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In the 1930s and 194­0s, celebrated quality-management expert W. Edwards Deming developed 14 points to help manufacturers improve the quality of their products (1). His fourth point encouraged working with a single supplier of a given material to minimize total cost, improve quality, and increase productivity. Although American, European, and Asian (especially Japanese) manufacturers of automobiles and industrial products have followed that principle for more than 70 years, it was put to the test during and just after the COVID-19 pandemic. The principle reached a limit when automobile manufacturers needed to stop production because of semiconductor-chip shortages (2). All other components could be sourced from multiple vendors, but chips had come from single suppliers. Subsequent shutdowns led to sales losses for suppliers and manufacturers while increasing costs to consumers. Because of limited supply and high demand, prices for new and used cars went up significantly, contributing to high levels of inflation in 2021 and 2022.

Now the mantra is for companies to diversify their supplier bases so that production can continue even if vendors of required components are unable to deliver promised materials on time in the required quantities. As I wrote in an article for SupplyChainBrain, it is not just the pandemic that has made manufacturers rethink their supply-chain design and sourcing strategies (3). War, conflict, climate change, territorial claims, tariff threats, labor shortages, and employee strikes all significantly influence how manufacturers and consumers react to real or perceived shortages of critical product components. Governments of large countries are investing heavily in infrastructure to insulate domestic industries from exogenous factors. The Build Back Better policy framework, the CHIPS and Science Act, and the Inflation Reduction Act (IRA) are prime examples in the United States. Companies are redesigning supply-chain networks to be resilient in the face of exogenous and controllable factors.

Building Biotech Better

Biomanufacturing requires a continuous supply of high-quality raw materials, including chromatography resins, cell-culture media, reagents, and tubing systems. To hedge against shortages, security issues, and other supply-chain vulnerabilities, biopharmaceutical supplier Cytiva recently expanded US operations, built facilities in Canada, contracted with numerous certified suppliers, and took other steps to ensure production continuity at normal levels. Due to increased demand for biopharmaceutical products during the COVID-19 crisis, many new players entered the market, while existing ones expanded their footprints (4).

Demand for bioprocess supplies always has been high, often barely matching supply capacity. It continues to be high even now, having increased at double the prepandemic rate (4, 5). That was primarily because of government actions to vaccinate large swaths of the population during the pandemic and to continue biopharmaceutical investment. Companies also are increasing their stockpiles of supplies to protect against supply constraints. As a result, some chromatography resins have lead times of >15 weeks (6). In the near- to medium-term, demand for bioprocess supplies will remain steady, but changes to the supplier landscape, novel therapies, new technologies, evolving regulations, and general economic uncertainty all will continue to influence the supply chain.

In all industries, current trends include local sourcing of supplies and diversification of supplier bases. Biopharmaceutical companies are undertaking extensive digitization to predict product demand, maintain production operations at peak efficiency, manage warehouse inventory, and source products globally. Strategic partnerships with upstream suppliers and downstream collaborators could offer benefits to participating companies in uncertain economic environments.

With >75% of active pharmaceutical ingredient (API) suppliers located outside the United States (7), American drug manufacturers are hampered by logistical problems. For instance, shipping through the Panama Canal has been restricted severely due to drought levels not witnessed in the past 55 years. Conditions have forced shipping companies to reduce cargo weights and volumes while increasing prices, which are passed on to manufacturers and consumers.

Geopolitics also are at play. The conflict in Gaza is impacting shipping across the Red Sea and Suez Canal. And ~60% of the world’s voting-age population has gone or will go to the polls in 2024. Policies espoused by politicians to appease voters can have unintended consequences. For instance, electing a candidate who advocates economic integrity in a particular region could escalate conflict there. One US presidential candidate has mentioned that he will impose tariffs on 100% of vehicles made by Chinese companies (8).

Accidents also can influence supply chains for biopharmaceuticals. In March 2024, a container ship lost power and struck the Francis Scott Key Bridge in Maryland. Closing the Port of Baltimore for a period of time caused ripple effects along the US eastern seaboard (9).

Distributing Capabilities

Biotechnology is advancing rapidly. A focus on processes that can use widely available materials will help companies distribute production globally so that required products can be sourced locally in many regions. New technologies, therapies, business models, and logistical solutions offer hope that the US$450 billion biopharmaceuticals market can continue to innovate and keep the world’s population safe against existing and new diseases.

References

1 Dr. Deming’s 14 Points for Management. Deming Institute: Sanford, NC, 2024; https://deming.org/explore/fourteen-points.

2 Ramani V, Ghosh D, Sodhi MMS. Understanding Systemic Disruption from the COVID-19–Induced Semiconductor Shortage for the Auto Industry. Omega 113, 2022; https://doi.org/10.1016/j.omega.2022.102720.

3 Heragu S. Impact of Tariffs on the Supply Chain. SupplyChainBrain 25 January 2024; https://www.supplychainbrain.com/blogs/1-think-tank/post/38924-impact-of-tariffs-on-the-supply-chain.

4 Langer E, Brooks B. Post-COVID Supply-Chain Challenges Are Easing, Part 1. BioProcess Int. 21(6) 2023: 14–17; https://www.bioprocessintl.com/supply-chain/post-covid-supply-chain-challenges-are-easing-part-1-new-competition-is-changing-industry-s-buying-behavior.

5 Masson G. “Stunning” 4% Yearly Rise in R&D Share Has Emerging Biopharma Dominating Pipeline. Fierce Biotech 30 March 2023; https://www.fiercebiotech.com/biotech/emerging-biopharma-companies-dominate-rd-pipeline-22-iqvia-finds.

6 Nelson M. Astrea Expands MA Presence To Meet Chromatography Demand. BioProcess Insider 19 September 2023; https://bioprocessintl.com/facilities-capacity/astrea-expands-ma-presence-to-meet-chromatography-demand.

7 Sardella A. US Active Pharmaceutical Ingredient Infrastructure: The Current State and Considerations To Increase US Healthcare Security. Washington University: Saint Louis, MO, 1 August 2021; https://wustl.app.box.com/s/rjo1i7yews99hdr8zeo5fp0u71g47m0i.

8 Lowenkron H. Trump Threatens 100% Tariffs on Chinese Cars Made in Mexico. Bloomberg News 16 March 2024; https://www.bloomberg.com/news/articles/2024-03-16/trump-threatens-100-tariffs-on-mexican-made-cars-by-china-firms.

9 Hackbarth S. How the Baltimore Bridge Collapse Affects Business and the Economy. US Chamber of Commerce: Washington, DC, 2 April 2024; https://www.uschamber.com/infrastructure/how-the-baltimore-bridge-collapse-affects-business-and-the-economy.

Sunderesh S. Heragu is a regents professor and associate dean in the College of Engineering, Architecture, and Technology at Oklahoma State University in Stillwater, OK. He is president-elect of the Institute of Industrial and Systems Engineers (IISE) and a member of the Institute for Operations Research and the Management Sciences (INFORMS); [email protected].