By Carla Reed, president, New Creed LLC
Environmental Risks & The Life Science Supply Chain: Lessons Learned From Hurricane Maria
The hurricane season of 2017 will be remembered as one of the worst, with some of the strongest tropical cyclones ever witnessed creating havoc in the Atlantic basin.
The financial impact of these storms is still being measured, but of the more obvious outcomes are:
major disruptions to large U.S. ports (Port of Houston was out of commission for over a week after Harvey.)
millions of people without power for days
billions of dollars of crop damage ($2.5 billion in Florida after Irma)
major delays and disruptions in the movement of raw materials and products with impacts across the world.
Looking at the past season from the perspective of supply chain risk — and specifically risks that have impacted the life sciences supply chain — there are many lessons to be learned.
Puerto Rico: A Tiny Island With A Huge Life Sciences Impact Brought To Its Knees
A case in point is the impact of Hurricane Maria on Puerto Rico — a critical link in many life sciences-related supply chains. The legacy of tax incentives in the 1970s (phased out in 2006) is a concentration of life sciences companies on this tiny Caribbean island. Many global companies have operations in Puerto Rico, some of which are single-source locations for raw materials, components, and finished products.
Consider a few data points:
More than 25 percent of pharmaceuticals exported from the U.S. are produced in Puerto Rico — with more than 50 plants and distribution centers supporting the flow of starting materials and work-in-process and finished products. Pharmaceuticals represented 72 percent of Puerto Rico’s 2016 exports, valued at $14.5 billion, according to the U.S. Bureau of Labor Statistics.
The sector employs about 90,000 workers.
Puerto Rico is a distribution point for other parts of the Caribbean.
Hurricane season is a known factor in Puerto Rico, and companies there have built it into their business continuity plans. Stockpiles of generator fuel, backup UPS (uninterrupted power supply) emergency staffing plans, and other mitigation strategies are a part of doing business in Puerto Rico. However, no one expected a hurricane of this proportion would create the potential long-term damage Maria did. Many months later, the aftermath is still being evaluated — millions of dollars of property damage and the impact to the overall infrastructure of Puerto Rico. There are growing concerns related to the ability of manufacturing sites to recover to the extent where they are able to resume production and rebuild their inventory buffers. Despite assurances from large pharmaceutical companies that have operations in Puerto Rico that their contingency plans and redundant network designs will ensure supply, there are concerns about potential product shortages. The impact of this on the life sciences supply network should not be underestimated and is already being felt in many other parts of the world.