Over 7% of pharmaceutical drugs go to waste as supply chain managers bemoan damaged and excess inventory

New research suggests that stock inefficiencies could equate to 3.6% of total profitability of pharmaceutical firms

• Pharmaceutical companies discard 4.1% of stock due to perishing, spoiling or damage plus a further 3% due to overproduction – a total of 7.1%
• Respondents estimate this is equivalent to 3.6% of their annual profits.
• Companies recognize the problem and said their use of key technologies such as blockchain, RFID, robotics and drones will all at least double in the next three years to solve challenges

OEGSTGEEST, THE NETHERLANDS – November 10, 2022 — Stock inefficiencies and inventory ‘black holes’ are exacerbating the supply chain crisis for pharmaceutical firms according to new research.  Over 7% of stock is lost – either through the 4.1% which is damaged or perished or the additional 3% which is overproduced. As well as much of this stock is valuable for human health, it’s also hitting pharmaceutical firms in the pocket with respondents estimating 3.6% of annual profits are being lost. This is estimated at $10.3 billion in terms of the sale value of lost stock.

This data has been published in a new global report released today (November 10, 2022) by Avery Dennison, a leader in materials science and digital identification solutions. The Missing Billions: The Real Cost of Supply Chain Waste is an in-depth report assessing the state of global supply chains and the issue of waste across the US, UK, France, China and Japan. 

The data analyzed 64 global pharmaceutical firms including manufacturers, wholesale and distribution firms and retailers. It found that the biggest contributors to supply chain waste are product packaging, spoilage of perishable items, and inefficient transport and delivery with respondents rating these issues as 5.3, 4.9 and 4.9 out of 7 respectively in terms of severity of concern. There is good measurement of this issue since 94% of respondents track supply chain waste.

But issues related to transport and logistics were stated as the ‘biggest concern’ by nearly 40% of respondents in terms of the ‘most disruptive to their supply chain operations’. The ‘availability of transportation and logistics capacity’ was cited by 20% whereas 19% specified the increased cost of transportation.

A massive 92% of respondents also said they are coming under pressure to become sustainable and estimate that 29% on average of their total company sustainability impact comes from their supply chain activities. But despite this awareness of the problem, they are not investing the budget required to fix it. Just 3.9% of technology budgets are specifically dedicated to supply chain sustainability improvement. 

The report highlights an intention to address these issues with a step change in the breadth of technologies used over the next three years to boost efficiency. When asked which of these technologies would you consider ‘most strategic to address supply chain waste over the next 24 months ‘, autonomous delivery vehicles (selected by 34%) topped the list followed by RFID (22%) and robots and cobots (20%). Other technologies that can help with broader efficiency are also major investment targets. The use of blockchain can help with supply chain tracking and is used by 6.3% of survey respondents today, this will rise 15-fold to 95% in three years. 

Francisco Melo, senior vice president and general manager at Avery Dennison Smartrac comments: “The current supply chain disruption is leading to a waste crisis in the healthcare and pharmaceutical industries and elsewhere. Having visibility is key to optimizing supply chains for efficiency and sustainability, as well as helping to build trust and transparency with consumers. Digital identification solutions play a vital role in supply chain planning strategy and it is encouraging to see that companies are committed to further drive this change through the increased use of RFID technology in the coming years.”

Melo adds: “Digital triggers such as Radio Frequency Identification or RFID, provide unprecedented end to end visibility in a highly efficient and accurate way. Connected products not only shine a light on supply chains but also reveal valuable new information to enable consumers to make better decisions, including transparency and carbon footprint data.”

To download The Missing Billions: The Real Cost of Supply Chain Waste visit here. 

To access the press kit visit here.