by Kelsey H | Sep 10, 2024 | Supply Chain
For years, many of the leaders in the biopharmaceutical industry focused on vertical integration in their supply chain. These industry giants built an internal network of manufacturing plants to keep the production of drug substance and drug product under their control. However, those internal networks have become difficult to sustain given the increasing rate of development of pharmaceutical products. According to the Congressional Budget Office, between 2010 and 2019, an average of 38 new drugs were developed each year, representing a 60% increase over the previous ten years.
To keep up with their quick pace of development, some biologics companies have utilized CDMOs to take over production on new products when their internal capacity is limited. According to Grand View Research, the global market for large molecule drug substance CDMOs is expected to achieve a compound annual growth rate of 9.3% between 2023 and 2030. At the same time, other companies have chosen to keep production in-house by expanding and optimizing their internal manufacturing sites.
There are advantages for both strategies of biopharma production. Internal manufacturing sites retain more long-term profit and control, while CDMOs help create a more dynamic and adaptable supply chain. For either production route, the benefits are most pronounced when the site can maximize capacity and resource utilization by deploying digital twin technology. Follow along with us as we explore the pros and cons of relying on in-house and contract manufacturing to produce new biologics products.
The Case for In-House Manufacturing Plants
Pros
For biopharma organizations that already have a network of internal production sites, utilizing existing facilities is often the most cost-effective way to accomplish commercial manufacturing when they develop new products. CDMOs work on a contract basis, charging their clients per batch or weight of product produced, in addition to raw material and other consumable costs. Those costs can add up quickly, and if demand for the new product increases, production costs will increase concurrently. Alternatively, if the biopharma developer can utilize an internal site, additional costs beyond materials can be minimized, resulting in more retained profit from the sales of the new product.
Keeping production in-house also gives biopharma companies more control over the manufacturing process. Working with an external partner introduces risk of mistakes or decisions the developer may not agree with, even if the CDMO has experience in the industry. Utilizing internal facilities ensures that production meets company standards for product quality, working conditions, and regulatory compliance.
To continue manufacturing new products at internal manufacturing sites, biologics companies will need to optimize their schedule to accommodate the production of both new and existing drugs. For organizations with a robust product lineup, finding available capacity for new projects is often difficult and time-consuming, eventually forcing them to work with a contract partner. However, digital twin software like VirtECS is designed to help plants optimize their processes and reorganize their schedule to maximize production capacity. A digital twin also allows in-house sites to refine their processes over time, adding worthwhile investments and layout changes to create competitive advantages your organization can benefit from long-term.
Cons
Pharmaceutical companies that don’t utilize digital twin technology may find it challenging and costly to fit their growing portfolio of products into their internal plants. It requires extensive time and resources to retrofit an old plant with new product lines. Then, when circumstances change and production needs to be scaled up or down in response to fluctuations in demand, sites with inflexible schedules and processes struggle to keep up. In these situations, utilizing a CDMO may be ideal – unless the company invests in digital twin technology. A digital twin can help manufacturing sites overcome many of these production challenges, analyzing data to recommend the most ideal schedule that will fit new projects into the plant schedule without disrupting current demands. Digital twins can also test future scenarios, such as scaling output for one product up or down, to analyze the trade-offs and find the production plan that maximizes revenue for the company.
In some cases, even a digital twin can’t overcome the reality that a company’s internal manufacturing plants are maxed out of capacity. Keeping production of a new product in-house will then require constructing a new facility, which costs millions or even billions of dollars and can take five to ten to complete. For some companies, this cost and time will still be worthwhile, if they have enough projects in the pipeline to fill the new plant’s capacity. A digital twin will be helpful in these future planning scenarios, ensuring the new site is designed to optimize production by maximizing potential output and creating flexible processes that can adjust around future product changes.
