Supply and demand: how tech is smoothing the way in pharma

According to a study by Transparency Market Research, the global demand for active pharmaceutical ingredients (APIs) is expected to increase at a compound annual growth rate of 6.5% from a figure of nearly $120 billion in 2013 to just under $186 billion in 2020.

APIs for drugs that treat cancer and central nervous system diseases are expected to grow at the fastest rate, providing vital treatment for patients. For pharmaceutical businesses to take advantage of the expected growth, continued access to supply is crucial.

As noted by Kevin Wilbur, SVP of AP Automation at Tungsten Network: “The pharma trade is so varied and vast, that a single Supplier may provide unreplicated access to a product. As a business that sits at the centre of global trade, we see this across multiple industries.”

While many will recognise the continual balancing of saving costs and managing processes, perhaps the most important factor to consider is having access to a crucial product ingredient in the first place.

“Suppliers have often been overlooked as a competitive force,” said Kevin, “but as we move further into the digital age it is vital businesses recognise the importance of a strong Supplier base.”

When considering Suppliers to the pharmaceutical industry, likely lists could include everyone from providers of raw materials and their intermediates to manufacturers, marketers and consultants. For each active ingredient, for example, there will be a complex supply chain between sourcing and final consumption. With demand set to rocket, complexity is only likely to increase.

“If a Supplier goes out of business, that access is called into question; and in the pharmaceutical trade, it’s not just ongoing business that is at risk, it’s the patients’ overall wellbeing” added Kevin.

Suppliers are under increasing pressure, however, from a number of fronts. One of those is long payment terms and the subsequent pressure on working capital. In a recent survey, Tungsten Network found payment terms in the industry can stretch up to a full year. Some five per cent of healthcare and pharmaceutical businesses said the longest payment term specified by a customer was 365 days, while for 11 per cent it was three months.

Improvements are being seen, however, and technology is leading the way. In all industries, the Buyer-Supplier dynamic has long been a source of wealth and consternation. Crucial to positive relationships is an understanding of both sides of the coin. To achieve this, visibility is key.

For Suppliers, knowing when invoices will be approved and payments made is crucial for planning how and when to take on future projects and target growth. For Buyers, a clear view on all the suppliers of the business and the price points is vital for managing costs and relationships.

How, then, to increase clarity across the board? One answer is data, said Kevin. “Access to reams of data embodies huge potential. It offers a deeper understanding of the relationships and pinch points that exist within supply chains, which is why we offer analytics as part of our electronic invoicing capabilities.”

By better understanding supply chains in the pharmaceutical industry, closer communication channels between Buyers and Suppliers can open up, allowing more open discussions. “It is this closer working partnership that will drive profitability for the pharmaceutical industry, and health and wellbeing for its customers,” concluded Kevin.