Usually, there is a lot of energy and money dedicated to speed to market, service effectiveness, and driving new business models. Typically, this is represented as breaking down silos, which might include:
- Demand forecasting
- Supply planning
- Production manufacturing
- Logistics planning
- Sales and operations
We’ll start with demand forecasting in a traditional supply chain. However, we could just as easily be talking about biotechnology manufacturing or hospital demand of vaccines at hand at any given location. Typically, we extrapolate demand. Then we observe the relationships between independent and dependent variances such as previous sales and future demand. Next, we apply internal data, past trends, and maybe customer signals (inputs). There is just one problem. COVID came and crippled this conventional demand-forecasting process.
Today, these areas are becoming more efficient by using sophisticated analytical approaches, with collaborations across multiple functions, channels, and suppliers. But guess what? It’s still not working. Healthcare and biotechnology companies required a new strategy. First, they tried the more traditional approaches to maximize value, including:
- Focusing on employee safety and operational continuity
- Improving productivity and performance management
- Increasing asset utilization and efficiency (whether it’s beds turnover or sterilizing medical equipment and instruments)
- Improving quality in day-to-day operations
- Optimizing workforce management
These approaches saw some thin benefits but not the 10x returns that were expected. Then they took a page from the Amazon and Apple playbook. Amazon has methodically taken control of its whole supply chain.
- Consumer side: amazon.com, amazon fresh, kindle, whole foods
- Seller side: amazon.com marketplace, amazon shipping
- Enterprise side: amazon web services, EC2 (processing), amazon cloud drive, AWS marketplace, S3 (storage)
- Entrepreneur side: amazon publishing, amazon flex (use your vehicle to deliver packages), amazon studios (new film series)
- Amazon prime air: drones deliver 5-30lbs in 30min or less. On January 6, Amazon bought another 11 Boeing 767-300 planes
- Amazon’s transportation fleet: now over 30,000 amazon branded vehicles and another 20,000 branded trailers
Amazon wants to own it all. The ability to control demand makes you curious, but the desire to manage your supply chain is more interesting. This concept also played out with Apple. Apple recently dropped Imagination Technologies. Previously, imagination was responsible for designing graphics processing units, the type used in Apple in products like the Apple iPhone. Apple plans to create its internal capabilities within the next 15months.
Biotechnology companies started to pay attention and have been leveraging this to control their supply chains, concentrating on production manufacturing for scale.
- Pfizer and its German partner BioNTech, made 120 million doses in the U.S. within the first quarter
- Aurinia Pharmaceuticals and Lonza have expanded their exclusive manufacturing relationship.
- L’Oréal signed a leasing deal with Micreo, a biotech firm specializing in bacteria
- Estée Lauder Companies announced a collaboration with biotech firm Atropos Therapeutics to explore lab-made ingredients
These examples highlight strategy movement to take ownership of traditional supply chains that were solely supplier operated and controlled.