The Case for CDMOs
Pros
Unlike pharmaceutical giants, which are not only involved in manufacturing, but also discovery, development, research, and market approval, CDMOs are specifically focused on key areas of commercial production. This narrow focus means that contract facilities can often dedicate more significant investments into perfecting its production processes. These sites are more likely to be kept up to date with leading technology and use leading tactics to optimize output, helping their clients produce more batches in less time. CDMOs can also offer biopharma companies examples of success from past product batches, providing much-needed assurance during high-stakes projects, as well as their proven knowledge of key industry regulations.
Additionally, CDMOs have the advantage of speed. Because CDMOs are project-based, their schedules tend to be more flexible, and most biopharma companies can quickly find and reserve space at a CDMO for new production needs. Companies that don’t utilize a digital twin at existing sites may find themselves short on capacity and spend years waiting to start production at a new internal site. If they instead partner with a CDMO, they could begin production within weeks and bring the product to market on an efficient timeline. CDMOs also offer the flexibility to scale production up or down as needed, without the internal scramble to reset the production schedule, which is complicated and time-consuming for plants operating without a digital twin.
The benefits of working with a CDMO can be enhanced if the site uses a digital twin for analysis, planning and scheduling. Using the digital twin’s virtual model of their facility, the CDMO can test scenarios incorporating new products into their schedule to find the optimal sequence of events that will satisfy all their deadlines. This technology can help CDMOs be even more accommodating for biopharma developers and take on their projects more quickly, further improving the product’s time to market. Biopharma companies looking for a CDMO partner should prioritize facilities utilizing a digital twin to gain the greatest advantage from their fast, reliable production.
Cons
Any time a company engages with a third-party partner, they run the risk of being responsible for their contractor’s mistakes. In a complicated manufacturing process, there will inevitably be errors made. If the CDMO is not well-prepared to produce a new product, they may face delays securing raw materials or mistakes that waste products, resulting in higher costs and slower run rates. Even if the biopharma company didn’t make the mistakes themselves, they will still have to deal with the fallout. To avoid these scenarios, it’s important for biologics developers to thoroughly vet their chosen CDMO to ensure they have experience in their industry and comply with Good Manufacturing Practices. Some companies also choose to create a quality agreement, which thoroughly outline expectations for production.
Coordinating the tech transfer for drugs between the drug developer and CDMO can be a particularly complicated process – especially if the CDMO or biopharma company does not use a digital twin. Without a tool that can analyze and incorporate the data for the product’s specifications early in the transfer process, CDMOs may have to spend time once the product arrives to prepare their equipment to run the batch. If there are misunderstandings or details lost in translation, it can lead to costly mistakes or wasted product that could have been avoided. To create an easier tech transfer process, biologics companies can utilize a digital twin to deliver specific production data to their CDMO partner. You can learn more about the unique advantages of VirtECS digital twin technology for biologics processes in our short guide.
by Kelsey H | Feb 16, 2023 | Industry News, Supply Chain
In recent months, healthcare providers and pharmacies across the US have experienced shortages of drugs like amoxicillin, Tamiflu, and children’s Tylenol. Without access to these high-demand medicines, families have been left scrambling to get through the “tripledemic” flu, RSV, and COVID season.
The biggest culprit of the shortages appears to be a surging demand for the products. The end of 2022 saw reported RSV and flu cases reaching heights not seen in more than a decade, according to the New York Times. Drugmakers’ supply chains were simply not prepared to handle the extreme increase in volume after the mild RSV and flu seasons of the last few years.
We understand the heightened pressure pharmaceutical plants feel with each decision they make. When people depend on your company for their health and well-being, solving problems comes with a heightened sense of urgency. As such, we know creating a more stable supply chain is now top of mind for many in the industry. Introducing automation into your manufacturing processes can remove some of the margin of error and give employees running the plant the support they need to be more efficient.
Unfortunately, according to McKinsey, biopharma companies have been slower to embrace automation than manufacturers in other industries. One reason for the late adoption is the long list of regulations that pharmaceutical plants must adhere to, which often delays their ability to introduce new technology. However, many of our pharmaceutical customers have found that the benefits of introducing automation are far greater than they imagined.
