DCAT Value Chain Insights’ “5 Minutes With,” part of the DCAT Member Company Community section, features interviews with business and industry leaders on issues impacting the bio/pharmaceutical manufacturing value chain.

This “5 Minutes With” features James Peterson, Global Vice President of Pharmaceutical Ingredients, Univar Solutions a global chemical and ingredients distributor. He discusses the key issues shaping bio/pharmaceutical sourcing and supply chains in 2022. 

Q: Global supply chains across all industries were pressured in 2021 in the form of transportation bottlenecks and increased shipping costs. What was the impact on the supply chain for pharma ingredients, including raw materials for those ingredients, and how is the situation shaping to be for 2022?

Peterson (Univar): We saw several market, environmental, and regulatory factors converge in 2021, along with repercussions of the COVID-19 pandemic, which led the way in impacting sourcing, availability, and delivery. From raw-material-manufacturing disruptions and transportation challenges to surging demand from bio/pharmaceutical manufacturers for critical ingredients, the pharmaceutical ingredient supply-chain crunch has mirrored those of other markets with increased prices and longer lead times for chemicals and ingredients from many suppliers globally.

Looking at the bio/pharmaceutical industry, demand for innovative chemistries driven by COVID-19 and mRNA technologies are very high. Suppliers and manufacturers are challenged to keep up with orders for materials such as bio buffers, amino acids, cell-culture media, and other key chemistries. Many suppliers are receiving volume orders well above historical levels, including a higher volume of government-rated orders associated with the Defense Production Act and the Defense Priorities and Allocations System. Adding increased consumer demand for medical procedures that individuals may have placed on hold or alternatives to prevent prevalent illnesses, we are witnessing a period where the market is asking for more than the current supply.

We foresee these challenges continuing to impact the pharmaceutical industry into 2022.

Q: To delve deeper, what do you see as key issues geographically in 2022 for sourcing and distribution of pharma ingredients, including raw materials for those ingredients? What are the region-specific issues that should be on the industry’s radar in the US?  European Union? Asia?

Peterson (Univar): Supply-chain experts dedicated to monitoring the global supply chain and movement of goods tell us that we should anticipate supply shortages and increased costs into 2022. Globally, as we exit the holiday season, the uncertainty of COVID-19 may continue to play an adverse role, disrupting the supply chain with further quarantines and vaccine mandates.

During the first part of the year, the Chinese New Year coincides with the Winter Olympics in Beijing. On top of the existing backlog and congestion at ports that we’re experiencing, these significant events may create additional manufacturing and supply-chain flow delays. Port congestion and high freight volumes are expected to continue in North America. In particular, we are closely monitoring the ports and truckload capacity, given the large freight volume that enters the country.

Q: Similarly, are supply-chain conditions favoring certain transportation modes (air, rail, truck) over another? What have been some strategies to address these conditions? Any key learnings from other industries?

Peterson (Univar): Rail is positioned to take considerable control of the supply-chain capacity. However, this requires easing port constraints and addressing the crewing issues presently impacting Class 1 railroads. We believe that companies with private fleets and rail spurs are more likely to mitigate inflation and supply-chain disruptions. 

Regardless of the industry or commodities being transported, each supply chain is a close-linked ecosystem. Therefore, each transporting mode has an upstream or downstream impact on the other. For example, truck-driver recruitment may take operators from rail cross-loading.  I believe that a strategy that incorporates a balanced and long-term multimodal approach with suitable investments in infrastructure to support vessel, truck, and rail modes will be beneficial.

Q: What other key issues should be on the industry’s radar for 2022 as it relates to sourcing and distribution of pharma ingredients, including raw materials for those ingredients?

Peterson (Univar):  I believe that industry experts should prepare for two key issues: (1) longer lead times required for raw materials that could impact production and (2) unforeseen events that could stress supply chains more.

Today, it’s more important than ever to forecast production needs and align with distributors who have resilience throughout the pharmaceutical supply chain and who can also carry strategic and diversified relationships with major suppliers globally, with the ability to draw upon various sources and resources and prioritize their orders. Furthermore, companies should consider dual sourcing by qualifying multiple sources for the same ingredient or by reformulations with different compounds, so that if one source is disrupted, other alternatives exist.

Companies must be prepared to meet demanding supply-chain challenges and scarcity conditions as we expect these challenging times to continue into 2022. Security and resilience are key, and companies must have the processes, resources, and people in place to keep running even in the most challenging environments.

James Peterson is Global Vice President of Pharmaceutical Ingredients at Univar Solutions, where he is responsible for driving growth worldwide for the company’s Pharmaceutical Ingredients business, focusing on excipients, active pharmaceutical ingredients, and high-purity solvents. His primary geographic reach includes leading teams in North America, Europe, Latin America, and Asia.