Finetuning the API Supply Chain

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Pharma & Healthcare

Finetuning the API Supply Chain

“The continuously evolving sourcing needs and the global supply chain disruptions have highlighted an important requirement – need for a fully de-risked, functional source base across all raw material categories. To meet the demands of this environment with multiple moving parts, we remain vigilant and demanding with our supply partners, build strong relationships, ensure that we are trustworthy partners at all times, by extending unstinted support and keep a constant eye on the regulatory framework. This way we are able to marry both these seemingly opposing objectives and thereby remaining competitive and compliant,” highlights Dr. Sundar Narsimhan, Sr. VP & Head, Supply Chain Management, Neuland Laboratories, during this exclusive interview…

How crucial is supply chain management with regards to Regulatory Starting Materials (RSMs)?

Dr. Sundar Narsimhan

Regulatory Starting Materials (RSMs) are the key building blocks of the API/ Drug product. Their quality and impurity blueprint carries over to the drug product based on the process capability. Given their impactful role, it is incumbent upon the drug product manufacturer to ensure that the RSMs are manufactured according to the applicable GMP standards, we have a good oversight on the supplier’s facility and process and our supplier tests and certifies the material as per our test methods and specifications. This also helps us to understand a key causative factor governing the product quality and the impurity profile of the KSM apart from achieving a high level of incoming quality (FTR). Sourcing RSMs from reliable sources gives us manufacturing flexibility, achieving scale in-house, and control over incoming quality. Hence, we ensure sufficient management (SCM, QA, RA and R&D) time and effort is spent in this process.

In today’s global business environment, it is essential to have a secure supply chain, which can provide consistent quality and prompt delivery without interruption. The pandemic has strained some aspects of the supply chain, emphasizing the importance of keeping a watchful eye on every aspect of the process. Where vendor qualification was once a task performed periodically, companies today must be constantly vigilant, paying close attention to their suppliers and ensuring they are ready to pivot instantly to address potential issues.

Increasingly complex drug compounds have led to complicated supply chain attributes. Cold chain logistics has become top-of-mind in the wake of the mRNA vaccines. But cold chain was already a critical aspect for the drug industry. Cold chain logistics may have become more necessary, but it also increases the risk of non-conformance in the supply chain. At Neuland, we’ve partnered with two logistics companies who are certified for Good Distribution Practices (GDP) and are considered among the best in the trade. In the past few years, we’ve avoided temperature outages in our commercial cold chain shipments and have had no products fall out of conformance.

How do you constantly juggle between meeting the stringent regulatory requirements and the changing sourcing needs alongside withstanding the external factors?

There has been a steady increase in the Regulatory oversight on Pharma manufacturing aimed at achieving highest patient health and safety while using approved drugs. Neuland has been supplying most of the drug products (APIs) into highly regulated markets such as Europe, USA, Canada, Japan and South America. Innovator customers, generics and medical authorities alike have increased vigilance on the Tier-II suppliers viz. Intermediate and KSM suppliers. As we speak, flurry of Indian Intermediate suppliers is facing USFDA audit for compliance to applicable GMP regulations and obtained certification.

Contrastingly, API producers are faced with both input cost pressures and decreasing finished good price pressure. Those of us that supply into regulated markets must follow stringent quality standards, world-class facilities, transparent and traceable documentation and above all a constant readiness to face medical authority audits. The quality and compliance ask of our sources limits our choice to be best ones from the trade.

A third dynamic is the need for two or more qualified suppliers at any time. Disruptions in the past years have been a hard reminder about this important need. Source qualification is a long-drawn process in the Regulatory space and must be planned well in advance.

Overall, the continuously evolving sourcing needs and the global supply chain disruptions have highlighted an important requirement – need for a fully de-risked, functional source base across all raw material categories. To meet the demands of this environment with multiple moving parts, we remain vigilant and demanding with our supply partners, build strong relationships, ensure that we are a trustworthy partner at all times, by extending unstinted support and keep a constant eye on the regulatory framework. This way we are able to marry both these seemingly opposing objectives and thereby remaining competitive and compliant.

What challenges are still plaguing the pharma supply chains and how can the industry work towards resolving them?

