By Martin Rode, senior consultant at NIRAS
The COVID-19 pandemic exposed vulnerabilities that many organisations had long understood in theory but had never fully experienced in practice. Reliance on concentrated Active Pharmaceutical Ingredients (API) production centres, fragile logistic networks and limited visibility beyond immediate suppliers created disruption on a scale few had truly anticipated. Products were delayed, manufacturing schedules were interrupted and procurement teams found themselves competing for increasing scarce materials.
During this period, global trade rapidly declined, with foreign direct investment dropping by nearly 50%. The global pandemic proved that supply chains designed for efficiency are often the most fragile.
The response was substantial. Across the life sciences sector, companies have invested heavily in digital transformation projects intended to improve supply chain resilience. Advanced planning platforms, AI-based risk monitoring systems, digital supply chain twins and enhanced visibility tools have become everyday features and central components of many transformation programmes.
This raises a bit of an uncomfortable question. If the technology has improved so significantly, why are the same vulnerabilities continuing to persist?
Yet, despite these investments, many of the structural weaknesses exposed during the pandemic remain largely unchanged.
The industry today has access to more data, greater visibility and significantly more sophisticated analytical capabilities than it did six years ago, however, when disruption occurs, many organisations continue to encounter familiar challenges. Critical dependencies remain concentrated while alternative sourcing options are often limited and operational decisions are still frequently favouring efficiency over resilience.
This raises a bit of an uncomfortable question. If the technology has improved so significantly, why are the same vulnerabilities continuing to persist?
The answer to this lies in a misunderstanding that has become increasingly common across supply chain transformation programmes (across industries): resilience is being treated as a technology challenge when, in reality, it’s primarily a leadership and governance one.
Better visibility doesn’t automatically create resilience
One of the strongest assumptions underpinning many supply chain modernisations is that greater visibility will naturally lead to stronger resilience.
At first glance, the logic appears sound. If organisations can identify potential risk earlier, they should be able to respond more effectively.
Modern platforms are certainly capable of detecting issues that would previously have remained hidden. They can identify supplier concentration risk, monitor geopolitical developments, flag disruptions across transportation networks and model the potential fall out of supply interruptions across multiple manufacturing sites.
But, the problem is that visibility alone doesn’t change decision-making.
In many organisations, the data already exists. Risk dashboards highlight supplier dependencies. Scenario modelling demonstrates the consequences of disruption. Procurement teams understand where vulnerabilities sit within the network. So the challenge is rarely a lack of awareness.
The challenge emerges when acting on those insights require difficult commercial decisions.
Diversifying suppliers often increases costs. Qualifying alternative manufacturers can require extensive validation activity and regulatory engagement. Holding additional inventory ties up working capital. Introducing redundancy into a network can reduce operational efficiency.
These decisions frequently conflict with the performance metric against which organisations are measured and as a result, risks become visible without necessarily becoming actionable.
A persistent challenge is the limited visibility many organisations maintain beyond their direct supplier relationships
This distinction is critical. A supply chain platform can identify a vulnerability, but it cannot decide whether an organisation is willing to absorb the cost, complexity or regulatory burden associated with reducing that vulnerability. These choices remain fundamentally human decisions shaped by leadership priorities and business strategy.
Until businesses address this gap, investments in visibility will continue to produce unsatisfying results. Knowing where the weaknesses are is valuable, but only if that knowledge is allowed to influence how a supply chain is designed and managed.
The hidden exposure beyond tier-one suppliers
Another persistent challenge I see time and time again across pharmaceutical supply chains is the limited visibility many organisations maintain beyond their direct supplier relationships.
Most manufacturers possess a relatively strong understanding of their tier-one suppliers. They know who supplies their APIs, excipients, packaging materials and critical components. They understand contractual obligations and performance metrics and can typically assess supplier reliability with reasonable confidence.
However, the waters muddy further upstream and the picture becomes far less clear.
This presents a particular challenge within pharmaceutical manufacturing because many products depend on highly specialised raw materials and intermediates sourced from a small number of global producers. On paper, an organisation may appear to have a diversified supplier base, but in reality multiple suppliers may depend on the same upstream producer, manufacturing site or geographic region.
The risk may therefore be far more concentrated than procurement records initially suggest.
This issue became evident during the pandemic, but similar vulnerabilities continue to exist today. Geopolitical tensions, regional instability, trade restrictions, energy supply concerts and environmental events all have the potential to disrupt critical production hubs.
And the challenge is compounded by increasing regulatory scrutiny. Pharmaceutical manufacturers cannot simply switch suppliers when disruptions occur. Alternative sources have to undergo qualification processes, quality assessment and, in some cases, regulatory approval before they can be introduced into commercial production.
Organisations must also be willing to act on what the mapping goes on to reveal
This pending headache means that supply chain resilience must be developed long before disruption takes place.
