Lessons from the medical supply chain disruption in Puerto Rico
When Hurricane Maria hit Puerto Rico it didn’t just decimate the island; it’s also devastating two leading sectors: big pharma and the medical devices industry. That’s because Puerto Rico is a hotbed for manufacturing pharmaceuticals and medical devices to the tune of $15 billion a year. As a result, the hurricane and its aftermath have disrupted the supply chain of prescription drugs and medical devices with the potential to upset the supply demand curve.
According to the New York Times, “federal officials and major drugmakers are scrambling to prevent national shortages of critical drugs for treating cancer, diabetes, and heart disease, as well as medical devices and supplies, that are manufactured at 80 plants in hurricane-ravaged Puerto Rico.”
This story will continue to unfold and impact stakeholders like hospitals, nurses, doctors, and patients whose livelihoods and even their lives depend on the supply chain. Even if we are not in the healthcare industry, what can we learn from it? Here are five lessons you can take away for implementation at your organization.
1. Make sure you have a business continuity and disaster recovery (BC/DR) plan
A BC/DR plan outlines how to go from business interruption to business as usual. The plan should detail backup vendors when a key supplier fails to meet its contracted requirements. Review the plan regularly and test it with exercises and scenarios.
The lesson? A supply chain disruption caused by a major weather interruption like the hurricane that hit Puerto Rico would be one of the scenarios you would account for in a BC/DR plan.
2. Manage vendor and third-party risk with regular assessments
How well do you know your supply chain? Do suppliers have BC/DR plans of their own? What about contingencies for their vendors? The best way to find answers is to ask questions. Issue assessments to third parties. Score completed assessments based on risk level to your organization. Analyze findings to identify issues and trends.
Here’s the lesson. Assessments can’t prevent hurricanes from hitting Puerto Rico or elsewhere. They can help you determine what third parties are vital to your organization so you can be more prepared when a disaster occurs.
3. Consider the business impact from the supply chain
When third parties fail to deliver, it impacts your business operations. Customers don’t receive their orders. Customer service is flooded with complaints. Sales is encouraged to delay orders. Resources are diverted to solve the problem. The board wants answers.
The lesson: see the supply chain as an integral part of your operations. With that mindset, you can make adjustments like having backups for key vendors to keep the supply chain moving.
4. Make the most of the investigation process after incidents and disasters
When an incident or a disaster impacts your supply chain, the investigation process can identify a treasure-trove of lessons learned, processes to improve, and BC/DR plans to update.
The lesson: by making the most of the investigation process, you’ll be better prepared for the next supply chain disruption. Are there key questions that should be added to the third-party assessment questionnaire? Is there a way to streamline incident reporting, so decision makers can respond faster? Would customers benefit from an earlier notification? Asking the right questions can be invaluable during your investigations.
5. Be aware of the risk to your company’s reputation and brand
A supply chain disruption can leave customers stranded, which can hurt your reputation. If people can’t get a prescription for a life-threatening condition, due to what’s happening in Puerto Rico, we’ll hear about it. Social media will light up with negative posts. Mass media will run stories that put the company in a negative light. That hurts brands.
The lesson is that you need a PR crisis plan for managing the fallout from a supply chain disruption. You have to convey the message that the company is taking action to address the situation and focusing on returning to business as usual. Getting a message out that’s empathic and action-oriented is the first step to preserving the company’s reputation and brand during a crisis.
The situation in Puerto Rico and the disruption to the supply chain of vital medical drugs and devices should be a wakeup call. For any industry with complex supply chains or provides life-dependent products and services, companies need to be prepared for disaster by assessing suppliers regularly, considering risk to operations, applying lessons learned, and being proactive with crisis communications.
Learn a few key insights from the workshop Third Party Management by Design.
Read about third parties being both a necessity and a burden.
Read about some of the highlights from our expert panel discussion.