Monitoring
The strict regulations in the pharmaceutical industry actually present a perfect opportunity for using automation to enhance rigorous quality control processes. Many plants today still rely heavily on manual monitoring processes, which can consume hours or even days from valuable employees who could be better utilized elsewhere. It also introduces elements of human error, which can lead to wasted product batches and further delays down the line.
Advanced monitoring is an area where automation can be incredibly helpful. Highly sensitive devices are able to quickly track and measure products throughout the production cycle and immediately alert the site to issues that require immediate corrective action. According to data from Pharmaceutical Technology, Pfizer managed to post less than 0.1% product loss for its COVID-19 vaccines using automated onsite monitoring. Automated monitoring systems can also be used to encrypt production data, which keeps valuable plant information more secure from cyber-attacks, which have become a common issue in the manufacturing sector.
Communication
Pharmaceutical manufacturing sites can involve thousands of moving parts to create products that are then distributed to point-of-use destinations scattered across the globe. To maintain a fluid production process while fulfilling a high quantity of orders, plants rely on swift communication among employees. In many cases, sites’ existing communication methods, such as email or even word of mouth, have not scaled at the same rate as production. When employees miss important updates or messages, it can result in wasted batches of product or unexpected downtime.
To facilitate these kinds of sudden and urgent messages, it’s important for facilities to implement a communication tool that better connects team members. When employees are busy working, an automated alert or message notification can be the difference between catching an important production update or wasting a batch of product. Utilizing automated communication tools that quickly direct attention to changes will allow all departments to remain coordinated and run efficiently.
Data Collection
Perhaps an unexpected but particularly useful aspect of automation is the detailed data collection these tools can offer. The most effective automation tools will link to other technologies and track products throughout the production cycle, which means they can gather and share information that will better inform production. This important and accurate data allows facilities to make better decisions about changing production schedules or the size of the product batch on a particular day. Utilizing real-time data means plants can plan their schedule based on current supply chain conditions, rather than estimates.
VirtECS® and VirtECS® Symphony are two such tools that can provide automation and data collection capabilities. VirtECS® automatically tracks real-time data using a virtual plant model to identify opportunities to optimize production and make beneficial scheduling changes. Its web-based counterpart, VirtECS® Symphony, can then publish the new schedule instantly and alert plant employees to urgent updates. VirtECS® Symphony also offers a messaging feature that employees can use to instantly make comments or suggestions to their colleagues across the site. For more information about VirtECS® Symphony, follow the link to download our short informational guide. https://blog.combination.com/guides/virtecs-symphony-guide/
by Kelsey H | Nov 8, 2022 | Industry News, Supply Chain
It’s no secret that manufacturers have been rethinking their supply chains in recent years. Many reports indicated US companies were considering a manufacturing move, and this year, businesses were ready to take action. According to recent data from UBS, a staggering 80% of executives at American companies have plans to move their manufacturing out of China and reshore some or all of it back to the US.
Why are so many businesses bringing production back to the US? Why now? Is the country prepared to handle the influx of work, and how can manufacturers work around potential roadblocks? We’ll discuss all these questions and more below.
China’s Problems
For the last four years, China has suffered a series of setbacks that caused waves of US businesses to move manufacturing out of the country. It started back in 2018, when former President Trump imposed tariffs on many imported Chinese products that are still ongoing today. Then two years later, pandemic-related production delays and rising shipping costs further saddles Chinese manufacturing sites with inconveniences. Lower costs were the primary motivation for companies to outsource manufacturing to China; with rising prices, that advantage disappeared.
With manufacturers eager to move out of China, it naturally raises the question of where they should relocate to. For American companies, the resounding answer has been back to the continental US. Why are so many manufacturers choosing to onshore production, rather than move to other Asian countries or international sites?
Technology & Automation
The US may not seem like an obvious choice to relocate production sites at first, given its strict regulations and an expensive, shrinking labor market. However, the US is also a global center of technological innovation, and the increased use of automated systems has curtailed the need for mass amounts of labor. In areas of the world where labor is less expensive, they haven’t had the need to develop automated processes to take the place of human labor. In countries like the US, though, thousands of unfilled manufacturing jobs exacerbated the demand for artificial intelligence-backed advancements.
