Rethinking Global Supply Chains to Secure Access

The COVID-19 pandemic exposed vulnerabilities in production strategies and supply chains across the world. Temporary trade restrictions and shortages of pharmaceuticals, critical medical supplies and other products have highlighted these weaknesses. Nearshoring and automation of manufacturing operations can, however, bring efficiency back to supply chains, say experts.

“It will take some time for the world to truly overcome the pandemic. Supply chains have been affected. The pandemic will completely change the future of business, specifically amid the nearshoring and reshoring of the supply chain,” says Gabriel Parrodi, Country Manager of Rainmaker Global Market Access.

For Project Syndicate, this reality will slow down the globalization advances seen over the past four decades. “A far less global and less deeply interconnected supply chain model is emerging, one more focused on trade among regional players and allies, characterized by a shift from a few global economic powers toward multiple political and economic centers,” according to Morgan Stanley Research, which calls this process a “slowbalization.” Morgan Stanley forecasts that countries like Mexico, India, Vietnam and Turkey could benefit the most from this scenario. 

Current disruptions have become an issue for healthcare and many other industries. However, unique opportunities are emerging for the healthcare industry thanks to nearshoring, reshoring and automation trends, especially in the pharmaceutical sector.

Mexico’s Nearshoring Opportunities

Nearshoring entails the transference of manufacturing operations to hubs closer to the final market intended for the product. This practice has emerged as a response to offshoring, which, in order to reduce costs, seeks cheaper suppliers in far-off destinations, generally in Asia.

Not all countries are attractive candidates for nearshoring activities. However, Mexico has several elements that make it a reliable partner for these operations. First, the country has a specialized, skilled and cost-effective workforce. The country’s proximity to the US has also been boosted by close trade relations and the creation of USMCA, which, according to Oscar Silva, Partner Leader at KPMG’s Strategy Group, will make Mexico a “trustworthy partner in the coming years,” especially after the China and US trade fallout.

The medical devices industry is among the main seekers of supplier alternatives and according to an article by Prodensa, Mexico is one the most attractive destinations for these types of companies. Pharma is another sector with the potential to take advantage of Mexico’s position regarding nearshoring, as Leticia Zermeño, Director of Grupo CPQ, described to MBN. “The country should be prepared and not rely completely on foreign suppliers,” she says. According to Zermeño, the government should create a program to encourage and support a strong national pharma industry to face health challenges, “fostering local production of active pharmaceutical ingredients, aside from the already well-developed medicines market.”

There is also a substantial presence of international pharma companies and contract manufacturing organizations (CMOs) in Mexico. Slightly less than half of the CMOs have international owners, which shows there is already good international investment and a high level of interest in the country.

In the future, Mexico’s pharma manufacturing sites could diversify the countries they supply to in an effort to reduce the risk associated with specific markets, increase sales and reduce dependency on a few markets. Pharmaceutical Technology explains that securing additional capacity to supply Brazil, the EU, Japan and the growing China markets would help grow Mexican contract manufacturing.

Automation to Streamline Supply

Supply chain automation uses digital technologies to improve efficiencies, connect applications and streamline processes within supply chain operations. It usually incorporates intelligent technologies, such as digital process automation, robotic process automation, artificial intelligence (AI) and machine learning. 

“The medical industry has begun to see the immense value in healthcare supply chain automation after many hospitals struggled to get the resources they required to carry out efficient healthcare delivery during the pandemic,” states an article by B2B e-commerce company Sana. 

Being able to forecast future disruptions is a significant value for companies in the healthcare industry and this has opened up a new way of thinking about how technology can leave the industry better equipped in the future.

While automation is already a part of most supply chain models, these systems still require human intervention despite having complex algorithms predicting demand and aiding in forecasting. With AI and other tools like machine learning becoming more accessible, the opportunities to have a completely automated system arise. AI is one of the tools able to spur more benefits. For instance, it can facilitate better planning for the types of services and products needed to support patient care, while ensuring products are available where required. This helps to prevent potential backorders or shortages while also avoiding overstocking products that are at risk of expiring before use.

“Industry 4.0 has arrived but Mexico is still behind countries like Brazil and Argentina in digitalization, serialization and regulation, all necessary tools for industry players to ensure that their technologies are soundproof and their products cannot be replicated,” explains Miguel Ricchiuti, Operations and Supply Chain Director Mexico and Latin America for Apotex. 

Once these hurdles are overcome, there are infinite opportunities in the sector, says Ricchiuti. IoT and AI technology will not replace human labor, according to Ricchiuti. However, the industry will see lower demand for human labor to manage simple tasks, smoothing out transportation processes and reducing overall costs.

Overall, Mexico’s opportunities to revamp its manufacturing capabilities are enough to improve the country’s position in different fields, such as the pharmaceutical industry. This could also foster supply chain improvements in other segments of care, such as hospitals. Still, collaboration will be needed to foster this transformation. “The private and public sectors, along with civil society, will have to interact to generate ideas free of as many blind spots as possible,” says Miguel Lombera, President of CANIFARMA.