Pharma supply chains are faced with two or three key challenges:

  • Supply disruptions owing to closures or stoppages of supplier factories attributable to pandemic, war, and shortages.
  • The cost position of some of the drug products have been severely impacted due to increase in mined inputs (Iodine), demand surge in other sectors (Lithium/Reduction reagents) and other related inputs (Piperazine and other amines).
  • The industry has an uphill task to a) find alternatives to use of such reagents, b) work with Government to develop schemes aimed at increasing competitiveness in those specific products and c) find chemistry solutions to increase yields/efficiencies to reduce use of some of these now-costly inputs.
  • Due diligence has always been an essential part of RSM procurement. If you’re looking to establish a long term relationship with a supplier, you can’t afford to skimp on due diligence. Do a thorough due diligence on your key potential partners, and you should be good to go with RSMs.

We would like to know from you the nuances of sourcing strategy of Neuland and how successful and impactful has it been in the tough times that we faced?

Flexibility and proactiveness are the biggest secret ingredients. For instance, at Neuland, our global sourcing strategy means we have a wider reach when it comes to ensuring the desired regulatory status and cost competitiveness for each client. Our regulatory affairs and other teams have a wealth of experience with RSM sourcing, which provides greater confidence to clients seeking to mitigate business risks. To give you an instance, we ensured full visibility all the way to the last tier supply partners of the end product demand that lay ahead of us. We arranged transportation, raw materials and/or columns wherever needed by them to enable uninterrupted production at their factories and incoming movement into our facilities. We built inventory of some of the key precursors needed by our suppliers to help contain costs and overcome shortages – this not only helped us keep costs down but helped build a strong relationship bridge and trust with some important partners. We engaged trucks on a full journey basis and ran milk runs from different factories to overcome transport constraints. We provided health, food, and safety requirements of drivers at our factory locations that gave them the assurance to move into the facilities from outstation without hesitation. We explored/agreed on a reasonable meeting ground with the providers by having updated information so that our contracts/spot orders reflected the realistic cost situation impacting the suppliers – with a condition that when things get normal, we will re-negotiate the pricing. In our conversations, calls, and meetings we ensured we are seen as empathetic, helpful and trusting customers and were motivational and integrating in our approach.

Our business continuity planning, timely, cost-effective manufacturing, and supporting satisfaction of customers all depend on a reliable and resilient supply chain. Pandemics and geopolitical situations over the past few years have tested our supply chain. Incidentally, we started a supply chain de-risking plan with an emphasis on decreasing geographical dependencies and shortening the supply chain before the pandemic and other global concerns appeared. As a result, during the past three years, our expenditure on domestic suppliers has climbed by over 10%. We are developing a diversified vendor base to de-risk the challenges of working with a single vendor. It also provides us with the opportunity to engage with small and medium enterprises, assisting in the growth of the local economy and supply chain. Today, 30% of our procurement spending is on diversified vendors. 60% of our procurement has shifted to an e-procurement portal providing every vendor with an equal opportunity to access the opportunity of associating with NLL in a transparent manner.

Kindly share with us tips for enhancing supplier management?

In over 15 years of my stint in this highly dynamic pharma industry, a sustained search of the supply base usually leads to the jackpot. Fine-tooth combing through high-quality databases like DWCP and Row2Technologies can unearth excellent sourcing options for any given API and its intermediates. That being said, results can be hit or miss if NECs are involved, and commercial RSM options are limited. In that case, it may be up to the R&D team to develop a cost-effective manufacturing process for the starting material to facilitate commercial external manufacturing. Supplier Management starts with getting the basics right namely…

  • Close & regular monitoring of vendor performance of key metrics such as cost competitiveness, timely supplies, quality
  • Building trust & relationship by close collaboration helps to exercise a positive influence on the key supply partners
  • Right segmentation of suppliers to cover the entire supply base with the available management time – Category Management or A, B, C Based or Process Criticality based.                                      

What are the three most critical aspects that you feel will help pharma companies in managing their supply chains in tough times or otherwise?

In recent years, supply chains across industries, not just the pharmaceutical industry, have faced numerous challenges. Crisis management is possible through foresight, better preparedness, and swift adaptation to new circumstances.

