Carlos López
Director General
Expert Contributor

Improve Logistics to Strengthen Healthcare Industry's Benefits

By Carlos López | Fri, 10/15/2021 - 12:49

We live in uncertain times.  The COVID-19 pandemic, which has been in the world for over a year, has created changes and new challenges in all industries. We have learned a great deal, as we have had to adapt to new unfamiliar conditions and learn to operate under different and unanticipated environments, perspectives and procedures. The COVID-19 pandemic has undoubtedly changed the traditional way of doing things.

In early 2020, China closed factories, roads and ports in an effort to contain the virus. In 2021, as the Delta variant emerged, India did the same. These shutdowns caused supply disruption in industries such as automotive, electronics and especially medical and healthcare equipment and supplies. This forced supply chains to implement actions to address these issues and meet their targets.

In 2018, China was the world's largest pharmaceutical manufacturer, accounting for 32.2 percent of those produced globally. Chinese manufacturers also increased their pharmaceutical exports by 40 percent from 2013 to 2018, meeting 1.8 percent of overseas market demand. A significant part of Chinese pharmaceutical exports are active pharmaceutical ingredients (APIs) contained in many life-saving drugs globally, according to Euromonitor International/Cámara de Comercio de Bogotá.

Supply chain disruptions have spread globally, mainly due to problems in China and India, as 70 percent of all precursors used in API manufacturing in India come from China. India is also responsible for 20 percent of the world's pharmaceutical production in terms of volume and the leading API exporter, also according to Euromonitor International/Cámara de Comercio de Bogotá.

Transportation overload and restrictions on air and maritime operations led to an increase in transportation costs and delays in the delivery of raw materials required for manufacturing drug products, as well as a bottleneck in suppliers' distribution capacity. If we also add the increase in e-commerce and B2C and the decrease in B2B, the shipping industry became saturated due to the increased demand for final customer deliveries.

Therefore, the need to adapt, change and innovate is paramount.

The COVID pandemic increased the importance of self-sufficiency in drug and medical equipment production to address an unprecedented health crisis and to face a supply chain problem such as the one we have experienced in the last year and a half. In particular, and as a country, developing greater resilience in the supply chain is essential. This involves reviewing and fostering incentives, policies, and support to rebuild the Mexican pharmachemical industry, and also analyzing the convenience of having viable and diversified precursor supply alternatives.

While teamwork between the government and the private sector has helped to partially alleviate this crisis, it is clear that we are still far from solving the problem and implementing a clear long-term strategy to address it.

In a McKinsey survey conducted last May with supply chain executives, 93 percent of respondents said they plan to take measures to increase their supply chain resilience, such as moving manufacturing closer to consumption points.

Photo by:   Carlos López