Speaker 1: Some of the most complex supply chains we have can be health care supply chains. And this week, we're going to be talking to an expert on health care supply chains coming right up. So this week, again, we're very lucky to be talking to Prashant Yadav. Prashant, welcome. We're going to be talking about health care supply chains. Now, if you haven't seen a previous video with Prashant, I better give you a bit of an introduction because Prashant is a heavy hitter in terms of supply chain and health care. So Prashant is a senior fellow at the Center for Global Development. He's a professor at INSEAD in France. He lectures at Harvard Medical School. We'll put the full CV down below the video. But Prashant, thank you once again for spending a bit of time with us today. I know you're a very, very busy man. So in terms of health care supply chains, in 2020, 2021, it was all around sort of COVID vaccine supply chains. And we talked a little bit about the problems associated with those. But are we going to see big changes to health care supply chains going forward as a result?

Speaker 2: Thanks, Rob. So first of all, thanks for having me on your show. Two things. One is the amount of public scrutiny that health care supply chains have received in the last 18 months means people who are involved in making decisions about where things will get manufactured, who will be involved in deciding where to hold inventory or where to stockpile, what kind of transport options will be used. These were decisions that were done largely by firms operating the supply chain. So a company, its supplier, its logistics provider. But because of the public scrutiny, in many cases, we are seeing that national governments are getting much more involved. They want to have more clarity, visibility and transparency into how are the suppliers of key or critical medical equipment managing their upstream supply chains. And that means the decision making has become more complex. It has public actors constantly looking over. The second thing is that people have come to realize that we perhaps need to think about the geographical diversity in a much more thoughtful and meaningful way than we may have done in the past. And when we talk about geographical diversity, then we face a trade-off where the benefits of economies of scale and to some extent economies of scope have to be balanced against the benefits from a resilience standpoint that geographical diversification brings us. So we are likely to see new regional production for a number of medical products, vaccines, other medicines occur in regions where it didn't occur in the past. So examples would be Africa as a continent will have a very concerted effort to ensure that they do more vaccine manufacturing, more medicines and more health product manufacturing regionally on the continent. The same is a question that's being asked among many countries in Latin America. And a similar question perhaps is being asked in Australia, New Zealand and other regions. So we'll see the effects of that with new manufacturing hubs emerge. How long will they be sustainable? Whether they will achieve cost parity with the other manufacturing sites that let's say currently exist in Europe, North America, India, China is still to be determined. And it's going to be a function of many factors, such as are the new sites using equipment which is more flexible? Because in terms of technology of manufacturing, we have come much farther ahead. The earlier sites didn't truly leverage the latest and the state of the art in terms of manufacturing technology. So perhaps the new sites can leapfrog and that can also give them some cost efficiencies and flexibility. So those are factors which are determining where the health care supply chain is headed. But where will all this land us in and what will be the exact shape and form yet to be determined?

Speaker 1: You know, that that raises a couple of questions in my mind. Over the last decade or so, we've seen a huge rationalisation in the health care sector, particularly in the pharmaceutical sector. So what you're talking about there seems to almost play against that. Or do you think we'll see further rationalisation and a growth of the sort of mega pharma companies?

Speaker 2: The latest thing that we have seen in particular in COVID vaccine manufacturing is that contract manufacturers, companies such as Lonza, Catalan, Urgent, even CSL Securis to some degree, are the ones who have taken on a much more expanded role for manufacturing. So whether we will see consolidation of larger pharmaceutical and biopharma companies, or will we see more consolidation in the contract manufacturing industry is unclear. I think new contract manufacturers may actually emerge. There are a few midsize companies which are expanding, seeing the growth opportunity in contract manufacturing for biologics. So we might see more players in this. And then once again, a wave of consolidation may start. Whether we will see biopharma companies buying contract manufacturers or contract manufacturers themselves getting into product development is another possibility, which there are some signals of that emerging.

Speaker 1: Yeah, fascinating. Again, this might be a weird question, but listening to you talk about the difficulties in setting up manufacturing, particularly things like vaccines, how hard is it to set up a vaccine production plant? I mean, is it like setting up a petrochemical plant, you know, with huge capital investment and infrastructure? Or do you ever, do you see that maybe in the future we can have almost pop-up sort of production facilities, modularized, that could really be up and running within months?

Speaker 2: Yeah, so it is complex and it is capital intensive, but it is not like setting up a petrochemical plant or an oil refinery. Some of the higher end biologics manufacturing plants, not just for vaccines, but vaccines and other biologics therapies are probably close to a wafer fab for semiconductors. So the degree of complexity and expenditure start to get in that range. But modular manufacturing is very quickly gaining ground. And with modular manufacturing, we are seeing two benefits. One is, of course, flexibility, which means you can rearrange your production suite. It's literally thinking of, you know, snap different reactors or different unit operations to each other and start making a different product. And second benefit of modular manufacturing is that some parts of it is prefabricated, which means you can ship semi-ready equipment and have a much quicker installation and ready to go time. So the timelines are compressed, but the capital expenditure is still quite high. And as I mentioned earlier, I think the regulatory processes to get something out of a plant are probably the most cumbersome part of a new vaccine manufacturing centre.

Speaker 1: Yeah, OK. Well, that's really interesting. So we're not quite at the stage where we can have a vaccine plant sort of ready to go in 30, 40 foot containers and just set it up. But

Speaker 2: but some way towards that, perhaps. Yeah, so we may not be at a stage where we can have a vaccine manufacturing plant in a container and that's just turn to put it on. But at the same time, we are progressively getting towards that stage, which means the modular ones are like large containers. They require a lot of work once you have selected and put them on the site. I think soon we will get to that stage of what you're describing.

Speaker 1: Interesting. Well, Prashant Yadav, thank you very much for joining us again on the channel. Always fascinating talking to you. And I know you're a very busy man. You're in the US currently and you're heading back over to France. So I'm sure our viewers will also very much appreciate your time. Maybe as you're watching this, have a think about supply chains of the future. We've been talking about healthcare supply chains, but what do you think is going to be happening with other industries, other supply chains? Maybe some predictions down below in the comments, and we'll see what you come up with. So thank you for watching. Thank you again, Prashant. And amazing to talk to you as always. Thank you.