Supply Chain Risk Management for Intermediates

In the pharmaceutical industry, many risks don’t stem from “technological limitations,” but rather from “sudden supply disruptions.”

In recent years, almost all companies, whether innovative drug companies, generic drug companies, or CDMOs, have experienced similar scenarios:

The intermediate quality is fine, and the process is stable, but a critical raw material or a supplier suddenly encounters a problem, forcing the project to halt and delaying the overall timeline.

Based on our long-term experience in intermediate projects, supply chain risk management is no longer just a matter for the procurement department, but a core capability that directly impacts R&D pace, registration compliance, and commercialization progress.

Especially in the intermediate stage, risks are often underestimated, but once they occur, the cost is extremely high.

Why are Intermediate Supply Chain Risks More Insidious than API Risks?

Many companies have established relatively complete risk management systems at the API level, but are relatively “relaxed” at the intermediate stage. The reasons are quite realistic:

• Intermediates are not directly submitted for market approval.
• They are not the final sales product.
• They seem “easily replaceable.”

But the reality is quite the opposite.

Intermediates often have the following characteristics:

• The route is not yet fully finalized, and the process is still evolving.
• The impurity profile is highly correlated with the raw material source.
• Critical raw materials may be niche chemicals or custom-made products.
• The hidden costs of switching suppliers are extremely high.

Once a problem occurs in the intermediate supply chain, even if the API side has production capacity, it cannot proceed.

We have seen this more than once:

Project failure is not due to difficult synthesis, but because of an inconspicuous starting material, for which there are only one or two stable sources globally.

Dual Supply System: Not just “two names,” but “the ability to switch”

Almost all clients now mention “dual supply,” but truly effective dual supply systems are rare. A common misconception is:

“We already have two suppliers.”

However, in actual audits, many so-called “dual supply” arrangements have significant problems:

• The second supplier has never produced large batches.
• Raw material specifications differ, but no systematic evaluation has been conducted.
• It only exists at the contract level, without technical verification.
• Switching suppliers would require redoing impurity studies.

A truly valuable dual supply system must meet at least three criteria:

1️⃣ Technically interchangeable

• Consistent or equivalent raw material structure
• Clear impact on critical impurity pathways
• Supported by experimental data, not assumptions

2️⃣ Equivalent quality system

• Consistent GMP or similar GMP management level
• Stable change management mechanism
• Auditable data integrity

3️⃣ Commercially viable

• Actual orders have been placed
• Stable batches have been produced
• Not a “backup list,” but a “backup production line”

When assisting clients in establishing a dual supply system, we usually recommend:

At least one project cycle should involve truly utilizing the second supplier to complete a full batch.

Critical Raw Material Assurance: Sustainability is More Important than Price

In the intermediate supply chain, the real risk points are often concentrated in starting materials and key reagents.

Especially the following types of raw materials:

• Highly customized heterocyclic compounds
• Intermediate raw materials containing chiral centers
• Chemicals significantly affected by environmental or safety regulations
• Substances with low production volume but irreplaceable in the process

The risk of these raw materials is not reflected in “whether they can be purchased today,” but rather:

• Whether they can still be legally produced next year
• Whether the supplier can pass continuous audits
• Whether there are policy or environmental uncertainties

In actual projects, we are more concerned with:

• Whether the raw material has upstream source dependencies
• Whether there is a single country or regional risk
• Whether there is a clear inventory and delivery time strategy

For pharmaceutical companies, instead of repeatedly negotiating lower prices, it is better to establish a more stable technical and planning collaborative relationship with key raw material suppliers.

Compliance Audits: The “Last Line of Defense” in Supply Chain Risk Management

As regulatory requirements move upstream, more and more clients are realizing that:

The compliance capabilities of intermediate suppliers are themselves a risk variable. Current audit focus has shifted significantly:

• It’s no longer just about whether a company “has a GMP certificate,”
• but more about data integrity and trend management,
• and even more about whether changes are traceable,
• and whether there is consistent management capability across projects.

In the client audits we participate in, common high-risk issues include:

• Insufficient evaluation of raw material changes
• Discrepancies between experimental data and production data
• Incomplete batch records
• Lack of historical trend analysis for key parameters

These issues may not be apparent during normal operations, but they often become magnified risks during registration or on-site inspections.

Therefore, choosing an intermediate partner with a mature compliance system is essentially “buying insurance” for the project in advance.

Why must Supply Chain Risk Management Start with Intermediates?

A realistic but often overlooked fact is:

The flexibility at the API stage often depends on the stability of the intermediate stage.

If the intermediate route, raw materials, and suppliers are sufficiently stable:

• There is more room for API process optimization
• Quality fluctuations are more controllable
• The risk of commercial scale-up is lower

This is why more and more companies are choosing to:

• Restructure at the intermediate stage
• Focus on core controls at the API stage

Conclusion: Supply Chain Management is not about “Preventing Problems,” but about “Preventing Project Delays.”

Truly mature supply chain risk management is not about fixing problems after they occur, but about clarifying several key questions early in the project:

• Which raw materials cannot be interrupted?
• Which suppliers must be replaceable?
• Which changes, if they occur, will have the greatest impact?

When these issues are systematically addressed at the intermediate stage, the overall certainty of the project will significantly improve.

In an industry environment where uncertainty is the norm, a stable, auditable, and switchable intermediate supply chain is becoming one of the most realistic competitive advantages for pharmaceutical companies.

Planning your next API or intermediate sourcing decision? →sunqian0123@gmail.com
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