By Steve Brownett-Gale, Marketing Lead, Origin
Over half of UK manufacturers are exploring reshoring strategies, highlighting the growing shift towards this supply chain strategy.
Key drivers vary but could be linked to greater sustainability, rising shipping costs and the growing complexity and uncertainty in global politics and economics.
The pharmaceutical sector is not immune to these tensions, and not too long ago a worldwide pandemic underscored the importance of localising production in the interest of developing more resilient and strategically robust supply chains.
In this article, I delve into the essence of reshoring, its significance, and its implications for bolstering the pharmaceutical supply chain, drawing on the many merits, including sustainability.
Reshoring and its relevance to pharma
Reshoring is the strategy of moving manufacturing, production and service operations back to the company’s home country or nearby.
In an era marked by severe geopolitical and economic uncertainties, the role of reshoring in pharmaceutical supply chain management could protect the industry’s critical role in protecting global public health.
The COVID-19 pandemic has cast a glaring light on the fragility of the global supply chain, highlighting an excessive dependence on overseas suppliers and a misplaced confidence in worldwide stability. This reliance has proven to be a risk not only for procuring active pharmaceutical ingredients (APIs) and finished medicines or vaccines during health crises but also for maintaining the supply of other vital drugs.
The benefits of reshoring
But beyond the pandemic, current geopolitical tensions and economic instabilities, such as the situation in the Red Sea, further stress the importance of a secure, sustainable, and resilient supply chain.
By transitioning towards on or nearshoring, pharma can capitalise on the following benefits:
Enhanced supply chain reliability
Localising supply chains mitigates the risks of disruption from global crises, ensuring a more stable provision of medicine.
This is especially important for sensitive pharmaceutical products which may require refrigeration or have expiry dates that cannot fall below six months.
Additionally, increased oversight fosters transparent supply chains, reducing the likelihood of counterfeit medicines and their distribution.
Improved quality control
Closer oversight over manufacturing can ensure higher quality products are manufactured, adhering to the various regulations designed to protect public health.
The MHRA’s guidance on medical devices is a primary and widely followed source for product standards in pharmaceutical packaging in the UK.
Increased responsiveness and flexibility
A supply chain that is not globally dispersed allows for quicker adjustments to market demands and disruptions, allowing businesses to maintain market relevance and competitiveness.
Without disruptive time zone differences, communications are smoother allowing for quicker response times and shorter lead times in design and production.
Cost reduction and sustainability
Reducing transport distances can significantly cut costs and carbon emissions, contributing the environmental sustainability and aligning with consumer preferences for eco-friendly products.
Successful implementation despite challenges
But realising these benefits isn’t without challenges. Reshoring brings potentially increased labour costs within the domestic market, a local workforce that may lack certain specialised skills or expertise, and the high investment required for the necessary machinery, infrastructure, and technology.
Moreover, the challenge of finding local suppliers or service providers that meet the necessary standards can make it difficult to establish an efficient local supply chain, possibly resulting in decreased productivity.
Adapting to local regulatory requirements also poses a significant challenge that needs swift resolution.
To navigate these hurdles effectively, conducting a detailed cost-benefit analysis is essential.
This analysis should compare various expenses, including labour, transportation, and potential government incentives, while also identifying areas of foreign dependency and logistical vulnerabilities within the current supply chain.
Developing a strategy that addresses these challenges involves partnering with local suppliers and revising production methods to suit reshoring objectives.
Additionally, exploring opportunities to adopt advanced manufacturing technologies and automation could offset higher domestic labour costs by boosting efficiency, productivity, and quality.
Securing the necessary funding for these significant investment needs, through loans, grants, and government assistance, is critical for the successful implementation of reshoring efforts.
Building strong partnerships with local suppliers and contractors is key to creating a resilient and dependable supply chain that ensures consistent access to essential materials and resources.
Addressing potential skill gaps in the local labour market through investment in training and development is also crucial.
It’s important to communicate the value and reasoning behind the shift towards onshoring or nearshoring to all stakeholders, including employees, customers, and investors. This ensures they understand the benefits from an investment, social, and environmental perspective, leading to widespread support for the initiative and its long-term success.
