MANAGING RISK IN PHARMACEUTICAL GLOBAL SUPPLY CHAIN OUTSOURCING: APPLYING ANALYTIC HIERARCHY PROCESS MODEL


ABSTRACT
Because of the intense pressure to contain R&D costs, pharmaceuticals firms are increasingly outsourcing their supply chain operations. Global supply chain outsourcing can be viewed as a strategic competitive weapon rather than cost savings initiative because it can offer flexibility in production, satisfy ultimate consumers’ growing demands, reduce fixed costs, and enhance positional advantage. Thus, for the pharmaceutical firms, global supply chain outsourcing has become a competitive requirement for ameliorating performance and profit margin. It allows allow firms to leverage their core skills and resources well beyond levels available with other strategies. Well executed global supply chain outsourcing strategies can enhance returns on capital, reduce risk, improve flexibility, and make firms more responsive to their customers and shareholders’ requirements. Although the attractive benefits associated with global outsourcing have been acknowledged widely, much of the inherent risks tend to be overlooked. Acknowledged pharmaceutical supply chain outsourcing risks include regulatory risk, operational risks, technical risk, and corporate social responsibility risk. Supply chain risk management strategies that can be employed to tame a firm’s exposure to supply chain outsourcing risk are risk avoidance, reduction (mitigation), transfer, and acceptance (retention).