The Impact of Sustainability on the Pharmaceutical Supply Chain

The pharmaceutical industry is faced with the challenges aimed at coping with the dynamics of the global economy (Friend, Swanick, and Arlington 2011, p. 1). Such challenges include complex regulations that govern the production and supply of quality drugs. Additionally, modern businesses regardless of their sizes are faced with the increasing competition, customer demands, and rising development costs. Similarly, there is an increasing concern regarding the environmental impact of the processes used to transport the raw materials and products from one place to the other while the organizations are also faced with cost and process efficiency concerns (Friend, Swanick, and Arlington 2011, p. 11). Companies must, therefore, explore alternative methods for business operations as a strategy for remaining competitive and profitable while delivering the consumer’s needs. One of the methods employed by firms entails reviewing the supply and value chain management as a way of increasing the efficiency of the business operations.

            Consideration of the sustainability in the pharmaceutical sector arises from the fact that the sector is characterised by long product development and lead times as well as the significant real-life impact of the products on the consumer. Factors like the existence of multiple supply networks at different stages of pharmaceutical production further complicate the problems. Singh, Rice, and Riquier (2006, p. 2) describe that the dynamics of the pharmaceutical supply are further complicated by numerous stakeholders with diverse objectives and scope consequently leading to convoluted interactions.

            Environmental impact arising from supply chains should also be considered especially due to the emerging problems such as climate change and global warming. Other effects from the supply chains include the release of toxic wastes, deforestation, loss of biodiversity, emission of poisonous and greenhouse gases as well as depletion of energy (Rossetti, Handfield, and Dooley 2011, p. 601). Specifically, the pharmaceutical industry supply chains cause environmental pollution due to the aspects of energy and materials as well as through hazardous emission into the water bodies or air.

            Incorporating sustainability into the operations and supply chains remains one of the major focuses of companies. Sustainability refers to the consideration of the social, economic, and environmental impacts of the business activities as well as the emphasis on the longevity of the undertakings. The purpose of this essay is to explore the environmental sustainability of the pharmaceutical sector supply chain. The economic impact of the environmentally sustainable supply chain activities on organizations is also examined to establish the significance of the marketing dynamics like pricing and profitability. General examples of efforts undertaken by companies towards sustainable supply chains are also discussed. The pharmaceutical cold chain has used an example to describe the impact of sustainability issues on business to business (b2b). Illustrations are further drawn from the case of Novo Nordisk as one of the major global pharmaceutical industry leaders. The significance of the discourse presented in this essay is observed in the sense that the pharmaceutical supply chains represent some of the most important value in the world. Furthermore, the necessity of such discourse is associated with the vital nature of the healthcare needs globally. The discussion on the impact on b2b marketing is significant in presenting the dynamics of the sustainable operations as they relate to other stakeholders in the supply networks.

Business-to-business Marketing and Sustainability of Supply Chains

            Supply chains are vital components of business-to-business marketing due to the flow of products and information that are part of the offerings made to the various stakeholders. B2B marketing plays an important role in the supply chain by providing information about as well as building relationships that are necessary for improving the efficiency of the operations (Svensson 2003, p. 304). The other information that is also provided includes the product availability, sales information, order tracking, prices, and marketing campaigns. Similarly, the process enables the integration of the supply and demand operations within the companies while stressing the necessity for collaboration and coordination between the channel partners to allow for efficient operations (Jaberidoost et al. 2013, p. 69). Additionally, B2B strategies are essential in building the relationships between the stakeholders through the implementation of appropriate communication methodologies.

            Consequently, a collegiate environment is created in which all the stakeholders interact and participate in the developmental programmes aimed at improving the services delivered to the business consumers. On the B2B markets, organizations not only seek to develop effective relationships with their customers but with their suppliers as well. The companies further require the relationships to accomplish mutual benefits and trusts. An integrated supply chain that is the basis of the efficient B2B marketing allows for addressing the needs of the business customers (LaPlaca and Katrichis 2009, p. 56). The marketing approaches are also essential in the determination of the channels for distribution as well as the subjects for joint planning and distribution of the company products.  

            The sustainable supply chains are created when the partners are aware of market dynamics and consequently developing the right products that suit the specific consumer needs (Flynn, Huang and Zhao 2015, p. 4). The B2B marketing concepts can be used to design programmes such as business education activities that are essential for raising awareness about the particular environmental impacts of the products and operations that are part of a supply chain.