  1. Risk Management – Identify risks associated with suppliers, partners & other stakeholders and actively manage them (Geographical Derisking & Contingency planning)
  2. Keep close track of the Cost Drivers i.e., have a close eye on the ball, learn what goods and services have the most influence on material costs. Always be on the lookout for new information that could affect your purchasing strategy.
  3. Use Inventory and Contract Management efficiently. Inventory and forward contracts both operate as a safety net against unexpected events, buying the company time to assess the situation and devise a plan of action.

Agile practices and operating models enable organizations to solve specific problems quickly and efficiently. During the COVID-19 pandemic, we’ve proven our ability to face challenges with minimal impacts on operations. The agility and foresight of our Enterprise Risk Management (ERM) team enables us to initiate a prompt and adequate response to any unforeseen risk. The team closely monitors rapidly evolving consumer behaviours and demand patterns, anticipating potential reconfiguring of strategies, structure, processes, people, and/or technology.

Neuland actively works with alternate raw material suppliers, tracking re-opening schedules, clubbing shipments, monitoring outstanding receivables, truck transit and arrival closely and more to ensure efficient supply chain management. In some cases, it is important to consider stock accumulation risks and whether stocks should be built up for various geographies given the risks of supply chain recovery due to an unforeseen event.

Risk management aims to control future outcomes by proactively identifying the possibility of a risk occurring, determining what its potential impact could be, and developing strategies to mitigate or avoid those risks. Effective risk management gives Neuland the resilience as a preferred and reliable business partner to help our customers succeed in an unpredictable environment

What are the criteria based on which you select Logistics Service Providers?

Cost, Transit Lead Time, Service Levels, Safety are the fundamental factors for picking any LSPs. Product value, urgency of delivery, and other special requirements, which affect basic criteria are most important when choosing an LSP.

What are the need gaps that you feel should be worked upon by LSPs in order to service better?

I firmly believe that the intervention of right technology at the right time would not only help LSPs to service their customers better, but it will also help their clientele to up their service game to their customers, which ultimately results in greater brand equity and definitely more business for both the parties – LSPs and Users. With real-time updates and full insight into the shipment's whereabouts, improved tracking and tracing may benefit both parties in cutting down on administrative work. Currently, the market is quite disorganized. Greater industry consolidation that produces a small number of dominant players has the potential to significantly boost productivity. I would also like to give one very important advice to pharma companies that they shouldn’t overlook the critical upstream process because it can potentially impact downstream processes. That’s a key reason why you should always work with an API contract manufacturer that is familiar with RSMs, has well-established sourcing procedures and understands the chemistry. The benefits include better traceability from starting material to final drug substance, reduced time to commercial launch, lower development costs, improved supply chain security, and more.

Your inputs on inventory management and the corresponding infrastructural landscape…

A company's inventory serves as a buffer to smooth out production and demand fluctuations, but it must be managed to provide the best service levels within the limits of available funds and existing infrastructure. Inventory optimization is considerably aided by more precise market forecasts, shortened supply chain, and seamless, real-time data sharing across all links in the supply chain. Third party warehousing has been trending up recently and industry is ripe with potential. Inventory management is a trade-off between market service level and servicing costs. Why I am saying this is because since unavailability related business loss is very high, manufacturing companies tend to focus on high availability goods at the retail counters. On the operational side, we see longer cycles; expiry related challenges and different regulatory requirements taking away any flexibility in inventory management. This is a classic double whammy for the generics that straddle the global markets, both regulated and less regulated combined. To top it all, the changed demand patterns due to the onset of Covid-19 has only accentuated this complexity.

What has been the most challenging day in managing supply chain? Kindly share with example…

The hardest day would be the one in which we had to deal with a crisis or other unforeseen event. There is a lot at stake, and there are many variables to consider. We'd have to stop everything we're doing and have a teamwide brainstorming session, then quickly settle on a course of action and put it into effect.

After the Covid lockdown was announced so close to the end of the quarter, we had to rush all domestic and international shipments to fulfil the company's quarterly goals. Meanwhile, we had to make sure that enough raw materials were coming in to keep production going, all when our team started working remotely for the first time. We held multiple Team calls and pulled out all the stops to guarantee we had hit our targets at the end of the quarter.