For many plants, those advancements have led to implementing robotics and automated machines. Data from Reuters revealed that US manufacturers implemented more robots into their processes in 2021 than any other year in history. According to MIT, plants that utilize robotics often see increased productivity, as well as improved wages and job satisfaction among the employees they do have. If your business is willing to invest in technology for your plants, you may be ultimately unphased by labor shortages, and even come out more profitable than before.
Advantages of Keeping Production Closer to Consumers
In addition to technology-related advantages, the US also offers close proximity to many American companies’ primary customer base. International shipping can often result in unexpected delays and unpredictable schedules, so having a domestic supply chain can ensure customers find products in stock and receive their orders on time. According to research from McKinsey, if the product a consumer needs is out of stock, 39% will select a different brand or product rather than wait for their usual item to come back in stock.
There can also be internal benefits to keeping production close to your consumers. Some consumers place a high value on brands that support the local economy, so choosing to add manufacturing and new jobs in the US will make your company attractive to certain customers. Such measures may also coincide with some of your company’s larger brand promises, such as those related to sustainability or community involvement. For businesses who specifically produce semiconductor chips, President Biden has also offered a 25% tax credit and other financial incentives to those who build new plants within the US.
Ways to Offset Higher Costs for US Sites
These are just some of the reasons manufacturers are flocking back to the US. However, if your company is still concerned about heightened expenses related to onshoring production, know there are several other strategies that can make a domestic supply chain feasible. For example, if building a new plant seems daunting, but you already have one or more US sites, consider adding capacity to the structure. By adding on to a current plant or acquiring another existing site, you can still meet production needs without investing as much upfront.
Planning and scheduling optimization is another area that can provide significant savings and increased profitability. When based on a highly detailed virtual plant model, an optimization tool can help your site navigate inventory, product demands, and maintenance to find the most efficient production schedule. It can also analyze your site’s layout to determine how you can maximize capacity to get the most output possible. To learn more about our advanced planning, scheduling, and optimization tool, VirtECS, we invite you to download our short overview guide.
by Kelsey H | Jul 12, 2022 | Supply Chain
Over the past year, a growing number of large US companies have kicked off efforts to onshore their manufacturing plants. Most have one common goal in mind: to regain control of their supply chain. Once established, a domestic supply chain is typically easier for businesses to manage, allowing them to reduce or eliminate most delays.
However, onshoring manufacturing facilities isn’t without its own challenges. To reach the worthwhile payoff, business leaders must be strategic with their operational plans and prioritize optimization in order to avoid a new set of problems. Below, we’ll discuss some of the challenges looming over new US manufacturing plants and suggestions to work around these issues.
A Shrinking Workforce
Many US industries have recently experienced labor shortages. Unfortunately, the manufacturing industry is among the most affected, with more job openings recorded last year than ever before, according to Deloitte. It’s likely the labor shortage will continue in the future, as the National Association of Manufacturers forecasts that 2.1 million manufacturing jobs will be unfilled by 2030.
For organizations opening new plants in the US in the coming years, this could present a serious problem without proper planning. When selecting sites for new domestic plants, manufacturers should research the demographics and manufacturing history of the area to ensure there will be enough workers available to staff the facility. However, it will also be important to create a mitigation plan to address potential staffing problems. For example, we recommend manufacturers design their plants with the capability to easily scale up or down depending on the number of employees they have available. With this feature incorporated into the plant’s capacity plans, leaders can make adjustments quickly with minimal waste or lost time.
The Search for New Vendors
When companies transition to vertically integrated domestic plants, they also need to secure their own suppliers for the facilities. For businesses that previously used contract manufacturers, this may be a new process that they’ve never had to engage in before. Because manufacturing is such a vendor-dependent industry, new plants need to establish a network of suppliers for all of their raw materials and sub-assemblies before they can get started on production.