Efforts towards Environmentally Sustainable Supply Chains

            Addressing the modern environmental challenges require organizations to undertake a number of strategies to ensure sustainability.  Environmental sustainability initiatives are also part of corporate social responsibility (CSR) in which organizations are called to be accountable for their actions on the society. Furthermore, the sustainability awareness as a major theme in supply chains is undertaken due to the external pressure from groups such as media, consumers, governments, and non-governmental organizations (NGOs) (Ahi and Searcy 2015, p. 361). Similarly, the need for sustainable operations is highlighted due to the potential opportunities for business growth and development.

            The undertaken efforts are made especially to mitigate the adverse effects of climate change such as global warming. Pharmaceutical organizations also aim at reducing the environmental impact of their operations. Consequently, some of the efforts implemented include periodical environmental assessment (EA) and reporting of the performance in such instances. The reduction of carbon footprint in both the pharmaceutical manufacturing and supply chains is considered as vital in the efforts towards achieving sustainability. Carbon footprint refers to the amount of the carbon dioxide that is emitted into the atmosphere from the various operations (Ahi and Searcy 2015, p. 363). High levels of CO­2 in the atmosphere are related to the greenhouse effects and hence global warming. The process further entails stopping of the use of fossil fuels that are considered as significant contributors to the CO­2 emissions.

            The reduction of energy consumption is also another element of focus that is relevant to the environmental sustainable operations in the industry. Some of the processes aimed at the reduction of the energy consumption include the application of energy-efficient devices and equipment as well as the use of the renewable resources. Some of the renewable energy sources that are used include solar, and wind power among others. Companies such as Novo Nordisk are committed to the implementation of the use renewable sources of energy by ensuring that all the electricity used are generated from renewable processes by 2020 (Novo Nordisk 2018). Consequently, the organisation has implemented various renewable energy initiatives in different countries around the world with the most notable ones including the hydropower, steam, bio-natural gas, steam, and solar power in its production sites in the US, Denmark, Algeria, China, Russia, Brazil, and Japan. The appropriateness of the mentioned sources of power varies from one country to the other. Another strategy adopted by the company entails the adoption of the car and travel policy in which the number of cars that are used in business travels is reduced significantly.

Environmental Impact Assessment in Pharmaceutical Supply Chains

            Supply of medicine as strategic products is subject a number of risks.  The medicine should be supplied in the right quantity, at the right place and customers, and with the acceptable quality. The supplies should also be consistent with the optimum costs of the healthcare system. The potential risks therefore not only lead to the wastage of resources but can also result in adverse effects on the patients’ health while hindering an access to a quality medication (PATH 2015, p. 8). The assessment and management of risks in the pharmaceutical supply chains is, therefore, an important process that allows for the delivery of quality medicines for an effective healthcare system. Such risks arise primarily from the environment in which the supply chain is located.

            Apart from the risks to which the medicines are exposed in the pharmaceutical supply chains, the materials entailed therein also pose a significant impact on the environment. The drug manufacturers and suppliers are for instance required to periodically assess the impact of the active pharmaceutical ingredients (APIs) on the wastewater to ensure that such materials are not discharged in toxic amounts (Caldwell et al. 2016, p. 814). The assessment of the environment is consequently essential to establish the potential impacts of the environment to ensure sustainable operations as well as part of the organization’s CSR efforts. The APIs are some of the major chemicals used in the pharmaceutical manufacturing alongside the one utilised for cleaning, dilution, and analytical processes. The environmental impact of such chemicals depends on the amount released as well as the nature of the particular materials.

            The energy use and release into the environment is also another element that should entail considerable evaluation to establish the sustainability of a supply chain (Chaabane, Ramudhin, and Paquet 2012, p. 38). Energy is not only used for driving the logistic operations such as for powering vehicles but also in operating manufacturing equipment like heating and cooling devices, centrifuges, separators, distillation units, and sterilization machines among others. The assessment of the energy use should be conducted to allow for the determination of the sustainable of the appropriate amount of resources used in the generation of the power. Similarly, the sustainability of the operations depends on the ability of companies in the supply network to ensure economical use of energy resources without considerable pollution of the environment through emission of heat or combustion products such as soot. The energy performance evaluation is also conducted to ascertain the carbon footprint.     

Collaboration and Sustainability in Pharmaceutical Supply Chains

            The big pharmaceutical firms recognize the importance of working together in developing and implementing the appropriate environmental, ethical, and social supplier standards (Hassini, Surti, and Searcy 2012, p. 70). The inception of the Pharmaceutical Supply Chain Initiative (PSCI) in 2006 is an example of the pre-competitive collaboration to improve sustainability in the pharmaceutical sector supply chain. Some of the major areas of collaboration between the stakeholders include process optimisation, energy management, screening of energy sources, renewable sources, and efficient design (Novo Nordisk 2018). The process optimisation for sustainability includes reduction of wastes as well as improving the operations across the organisations. The companies also seek to collaborate in the use of the renewable energy sources to reduce the CO2 emissions across all the processes in the supply chain.

