Supply chain configuration conundrum: how does the pharmaceutical industry mitigate disturbance factors?

Abstract

How a supply chain (SC) is configured can have a significant impact on the performance of global firms. More specifically, disturbance factors (i.e. those factors associated with uncertainty and risk) are increasingly important considerations. This paper focuses on endogenous, exogenous and environment-related SC disturbance factors and their relative importance when configuring global SCs. Three alternative scenarios of SC configurations for European-based pharmaceutical firms are identified -insource nearshore, outsource nearshore and outsource offshore. Through a multi-phase, mixed-method approach we find that the top five disturbance factors managers should be aware of while configuring their SCs are quality defects, unforeseen and random interruptions in manufacturing processes, order processing difficulties, untimely delivery of products, and a mismatch between market demand and supplier responsiveness. This study is able to provide insights into the impact of disturbance factors on the SC configuration strategy for Big Pharmas. We show that SC disturbances influenced the decision to bring production back home (reshoring) or to a closer location (near-shoring). To mitigate the effects of disturbances many Big Pharmas recalibrated their SC configurations by insourcing core products, outsourcing non-core products offshore and developing offshore insourcing capabilities through 'captives'.

Contextualisation of the complexity in the selection of developing country outsourcees by developed country outsourcers

“…We also construct four key location-related (external) contextual factorsgovernment policy, national human resources, infrastructure and transport and national cultural -and operationalise it. Our findings are concurrent with the limited number of studies which explored partially the outsourced-to country contextual factors and concluded that several uncertainties of outsourcing relationships can be assigned to one or more of these factors and hence can cast a major shadow on the future of the outsourcing relationship (Tjader, Shang, and Vargas 2010, Handley and Angst 2015, Huq, Pawar, and Rogers 2016, Kaur, Singh, and Majumdar 2018. For example, our case study research shows that the strength of outsourced-to country's legal system is very crucial for the flow of knowledge between outsourcing partners.…”

“…The outsourcing research widely demonstrated through comparative studies for different countries that government policies such as free trade policies, foreign investment regulations and the strength of legal system are strong indicators of how attractive or risky a country is as an outsourcing destination Fynes 2013, Bals, Kirchoff, andFoerstl 2016). Additionally, availability of highly skilled and educated human resources and transport and communication infrastructures are proven to be among strong determinants of manufacturing outsourcing location decisions (Kedia and Mukherjee 2009, Lewin, Massani, and Peeters 2009, Huq, Pawar, and Rogers 2016. Lastly, the outsourcing research exhibits that divergence of national cultures poses major challenges to the outsourcing performance through low familiarity and high outsourcees behavioural uncertainty (Tjader, Shang, andVargas 2010, Handley andAngst 2015).…”

“…Foreign investment, trade, tax and labour policies, political stability, security and legal system. (Bals, Kirchoff, & Foerstl, 2016;Huq, Pawar, & Rogers, 2016;Kedia & Mukherjee, 2009;Kenyon et al, 2016;Pawar & Rogers, 2013;Wiengarten et al, 2013) National Human Resources Country's labour force availability, quality, productivity, and education levels. (Huq et al, 2016;Kedia & Mukherjee, 2009;Lewin, Massani, & Peeters, 2009) Infrastructure and Transport Land, power, energy and water supplies, telecoms and data networks, roads, railways, ports and airports.…”

Peer‐to‐peer financing choice of SME entrepreneurs in the re‐emergence of supply chain localization

“…In the early 20th century, to lower their R&D, manufacturing, and logistics costs and expand access to external resources (Stentoft et al., ), leading pharmaceutical companies, such as Pfizer, Johnson & Johnson, and GSK, started to focus on their core competencies and relocate their noncore SC components to low‐cost locations (Huq et al., ). They employed outsourcing strategies that further globalized the pharmaceutical SCs and significantly increased their competitiveness and profitability (Huq et al., ). At the same time, SC complexity and risk have been magnified and new challenges toward SC coordination (e.g., endogenous, exogenous, and environmental disturbance factors) have been created (Huq et al., ).…”

“…They employed outsourcing strategies that further globalized the pharmaceutical SCs and significantly increased their competitiveness and profitability (Huq et al., ). At the same time, SC complexity and risk have been magnified and new challenges toward SC coordination (e.g., endogenous, exogenous, and environmental disturbance factors) have been created (Huq et al., ). After experiencing severe disruptions and dealing with several strategic and operational issues (Asian and Nie, ), these companies decided to reconfigure their SC network using SC localization as a strategic mitigation strategy.…”