We spoke to Andrew Goldman, Head of Business Continuity and Supply Chain Risk at Merck, and a long-standing member of BioPhorum’s Risk and Business Continuity Workstream, about his company’s approach to risk management and what it learned from the pandemic.
How did you manage risk and business continuity before COVID-19?
We had a robust business continuity management program before the pandemic. This is based on ISO 22301 and our plans might have a site or a product-family focus. For large sites, we look at risks across the end-to-end supply chain, from supplied materials and utilities downstream to our distribution and logistics network. We also do site-level disaster recovery and crisis management plans.
We were generally well prepared for COVID-19 as our business continuity plans drove resiliency by addressing potential failure modes, e.g., a workforce strike, a disrupted market for a raw material, a weather event, etc. We launched our program in 2012, so it had some maturity by the time the pandemic hit. This helped us be somewhat prepared for COVID-19 but, of course, there were many surprises.
How did you manage during the pandemic?
While our site-level business continuity plans were strong, we didn’t have corporate-wide pandemic plans. We had assumed, obviously incorrectly, that a pandemic might only happen in one region, so if we had a disruption event at one site, we knew we could flip the switch and use our network. But activating plans across 70+ manufacturing and distribution sites often at the same time was a different matter, and we found some of our plans weren’t easily executable at the corporate level.
A big topic of conversation was obviously around suppliers and raw materials. Our supply chain mapping exercises proved valuable because we could identify – especially in the early stages of the pandemic when it was seemingly isolated to China – which materials were coming from that region.
Many people in the risk world talk about qualifying second suppliers or alternative materials being crucial; they are, but we found that strong relationships with our suppliers were most important. For example, when we knew an event was happening, we could ask them which materials were coming from affected regions and get honest responses that helped us secure materials early.
Many mitigation actions in our business continuity plans built resiliency that we could use during COVID-19, such as increasing the inventories of higher-risk materials or purchasing more equipment to give us extra capacity.
Capacity was a major challenge during COVID-19 because we’re a supplier to the vaccine market, so we had a surge in demand for our products. But even customers not in that vaccine space were increasing their orders to create a buffer and mitigate their own risks. So we had extra demand and an initial reduction in capacity caused by local outbreaks, social distancing restrictions, etc. We didn’t anticipate that all our sites worldwide would be susceptible to infection and our biggest challenge during the initial stages of the pandemic was that our plans considered these issues happening separately, not simultaneously.
This is one of the problems with tabletop exercises, especially during a global pandemic, as there are so many variables. I would be amazed if any company had run a simulation with all the many variables that occurred.
How are you doing things differently as a result of what you’ve learned?
For our future crisis management planning, we’ll incorporate those extra variables and do more simulations. We’re leveraging plans that go across sites, expanding our supply chain mapping activities, and gaining more understanding about what our suppliers are doing for crisis management. COVID-19 has also supercharged our reviews of our inventory levels.
A big corporate strategy is to expand our capacity within our sites and use dual manufacturing locations across regions. So we’ll build new plants on different continents to increase capacity and mitigate the risk of regional issues.
We’re also improving our focus on safety measures. For example, we had to reactively figure out things such as shift overlaps and disinfecting during the pandemic, but these have now become part of our standard operating procedures. For distribution and logistics, we’re investigating areas like alternative transportation lanes.
How has being part of the BioPhorum workstream helped you?
The main way has been to improve the open, two-way communications between customers and suppliers. It has helped our customers better understand our challenges and vice versa.
I get a lot from the interaction with our customers and see their concerns and how they manage us as a supplier – and I then take those learnings back upstream to our suppliers. This helps me be a better partner with our suppliers and helps me ask them questions to better understand what they have in place for risk management and crisis management.