            According to Wilkinson and Young (2002, p. 123), the impact of sustainable operations arises from the fact that supply chains entail firms operating in networks. Consequently, the actions of one organization are likely to affect the efforts that are implemented by another firm in the network. The impact of a sustainable supply chain hence depends on the extent of collaboration between the stakeholders who works towards ensuring that the adverse factors on the environment are eliminated (Carter, Rogers, and Choi 2015, p. 90). An example of such collaboration is observed in the efforts of Novo Nordisk in engaging its suppliers in strategies aimed at reducing carbon dioxide emissions at their production sites. For instance, the organization is seeking to reduce CO­2

emissions in selected suppliers by 10% by 2025. Similarly, the organization is setting targets for the management of the emission of the hazardous materials into the atmosphere as well as the efficient use of energy in the production sites.

            The collaboration for sustainable operations is also important in the establishment of the potential of the partners who are involved in the networks (Ageron, Gunasekaran, and Spalanzani 2012, p. 169). In such case, the organization may consider aspects such as the impact of the transportation companies and the businesses that offer services relating to the flow of information. The partners are required to make the supply process faster and efficient while considering the economic, social, and the environmental impact of the business operations involved (Walker and Jones 2012. P. 16). The suppliers as the major stakeholders in the process should also be engaged to accept the tough changes that are part of the efforts towards achieving sustainability. Some of such efforts include the introduction of the broader criteria for the introduction and development of new products as well as strategies that entail re-use and recycle of materials.

Sustainability and Pricing Issues and Impact on B2B Marketing

            The adoption of the right supply chain strategies is required for a successful business. Whelan and Fink (2016, p. 3) argue that business executives are usually reluctant to adopt sustainability strategies due to the concern that the costs of such measures may outweigh their benefits. Businesses continuously seek to make the processes and operations to be more profitable and efficient through cost reduction strategies and making the products to reach their consumers through affordable options. An example of such strategies includes lowering the costs of transportation of goods. The goods are carried as raw materials from the suppliers’ production sites to the business customers who transform them into appropriate final products.

            According to Kotler (2011, p. 132), the effective and sustainable management of the environmental imperative requires a change in the marketing practices. Consequently, firms that embrace sustainability are required to make some basic changes in their production and marketing strategies. The changes are essential in the sense that they allow the adoption of appropriate policies for balancing between sustainability and profitable growth. Some of such policies may include the requirement of the suppliers to source a significant percentage of their materials from companies that are environmentally oriented (Darnall, Jolley, and Handfield 2008. p.30). While the sustainability efforts require changes in all the four Ps (product, place, promotion, and price) pricing policies are considered due to their significant influence on the revenues and the ultimate profitability of the businesses.

            The changes in pricing are implemented due to the need to present product offerings that address the different levels of environmental friendliness and consequently assign appropriate prices. Furthermore, businesses are also required to consider how the environmental regulations will affect the prices of the goods and services that are offered in the market (Chaabane, Ramudhin, and Paquet 2012, p. 38). The pricing decisions are hence required to address the cost extremities that are created by the regulations towards sustainable developments while considering that environmentally sensitive customers may be willing to pay more for the products of the desired quality.

            The pricing may also be determined by the factors like the relative value perceived by the buyer as well as the market forces (supply and demand dynamics). The pricing is further affected by whether the product supplied is a specialty commodity (Carter and Rogers 2008, p. 361). In the pharmaceutical industry, the specialty products may include certain ingredients used in the formulations as well as some unique drugs that can only be sourced from particular suppliers. In other cases, the supply chain may entail products that are generic in nature and can be sourced from any supplier. Consequently, the purchase decisions are made on the cost basis with the cheapest products being favoured over the relatively expensive commodities. In some other situations, the pricing may be influenced by the negotiating skills of the buyers and sellers. The pricing issues for sustainable supply chains are influenced by the perceived development risks as well as the costs that may arise from the adoption of the strategies aimed at implementing the desired and efficient processes.   