To find reputable vendors, some manufacturers rely on online supplier directories, which provide large, up to date lists of potential partners in the US and beyond. Of course, another safe route is to consult colleagues or other industry professionals for referrals. Contacts who have already built a US-based supply chain can offer valuable insight into important considerations or lessons learned from their experience. As you select your primary vendors, be sure to keep an updated list of backup options as well. If we’ve learned anything in the last two years, it’s that manufacturers should always be prepared for every possible supply chain disruption.
Rising Infrastructure Costs
Every manufacturer knows there are steep upfront costs that come with establishing a new plant. If the land doesn’t yet have infrastructure like water and gas in place, it can be expensive and time-consuming to add those facilities. To make matters more complicated, certain areas of the country can also have issues securing some critical resources, such as the ongoing drought causing water shortages in the West.
For companies hoping to regain control of their supply chain as soon as possible, infrastructure delays can be a big problem. Building costs are already steep, and plants need to start production as soon as possible to start recouping costs.
To assuage some of these expenses and delays, we recommend new plants utilize a capacity analysis tool before construction even begins. This software can help manufacturers avoid bottlenecks and maximize production capacity from the beginning. VirtECS® offers nearly 30 years of experience in capacity analysis for some of the most complex manufacturing processes in the world. As one client in the pharmaceutical industry told us, “I have evaluated more than a dozen process modeling software solutions and VirtECS® is hands-down the most powerful for end-to-end capacity analysis.” For a free demo of our tool, schedule a short call with one of our experts here.
by Kelsey H | Aug 3, 2021 | Industry News, Supply Chain
The ever-growing number of cyberattacks has much of the manufacturing industry on edge – and for good reason. According to a June 2021 report from Morphisec, one in five manufacturers in the US and UK have experienced a cyberattack in the last 12 months. As a whole, manufacturing plants reported three times as many ransomware attacks in 2020 as the previous year.
Cybersecurity has notably reached the highest office of the United States, with President Biden signing an executive order on May 12 after a string of recent attacks on federal agencies. The order outlines a “software bill of materials” that requires government vendors to provide specific tools that will help agencies identify their most vulnerable networks. It’s an important first step in the fight against virtual attacks, but these changes will have to make their way into private organizations in order to more significantly impact the manufacturing industry.
Cyberattacks bring up obvious security and financial concerns for manufacturers, but there are many other hidden dangers to these threats. One compromised plant can result in a backlog through the entire industry’s supply chain, leading to some of the product shortages we’re currently experiencing.
When attacks seem to be coming from all sides, it’s difficult to feel truly secure in the safety of your business. However, experts have noted how essential it is to work with a cybersecurity team and ask them some key questions to decrease your risk for a potential cyber threat.
What’s the status of our internal electronic connections?
According to a security expert from PricewaterhouseCoopers, assessing vulnerable connections between departments is critical to stop cyber threats before they happen. Performing a review of all tools and assets shared throughout the organization has helped other companies catch weak links in their electronic defenses and ensure sensitive information has all the proper barriers in place. You may also want to ask your IT department about the best ways to communicate with them in the event that you discover a threat or vulnerable channel. Providing a clear path of communication can help move emergency actions along much more quickly – and once you discover a cyber threat, every second counts.
Are there any parameters to remote work?
Working from home has added flexibility and physical safety for employees at many companies, but unfortunately, it’s also opened the door to cyberattacks. Data from a recent survey of IT and cybersecurity professionals indicates that remote work caused security breaches in 20% of all organizations last year. For organizations that use remote work in some capacity, it’s essential to consult your cybersecurity team about the tools currently in place to prevent hackers from stealing remote access and capturing confidential information. If you haven’t yet added any security features to address these risks, consider asking about geographic limits for remote access, multi-factor authentication, and heightened control over user permissions to your network.
Do we have protected backups in place?
For all too many businesses, cyberattacks eventually do become a reality. If your plant experiences a security threat, do you have a backup of your most critical data to get operations back up as soon as possible? And what methods does your cybersecurity team have in place to protect those backups? According to IndustryWeek, manufacturers who store monthly backups of all their data at a safe off-site location are able to recover more quickly from a cyberattack. If essential information is lost in an attack with no way to get it back, recovery may take weeks, if not months, leading to drastic delays, wasted product and lost revenue.