Technology can certainly assist in the mapping of dependencies and identifying exposure across multiple tiers, but understanding the network is only the first step. Organisations must also be willing to act on what the mapping goes on to reveal.
This may involve challenging long-established sourcing strategies, reassessing supplier concentration risks or investing in alternative manufacturing capabilities that appear difficult to justify during periods of stability.
The most resilient organisations tend to be those willing to have these conversations before a crisis forces them to.
Why resilience must become a leadership priority
Perhaps the most significant barrier to supply chain resilience is not technological or operational. It’s cultural.
For decades, pharmaceutical supply chains have been optimised around efficiency. Cost reduction, inventory minimisation, utilisation improvements and procurement savings have become deeply embedded within organisational performance frameworks, and these priorities have delivered substantial benefits.
However, they’ve also shaped how risk is evaluated.
Resilience investments often struggle to compete against initiatives with more immediate financial returns. Additional suppliers, strategic inventory buffers and manufacturing redundancy can appear inefficient when viewed through a purely short-term lens, but their value only becomes fully visible when disruption occurs.
This creates a predictable cycle. Resilience measures are discussed, analysed and frequently postponed because the immediate business case appears insufficient. However, when disruption eventually materialises, the same measures become mission critical, but implementation options are often significantly more constrained.
In my experience, the organisations that navigate disruption most effectively tend to approach resilience differently.
Rather than viewing resilience as an insurance policy or contingency measure, they treat it as a design principle. Supplier diversification, risk management and operational flexibility are integrated into strategic decision-making from the outset while leadership teams accept that some degree of redundancy is deliberate investment in continuity.
Importantly, these organisations recognise that resilience and efficiency aren't always mutually exclusive. The most effective supply chains are those capable of balancing both objectives rather than pursuing one at the expense of the other.
The pharma industry has undoubtedly taken great steps forward in understanding supply chain risks with digital tools and enhanced forecasting providing leaders with insights that would have been very difficult to obtain only a number of years ago.
But, the next stage of progress will require something technology alone can’t deliver.
Leadership teams will need to challenge the assumptions that continue to shape supply chain decisions
Leadership teams will need to challenge the assumptions that continue to shape supply chain decisions; organisations must act on the risk they can already see and resilience must be viewed as a fundamental component of supply chain strategy, not just a software upgrade.
Until this shift happens, even the most sophisticated digital platforms will continue to sit alongside many of the same vulnerabilities they were designed to eliminate.
By Martin Rode, senior consultant at NIRAS
The pharmaceutical industry has spent the best part of six years reassessing its supply chain.
The COVID-19 pandemic exposed vulnerabilities that many organisations had long understood in theory but had never fully experienced in practice. Reliance on concentrated Active Pharmaceutical Ingredients (API) production centres, fragile logistic networks and limited visibility beyond immediate suppliers created disruption on a scale few had truly anticipated. Products were delayed, manufacturing schedules were interrupted and procurement teams found themselves competing for increasing scarce materials.
During this period, global trade rapidly declined, with foreign direct investment dropping by nearly 50%. The global pandemic proved that supply chains designed for efficiency are often the most fragile.
The response was substantial. Across the life sciences sector, companies have invested heavily in digital transformation projects intended to improve supply chain resilience. Advanced planning platforms, AI-based risk monitoring systems, digital supply chain twins and enhanced visibility tools have become everyday features and central components of many transformation programmes.
Yet, despite these investments, many of the structural weaknesses exposed during the pandemic remain largely unchanged.
The industry today has access to more data, greater visibility and significantly more sophisticated analytical capabilities than it did six years ago, however, when disruption occurs, many organisations continue to encounter familiar challenges. Critical dependencies remain concentrated while alternative sourcing options are often limited and operational decisions are still frequently favouring efficiency over resilience.
This raises a bit of an uncomfortable question. If the technology has improved so significantly, why are the same vulnerabilities continuing to persist?
The answer to this lies in a misunderstanding that has become increasingly common across supply chain transformation programmes (across industries): resilience is being treated as a technology challenge when, in reality, it’s primarily a leadership and governance one.
Better visibility doesn’t automatically create resilience
One of the strongest assumptions underpinning many supply chain modernisations is that greater visibility will naturally lead to stronger resilience.
At first glance, the logic appears sound. If organisations can identify potential risk earlier, they should be able to respond more effectively.
Modern platforms are certainly capable of detecting issues that would previously have remained hidden. They can identify supplier concentration risk, monitor geopolitical developments, flag disruptions across transportation networks and model the potential fall out of supply interruptions across multiple manufacturing sites.
But, the problem is that visibility alone doesn’t change decision-making.
