What may well be the most important supply chain in the world today is also one of the most backward, when it comes to automating key processes.
The life sciences supply chain has provided us with the vaccines that are currently being deployed globally to fight COVID-19, not to mention a number of other drugs and remedies for various diseases over the years. years. But the success of the sector masks serious gaps in the link between industrialists and scientists in the laboratory.
Relatively few members of the general public paid much attention to the life science research industry before the coronavirus pandemic, says Florian Wegener, co-founder and CEO of Zageno Inc., an online marketplace for life science products. This is despite the existence of a $ 130 billion market – what Wegener calls “a very large niche industry.”
One salient fact is also unknown to the public: “The supply chain for this industry is severed,” Wegener says. Despite being responsible for countless medical and scientific breakthroughs, the life sciences research sector presents “a great facade,” behind which lies an archaic system or command and execution.
In North America today, Wegener says, 20% of all lab supply orders are still placed by phone and 20% by fax. Buyers have to leaf through huge paper catalogs, and suppliers are lagging far behind in developing e-commerce capabilities. Most don’t even have a web presence.
“From a supplier perspective, it is very expensive to serve this market,” Wegener says, noting that at least 30 cents of every dollar of supplier revenue goes to the sales force, and an additional 5 cents to the sales force. customer service. And the latter feature is not what an online retail shopper might envision. “Customer service teams” are primarily call centers that take orders over the phone.
All of this adds up to big headaches for scientists and laboratory researchers whose work relies on easy access to supplies. Because of the inefficient ordering process, they waste between four and six hours a week setting up experiments, according to Wegener.
He sees the dilemma as presenting three big challenges for the lab scientist looking to buy a product. One is inadequate or non-existent research capacity. The second is the inability to access neutral information on product performance. And the third is a lack of transparency in prices.
Meanwhile, the biotechnology industry is booming. “Every quarter is a record,” Wegener says. “Last year we saw $ 80 billion invested in startups. This quarter alone, it’s $ 28 billion. This makes it all the more painful as the products are difficult to obtain, expensive and not transparent.
The complexity of the industry is staggering. Zageno’s automated marketplace provides access to more than 25 million SKUs, Wegener explains. Moderna, Inc., which makes one of the best performing COVID-19 vaccines, relies on more than 3,000 suppliers to create a single product.
Given the structure of the biotech industry, the fragmented nature of its supply chain is perhaps understandable. Most innovations come from small firms, of which there are thousands in North America alone, often backed by venture capital. They take the lion’s share of research and development on behalf of the pharmaceutical giants. “Very few big blockbusters have been invented within the big pharmaceutical companies,” Wegener explains. “Everything comes from these little labs.
So think of the countless small buyers trying to meet their needs with countless suppliers, who continue to market, process and fulfill orders manually. And so far there has been little appetite for reform. The problem, Wegener says, is that the lab’s researchers, who back a high-margin industry, hardly think about the cost of the product. In a survey of 3,600 scientists, this criterion was not among their top ten concerns.
With the advent of COVID-19, such attitudes are ripe for change. The general public now has a much better appreciation for the importance of life science research. (Given the historic inefficiencies plaguing the industry, it’s even more remarkable that COVID-19 vaccines have been brought to market so quickly.)
But even with the success of an automated ordering platform like Zageno coupled with growing public awareness, there is still plenty of room for improvement. From an end-customer perspective, about 10% of the products needed for COVID-19 research are out of stock, Wegener explains. One of the customers of Zageno, a UK-based lab with a few hundred scientists, was on the verge of shutting down due to long wait times to receive the product. Zageno was able to prevent this catastrophe at the last moment by digitally relaying an urgent product call to its thousands of suppliers, from whom it sources directly.
One can only wonder how quickly a COVID-19 vaccine could have been developed, had the life sciences supply chain been fully automated a year ago. But Wegener is optimistic about the future prospects for the industry to streamline the ordering process. “COVID-19 shook us like an earthquake,” he says. “This underscored the need for a digital transformation of the industry.”