"Just-In-Time" is a series of written interviews with experts from different backgrounds, all of whom have extensive experience with supply chains, including knowledge of current trends and future developments. Similar to the "just-in-time" supply-chain philosophy, we strive to bring valuable insight when it is needed most, particularly in light of COVID-19 and an increasingly volatile geopolitical environment. This series will continue in the months ahead as we seek further guidance from clients and friends on the state of global supply chains and distribution contracts.

Interviewer | Dr. Joachim J. Modlich, Partner, Mayer Brown

Interviewee | Peter Szczensny, Head of Commercial Development & Health Politics, Grünenthal GmbH | 6 April 2021 | The Truth: Supply Chain Trends

Is COVID-19 accelerating supply chain trends?

COVID- 19 is accelerating the trend towards more control over the supply chain—i.e., it has required more real-time information and transparency relating to the status of supply and projections on progress, as well as the impact of disruptions. This is of particular importance to the pharma industry where the value chain will continue to start mainly in India or China, either with starting materials or with API [i.e., active pharmaceutical ingredients]. Sensor technologies such as RFID chips are likely to play a material role in that regard in the future.

What are the future drivers of supply-chain developments?

Beyond the US "America first" approach, even on this side of the Atlantic we are seeing a general drive towards a higher degree of independence in the supply chains from regions outside the EU, which will have a positive impact on the stability of supply chains but also negative impacts on costs. Nevertheless, in the pharmaceutical industry, this will reduce but not eliminate the dependence on countries such as India and China.

What do you think supply chains will look like 10 years from now?

With supply disruptions making headline news, supply chains have received more attention than ever before and supply chain stability is likely to stay more in the focus of business executives and politicians. While geographic supply chain redesign is part of the answer, technological answers such as blockchain (for data security) and artificial intelligence will likely increase in importance. One area could be to model and simulate supply chains, also combining this with real-time data, thus increasing the under-standing of improvement potentials, risk factors and their impact.
In addition, data exchange between the ERP [i.e., enterprise resource planning] systems of different companies is likely to become easier and more ubiquitous. This will allow a more integrated look at supply chains and therefore more holistic management, making concepts such as collaborative planning and vendor-managed inventory easier to implement.

Is there any business model connected to the supply chain you would no longer invest your own money in?

I would no longer invest in business models with traditional OTC [i.e., over-the-counter] retail; OTC retail will lose its relevance in particular relating to every day products and will be replaced by online solutions. Real-life shopping experiences could move to "experience shopping"— i.e., looking at goods in a store without necessarily buying—which will probably be limited to the higher value market segment.

Brexit: How do you manage the changes that came along with Brexit?

The pharmaceutical industry has been particularly affected by the move of the Europe-an Medicines Agency from London to Amsterdam; impacts of the move have been managed relatively well. In addition, as I do not see any development of new pharma production facilities in the UK producing for the local market, the pharma industry will increase its inventory in the UK creating a safety buffer against supply chain disruptions. This is likely to continue until the uncertainties around import and export formalities have been resolved and companies have gotten used to dealing with them.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.