Pharmaceutical Cold Chain and Sustainability

            Cold chain refers to the temperature controlled supply chain that is essential for the distribution of products that are susceptible to the rise in temperatures and are frozen or refrigerated. The pharmaceutical supply chain requires temperature sensitive transportation of medicine such as insulin. The methodologies such as thermal and refrigerated packaging are required for the logistical planning that is necessary for protecting the integrity of the shipment (Rossetti, Handfield, and Dooley 2011, p. 609). The cold chain is also essential in the 1healthcare supply chain to allow for the continual supply of drugs in the healthcare industry. The need for the cold chain is noted in the advancement of the pharmaceutical manufacturing in which high-value active ingredients with strict temperature requirements. The need for temperature control and monitoring throughout the supply the chain is therefore required. The temperature control is accomplished through the application of insulated containers, thermal containers, refrigerants, and temperature-monitoring electronics.

            The sustainability of cold chains is faced with a number of challenges observed in the monitoring, delivery, and globalization. The biggest challenge encountered in the need to maintain a temperature range of 2°C - 8°C that is required for the pharmaceutical industry. The range is required for the entire delivery cycle (Bozorgi et al. 2014. p. 4). Energy requirements are essential for maintaining and controlling particular temperatures. Apart from the delivery challenges the other constraints include the fact that the transportation requires specialized trucks and personnel (World Health Organization, 2016, p, 12). Organizations can also face the challenge of a limited capacity required for the logistics operations.

            Temperature monitoring of high-value products across the supply chain is also another challenge that is encountered in the pharmaceutical industry. If the cooler is not at the right at the temperature, then the customer may lodge return claims as well as the potential delays for the patients (Behdani, Fan, and Bleomhof 2018, p. 4). The process is further associated with high levels of risks and costs of the devices that are required to maintain the temperature. Sensor technologies and recordable devices are examples of the requirements that contribute to the high costs of the cold chain operations.

            Globalisation is also another element that impacts the sustainability of the cold chain processes. The growth of globalisation requires that organizations implement stringent practices to comply with the regulatory standards. In the European Union (EU) for instance, almost 80% of pharmaceutical products should be transported under temperature-controlled transportation (Behdani, Fan, and Bleomhof 2018, p. 4). Furthermore, the regulation is serialised from one country to another and are associated with the complex costs. The requirement for visibility across the supply chain is also another element that complicates issues in the pharmaceutical logistics. The transportation requires that temperatures are controlled regardless of the location of the shipment around the world (Narayana, Pati, and Vrat 2014, p. 18). The environmental impact arising from the cold chain operations include the use of the energy to control and monitoring of the temperature of the logistics operations.

            An example of a cold chain is Novo Nordisk distribution network in Algeria. The company requires that adequate storage facilities are required for the quality of the drug products (Novo Nordisk 2018). Shipments are transferred from the organisation’s production site in Denmark to a warehouse in Algeria together with the Cox recorder that is analysed by a pharmacist throughout the delivery process.

            The sustainability of the shipment operations is necessary to allow for the continuous delivery of the products to the consumers while considering the cost-effectiveness of the supply operations (Kim and Kwon 2015, p. 34). The B2B concepts are essential in the cold chain operations due to the need for the appropriate communication strategies necessary for accomplishing effective interaction and relationships between the stakeholders. The marketing approaches are also essential in the determination of the appropriate distribution channels for the delivery of the high-value pharmaceutical products.

Conclusion

            The pharmaceutical industry supply chain is faced with various challenges such as increasing competition, customer demands, and rising development costs. Furthermore, the logistics in the sector is faced with the constraints of coping with the dynamics of the global economy like the changing regulations that are associated with the transport operations in different countries. The pharmaceutical supply chains are also under pressure from various groups such as governments, consumer groups, NGOs, and others to adopt sustainable approaches. The environmental sustainability efforts of the organisations are undertaken as part of CSR approaches as well as a means of enhancing the profitability of the business operations. The purpose of this essay was to explore environmental sustainability of the pharmaceutical sector supply chain while exploring the business to business approaches that can be used to implement the sustainable operations.

            The two major elements of efforts towards the sustainable supply chains include the reduction of the carbon footprint and increasing the efficiency of the energy consumption. The carbon footprint is the total amount of carbon dioxide that is produced from the logistic operations. The reduction of energy consumption is accomplished through processes that include the application of energy-efficient devices and equipment as well as the use of the renewable resources.  On the other hand, the carbon footprint is reduced through the processes like the elimination of the use of fossil fuels.  

            The B2B marketing approaches are essential in the establishment of the appropriate relationship and interaction among the stakeholders in the supply networks. Furthermore, the marketing methodologies are necessary for the provision of the necessary information regarding the products. The pricing issues for sustainable supply chains are influenced by the perceived development risks as well as the costs that may arise from the adoption of the strategies aimed at implementing the desired and efficient processes.  

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