Basics and Challenges of Pharma Supply Chains

Delivery of appropriate medicines in sufficient quantities is a strategically important issue nowadays. Medicines trade has increased six times in the first twenty years of the new millennium, which puts huge stress on the supply chain. Therefore, new problems began to appear, as well as solutions to solve them.

Elements of the supply chain in pharmacy

Today, access to medicines and treatment is one of the fundamental human rights. Pharmaceutical companies are therefore under increased pressure to deliver through the supply chain a sufficient quantity of quality medicines on time and at an acceptable price. Delays or errors in delivery negatively affect the company as well as the general health of the population. That is why good coordination of all elements of the supply chain is extremely important.

The five elements of the pharmaceutical supply chain are the manufacturer, the wholesaler, the pharmacies and hospitals, the PBM, and the patient as the end user. The manufacturer predicts the demand for medicines based on data on stock and distribution speed and plans production accordingly.

The wholesaler distributes drugs to pharmacies and hospitals in coordination with PBM. PBMs (Pharmacy Benefit Managers) are companies that regulate prescription drug prices. They use their large purchasing power to get a bigger rebate and thus reduce fees.

Pharmacies and hospitals are the last elements before the patient. Their task is to ensure a sufficient amount of medicines in warehouses as well as to provide instructions for their safe and efficient use to patients. Patients are the end users who bear the brunt of supply chain costs.


A large part of the cost of the drug itself falls on the supply chain. Any problems within it can significantly affect the price of the drug. Possible problems can be divided into those inside the chain itself and those outside it.

Challenges within the chain

It is an old saying that a chain is only as strong as its weakest link. That is why it is important to detect bottlenecks in the distribution of pharmaceutical products. Lack of coordination is probably the biggest problem within the distribution chain itself. Poor inventory management and insufficient supply control lead to incorrect information about demand, resulting in stockpiling or shortages of medicines. Humans are not infallible, so dependence on human resources is another big problem faced by the pharmaceutical supply chain.

Challenges outside the chain

The supply chain is highly dependent on the distance between elements. Today, this is especially pronounced since production has moved to the far east. Trade routes have been stretched, and the time it takes for goods to reach the end-user has increased.

Due to the large number of countries through which trade routes pass, the supply chain is particularly sensitive to international tensions and natural disasters. Another big off-chain threat that is getting bigger is cyberattacks.


Modern problems require modern solutions, such as the introduction of new technologies. Since coordination is the problem that causes most others within the chain, sophisticated computer programs can greatly reduce this risk. Each client has its characteristics, so programs are created specifically for each of them, according to their needs and specifications.

In this way, the visibility of the entire pharmaceutical supply chain is increased, which leads to easier detection of problems and their occurrence can be prevented. There are two types of software used in pharmaceutical supply chains and supply chains in general. These are on-premises software and Saas (software as a service).

On-premises software

This is software that is installed on the computers of a particular organization. They are tailored to fit the particular needs of one customer and can be accessed without the need for an internet connection.

On-prem software is generally more expensive than cloud-based mainly because of the initial cost of development for such specific software. The buyer is also responsible for maintaining the hardware and IT personnel needed.

SaaS software

Cloud-based Saas or on-demand model is a cheaper solution. It is licensed on a subscription basis and is centrally hosted. The customer needs an internet connection to access software but the initial costs of installing are lower. Also, the maintenance of software is the responsibility of a developer.

SCMS (supply chain management software)

If not managed and optimized properly, a supply chain can waste a lot of resources. That is why specialized software is used to maintain the chain and forecast the needs of all included. Most SCMSs use the following functions or modules:

  1. Customer-requirement processing
  2. Purchase-order processing
  3. Sales and distribution
  4. Inventory management
  5. Goods receipt and warehouse management
  6. Supplier management/sourcing

The complexity and price of software may vary. Small businesses need only to keep track of inventory and orders while big companies need more modules like supply chain optimization and tracking.

Forecasting and timeline

Pharmaceutical products are very time and temperature sensitive. On the other hand, they must always be available to patients. SCMS must predict when is the best time to order products to be delivered on time and with enough space in a warehouse.

When talking about the supply chain, people usually think of goods and means of transport. In today’s competitive environment, the most important thing about a supply chain that saves a lot of money is information. Get an estimate for a pharmaceutical software solution.