Service is key to any part of the business when it comes to risk and crisis management
The pharmaceutical industry is a highly complex industry especially in their processes and operations. They are involved in a myriad of areas such as the discovery, development and manufacture of drugs and medication. There is no one-size-fits-all approach to ensure that your organisation does not face a supply chain crisis like KFC. However, the most successful pharmaceutical companies are those that seize the opportunity by taking the initiative on building agile and efficient supply chains.
If you’d like to know more about the trends within supply chain or how other pharmaceutical organisations are managing their supply chains’ team, do contact our local team at [email protected] or follow us on our LinkedIn page for other related insights on the life sciences industry.