In many organisations, the data already exists. Risk dashboards highlight supplier dependencies. Scenario modelling demonstrates the consequences of disruption. Procurement teams understand where vulnerabilities sit within the network. So the challenge is rarely a lack of awareness.
The challenge emerges when acting on those insights require difficult commercial decisions.
Diversifying suppliers often increases costs. Qualifying alternative manufacturers can require extensive validation activity and regulatory engagement. Holding additional inventory ties up working capital. Introducing redundancy into a network can reduce operational efficiency.
These decisions frequently conflict with the performance metric against which organisations are measured and as a result, risks become visible without necessarily becoming actionable.
This distinction is critical. A supply chain platform can identify a vulnerability, but it cannot decide whether an organisation is willing to absorb the cost, complexity or regulatory burden associated with reducing that vulnerability. These choices remain fundamentally human decisions shaped by leadership priorities and business strategy.
Until businesses address this gap, investments in visibility will continue to produce unsatisfying results
Until businesses address this gap, investments in visibility will continue to produce unsatisfying results. Knowing where the weaknesses are is valuable, but only if that knowledge is allowed to influence how a supply chain is designed and managed.
The hidden exposure beyond tier-one suppliers
Another persistent challenge I see time and time again across pharmaceutical supply chains is the limited visibility many organisations maintain beyond their direct supplier relationships.
Most manufacturers possess a relatively strong understanding of their tier-one suppliers. They know who supplies their APIs, excipients, packaging materials and critical components. They understand contractual obligations and performance metrics and can typically assess supplier reliability with reasonable confidence.
However, the waters muddy further upstream and the picture becomes far less clear.
This presents a particular challenge within pharmaceutical manufacturing because many products depend on highly specialised raw materials and intermediates sourced from a small number of global producers. On paper, an organisation may appear to have a diversified supplier base, but in reality multiple suppliers may depend on the same upstream producer, manufacturing site or geographic region.
The risk may therefore be far more concentrated than procurement records initially suggest.
This issue became evident during the pandemic, but similar vulnerabilities continue to exist today. Geopolitical tensions, regional instability, trade restrictions, energy supply concerts and environmental events all have the potential to disrupt critical production hubs.
And the challenge is compounded by increasing regulatory scrutiny. Pharmaceutical manufacturers cannot simply switch suppliers when disruptions occur. Alternative sources have to undergo qualification processes, quality assessment and, in some cases, regulatory approval before they can be introduced into commercial production.
This pending headache means that supply chain resilience must be developed long before disruption takes place.
Technology can certainly assist in the mapping of dependencies and identifying exposure across multiple tiers, but understanding the network is only the first step. Organisations must also be willing to act on what the mapping goes on to reveal.
This may involve challenging long-established sourcing strategies, reassessing supplier concentration risks or investing in alternative manufacturing capabilities that appear difficult to justify during periods of stability.
The most resilient organisations tend to be those willing to have these conversations before a crisis forces them to.
Why resilience must become a leadership priority
Perhaps the most significant barrier to supply chain resilience is not technological or operational. It’s cultural.
For decades, pharmaceutical supply chains have been optimised around efficiency. Cost reduction, inventory minimisation, utilisation improvements and procurement savings have become deeply embedded within organisational performance frameworks, and these priorities have delivered substantial benefits.
However, they’ve also shaped how risk is evaluated.
Resilience investments often struggle to compete against initiatives with more immediate financial returns. Additional suppliers, strategic inventory buffers and manufacturing redundancy can appear inefficient when viewed through a purely short-term lens, but their value only becomes fully visible when disruption occurs.
This creates a predictable cycle. Resilience measures are discussed, analysed and frequently postponed because the immediate business case appears insufficient. However, when disruption eventually materialises, the same measures become mission critical, but implementation options are often significantly more constrained.
In my experience, the organisations that navigate disruption most effectively tend to approach resilience differently.
Rather than viewing resilience as an insurance policy or contingency measure, they treat it as a design principle. Supplier diversification, risk management and operational flexibility are integrated into strategic decision-making from the outset while leadership teams accept that some degree of redundancy is deliberate investment in continuity.
Importantly, these organisations recognise that resilience and efficiency aren't always mutually exclusive. The most effective supply chains are those capable of balancing both objectives rather than pursuing one at the expense of the other.
The pharma industry has undoubtedly taken great steps forward in understanding supply chain risks with digital tools and enhanced forecasting providing leaders with insights that would have been very difficult to obtain only a number of years ago.
But, the next stage of progress will require something technology alone can’t deliver.
Leadership teams will need to challenge the assumptions that continue to shape supply chain decisions; organisations must act on the risk they can already see and resilience must be viewed as a fundamental component of supply chain strategy, not just a software upgrade.
Until this shift happens, even the most sophisticated digital platforms will continue to sit alongside many of the same vulnerabilities they were designed to eliminate.