Vendors and partners are also an important group to consult about cybersecurity. Though they exist outside of your organization, they will likely have sensitive information about your products or services within their own network. To ensure you company is fully protected, be sure to talk to your current vendors about their cybersecurity plans and ask any new partners about their security practices before entering into an agreement. For other concerns you may have about your organization’s cybersecurity, don’t hesitate to reach out to your IT department or a trusted team of security experts in your area. These experts can provide more detailed advice for your specific needs and help you design strategic processes, giving your business as much protection as possible.
by Kelsey H | May 17, 2021 | Process Improvement, Supply Chain
Raw material costs are generally some of the largest expenses any organization incurs. It may seem like your plant has no control over the cost, and you’re simply at the mercy of your suppliers. After all, you certainly don’t want to sacrifice on quality for the sake of new, cheap materials that your customers won’t recognize.
However, manufacturers still have the ability to take back control of their raw materials. Over the years, we’ve uncovered a number of effective strategies for reducing supply costs that any manufacturer will be able to implement.
Negotiate with Suppliers
If you’re like most manufacturers, you may have a specific set of suppliers you work with on a regular basis to source the raw materials your plant needs. Over time, these partners have likely learned the ins and outs of your business, but prices and other terms may have remained stagnant since you first started working together. In many instances, though, there is room to reassess those agreements. Your supplier depends on your organization as a valuable customer, so they will likely be inclined to meet your requests (within reason). Requesting small changes, such as better financing terms, discounted shipping, or other perks can significantly lower your total costs over time.
In the event that your suppliers refuse to provide any additional benefits, it may be worth shopping around for alternative options. There’s no harm in looking, and a simple search may turn up a partner that can provide a better deal, faster shipping times, or other favorable improvements. Just be sure to do your research on the quality of their materials to ensure there will not be a noticeable difference that shows up in your products.
In any new supplier relationship, be sure to ask upfront if they can add in any discounts in return for a long-term agreement. Companies trying to earn your business are often very willing to provide extras that can create substantial savings for your business in the long run. You might also take this opportunity at the beginning of a partnership to create a plan to review the terms of your deal regularly so that that your agreement doesn’t become unfavorable down the road.
Buy in Bulk
If you have the space available at your facility and the cash to make larger purchases, buying raw materials in bulk can be a simple way to reduce expenses. Typically, the more materials you buy at once, the less each individual unit will cost. To take full advantage of these savings, consider whether there are specific times of year, such as an off-season or slower economic climate, when material costs will be lower. Purchasing a larger amount during these times can result in major savings on the products you know you will need in the future.
However, it’s important to note that you should only use this strategy for materials you know you will use during production well into the future. If it’s possible the material will be phased out or will sit around without being used, do not purchase bulk quantities of it. Buying larger quantities at once is only a good idea if you’re sure none of the supplies will go to waste.
Minimize Waste
Often times, manufacturers design their internal processes without considering the standardized formats that most vendors use. If your plant’s systems don’t align with the vendors who supply the materials you need, it can create a high degree of waste. To overcome this issue, consider whether you can modify your process to avoid scrapping any excess material. Using all of your raw supplies and minimizing related waste can start to reduce the $8 trillion of waste produced by manufacturers each year, according to Forbes.
If it’s not possible to change your internal procedures to account for the differences, you might be able to recycle the leftover material into a form you can still use in your existing process. Another approach would be adjusting designs to use less of the raw materials overall. The less total product you have to order, the more money your organization can save for other more beneficial uses.
Adjusting your production processes doesn’t have to be such a complicated and intimidating task. By using software that creates a virtual plant model, you can test out changes before you formally implement them. This strategy can help ensure you’re making the most beneficial modifications and relive some of the risks involved. VirtECS, our planning and scheduling optimization tool, has been used by many of the world’s leading manufacturers to provide solutions for their complex processes. If you’re interested in finding out how VirtECS can help optimize the processes at your plant, download our overview guide here.