What’s your take on technology adoption in supply chain? Has Neuland taken any innovative step in this regard? Please highlight…

  • Digitization is one of the strategic pillars on which our company long term business strategy has been envisioned. Across the organisation all functions are at an advanced stage of implementing digitized processes.
  • Supply Chain Management has automated the Procure to Pay cycle including a Vendor Portal that aspires to accord full visibility of company policies, transaction trails and supplier interactions
  • A fully functional e-Logistics platform brings together all aspiring Logistics providers to participate in bids, contract awards till uploading of their invoices for verification and payment cycle.

What’s your take on sustainability in pharma supply chain? Are there any innovative measures taken by your company in this regard?

The focus of bolstering and sustaining supply chains continues to be on the areas identified in our de-risking strategy. Key starting materials (KSM), intermediates, and speciality materials are essential to our business. Suppliers in this category are identified as our critical suppliers and the focus of our sustainable supply chain efforts has started with this part of our supply chain. We are actively looking to develop sustainable vendors and insisting existing Key Vendors to incorporate sustainability in their growth plans. We have strengthened our supplier assessment matrix to include items which de-risk our supply chain from delivery, quality and performance of environmental and social dimensions.

Our sustainable supplier assessment covers 80% of critical suppliers and 40% of total procurement. By 2025, we plan to cover 100% of our suppliers in the sustainable supplier assessment plan. As we started our sustainable supply chain program during the pandemic, we started with a desk-based assessment. Solvents are one of the important raw materials for us. Over years, Neuland has implemented solvent recovery measures reducing fresh solvent usage by more than 80%.

We also conduct a leak detection and repair (LDAR) programme annually at all production units. Through this program we are able to reduce wastage of solvent and emission of VOCs. Through our other  activities, we have reduced the use of Heptane and Ethyl Acetate by 50% in the manufacturing of Ezetimibe. Reducing the product washing from two to single wash has reduced carbon usage by 15%. While there is a limitation to reducing raw material use, we can adopt practices that minimize the environmental impact of raw material use. With this thought, we have adopted 10 of the 12 principles of Green Chemistry to minimise our environmental impact. Our growing focus on green chemistry is reflected in our process improvement and development (PID) program. As part of PID, a dedicated team is re-looking our existing processes, raw materials and chemical products for driving sustainable and safer operations.

Alongside Our goal of eliminating waste reaching land?fills is moving at incredible speeds. The percentage of waste reaching land?fills has reduced from 19% to 8%. 91% of waste is sent for co-processing and recycling. All these concerted and ongoing efforts have led Neuland Labs to receive the most coveted Silver Sustainability Rating by Eco Vadis, in the industry category – Manufacturing of basic pharmaceutical products and pharmaceutical preparation. Our efforts don’t just stop here… for us, this is the beginning of a new chapter, and we are all set to move in the right growth path, which will not only benefit us, but will ensure an all-encompassing sustainable growth of the industry.

What are the latest supply chain advancements that you are looking forward to imbibing?

We are witnessing increased adoption of innovative technology solutions faster than ever in the post pandemic world that demands speed and accuracy. There is an increased use of AI and automation in warehouses and the entire value chain, which enhances efficiency and precision in the process. There is also greater thrust on incorporating Data Analytics in the process as it adds value along the way to help pharmaceutical manufacturers extract meaningful insights from data to save costs, improve forecasts and prioritise patient health. Leading life sciences companies are fast integrating their systems and aggregating data with a view to gain real-time supply chain data to understand things like mix-level detail and material and capacity constraints to optimise production. IoT devices are facilitating companies in providing real time visibility of operations throughout the value chain – from production to distribution – to gain transparency and enhanced tracking of goods. Pharma companies are adopting hybrid cloud infrastructure to enhance operational efficiencies, reduce IT burden, drive costs down and improve data accessibility and analysis. All these factors put together are imparting greater resilience and in turn ensuring a structured risk management platform for companies. We are bullish about these technological trends and fast embracing them as we move ahead.

Where do you see Indian pharma and API industry shaping up from here on and supply chain’s able role to activate that growth...

India is inching towards the top in API Production both by volume and Value. Indian API Supply Chain should become more indigenous, technologically advanced and sustainable and the future looks quite promising in the near and far future. Companies need to invest the time necessary in supply chain management of RSMs upfront to minimize the likelihood of problems downstream – and across the drug lifecycle.

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