Pharma companies told to focus on supply chain issues

Europe's largest pharmaceuticals companies have been targeted as among those not paying enough attention to issues surrounding the procurement and supply chain.

A new report from the Chartered Institute of Purchasing & Supply (CIPS) has shone a startling light down on the UK FTSE 100, highlighting the fact that despite a volatile global economy and huge natural disasters
seen this year, some of the country's biggest firms are not paying close enough attention to the sector.

It found that over a three year period from 2008 to 2010, FTSE 100 firms had on average increased their focus on the supply chain by 14 per cent, a starkly different percentage from the attention that has been paid to risk management, skills, sustainability and even bonuses.

However, the CIPS stressed that supply chain is closely linked to how fragile the global economy gets and called upon major companies to look closely at the issues that surround the sector in their next annual reports

Encouragingly, businesses in the pharma and biotech sector were among the top to mention supply chain, procurement and purchasing in their annual reports over the three years. However, they were still notably behind the aero and auto sector, food and drink, and utilities sectors, while the retail and consumer industries paid the most attention to the issue.

This, observed David Noble, chief executive of the CIPS, is largely down to the fact that the retail sector's bottom line is heavily influenced on the good management of supply chains.

He noted that some of the increased focus on the supply chain lies down to the natural disasters that the world has seen in the past 12 months.

"Recent disruption caused by the Japanese earthquake and tsunami prompted some urgent refocusing on the resilience of supply chains," he commented.

The report examined the annual reports of AstraZeneca, Glaxosmithkline, Shire and Smith & Nephew and found an encouraging sign from the pharma industry regarding the focus they have put on emerging markets.

It examined other mentions in annual reports of issues away from the supply chain, with firms showing a 114 per cent increase in focus on emerging markets. By far, this was largely down to the strong focus the pharma and biotech sector has placed on the issue, mentioning emerging markets more than 80 times.

Emerging markets is a key issue for the logistics and supply chain, as businesses will need to adapt to the evolving global marketplace.While the CIPS only focused on the search terms in annual reports of FTSE 100 companies, this does not mean to say that companies operating in Europe are excluded from the organisation's call to pay closer attention to supply management activity.

Indeed, commenting on the report, Malory Davies wrote in his blog for Supply Chain Standard that the findings are a surprise considering the global issues supply chain professionals have had to deal with over the past year.

"Looking ahead, it would be a brave person who predicted that anytime soon there would be a significant improvement in the market conditions in which most supply chains have been operating," he wrote.  "It's no time to stop paying attention."

David Noble said that now, as businesses across the world and of all sizes are finding ways to survive economic volatility, they need to become more efficient, reduce costs and address their procurement function within the entire business.

This, he explained, is based on a "deep understanding of the value suppliers add to the reputation and success of the organisation, and the risks attached to the purchases made".

"Now is the time for businesses to start focusing on their procurement processes and getting the right people in the right positions to bring value to purchasing practice," he remarked.

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