Pharma’s Digital Supply Chain Transformation
Serialization and
track-and-trace mandates can expedite pharma supply chain digitization
Amid the increasingly crowded discussion of
pharmaceutical supply chain digitization, buzzwords abound - Industry 4.0,
Internet of Things (IoT), Big Data, Machine Learning, Artificial Intelligence -
and, of course, digital supply chain transformation.
In
parsing the pharma industry’s current tech-leaning vernacular, there is a
strong relationship between pharmaceutical serialization and the digital supply
chain: simply put, the former is a prerequisite infrastructure investment for
the latter to be realized. The most forward-thinking pharma companies are
starting to grasp this - and capitalize on it.
Having
a well-oiled digital supply chain, whose foundation is built on web-enabled
capabilities and technologies, gives a company a tremendous advantage. A pharma
company with a digitized supply chain - or any of its suppliers or customers,
for that matter - will be more adept at moving resources, assets, inventory and
personnel in just-in-time fashion, optimizing enterprise-wide resource
allocation and planning both quickly and effectively.
The
more precise and more granular the data used to guide its digitization effort,
the more likely a company will be able to effectively respond to any issues or
risks that arise - and to do so at the right level and with the right focus.
The more skilled a company becomes at doing this, the greater its realized
savings will be in terms of money, time and resources.
OPPORTUNITY
ABOUNDS
There is a disconnect, however, when it comes to general understanding of the important connection between serialization and the digital supply chain - specifically the need to make the necessary investment in digitization.
There is a disconnect, however, when it comes to general understanding of the important connection between serialization and the digital supply chain - specifically the need to make the necessary investment in digitization.
According
to recent McKinsey
& Company research, “The biggest future impact on revenue
and EBIT growth, is set to occur through the digitization of supply chains”
among other dimensions of the business. And yet, “only 2 percent, in fact,
report that supply chains are the focus of their forward-looking digital
strategies” across all industries. This compares, for example, with a “49
percent focus on marketing and distribution.” In other words, while the supply
chain has the greatest potential to influence future revenue and EBIT growth,
it is often the most neglected area when it comes to investment in
digitization.
A
unique opportunity now presents itself for the pharma industry. Because the
investment and focus on digitization of the supply chain is essentially being
force-fed by serialization mandates, pharma executives need only continue a bit
further down the digitization pathway to completely and positively transform
their supply chains for truly valuable competitive advantages. In doing so,
pharma companies can turn something they have to do into something they should
want to do: reap the economic benefits of improved customer service through
optimized production and distribution processes.
SUPPLY
CHAINS FORCED TO GO DIGITAL DUE TO SERIALIZATION REGS
About 90 percent of world GDP is already under some level of regulatory requirement (active, final or draft) for serialization.
About 90 percent of world GDP is already under some level of regulatory requirement (active, final or draft) for serialization.
These
regulations require trading partners - manufacturers, wholesalers, pharmacies,
etc. - to implement electronic systems of records for serializing each sellable
unit (e.g. cartons, packs, bottles), and to put in place the required processes
for exchanging serialized data. The resulting end-to-end drug supply chain
traceability is, in most cases, monitored by government agencies.
The primary motivation behind these regulations is the improvement of patient safety and supply chain security, with a goal of reducing a level of worldwide drug counterfeiting that the World Health Organization estimates at 10 percent of global drug supply.
The primary motivation behind these regulations is the improvement of patient safety and supply chain security, with a goal of reducing a level of worldwide drug counterfeiting that the World Health Organization estimates at 10 percent of global drug supply.
MAJOR
CAPITAL INVESTMENT TO MEET SERIALIZATION MANDATES
The world’s leading pharmaceutical drug manufacturers have already started implementing major capital investment programs to comply with regulations. Turkey, Argentina and China were among the first to require these investments, followed by larger western economies, such as the United States and the European Union. According to Supply Chain Wizard surveys and research, by the end of 2016, more than 50 percent of pharma manufacturers and Contract Manufacturing Organizations had some level of their capital budgets allocated to complying with the initial U.S. serialization deadline of Nov. 27, 2017, and the EU serialization deadline of Feb. 9, 2019. Considering more than 10,000 pharmaceutical packaging lines in the world to be eventually upgraded with capital equipment, plus additional IT systems at the site and enterprise level, the total global capital investment required in the next 10 years would be estimated at tens of billions of dollars, with cost per packaging line upgrade reaching up to $1 million for most complex implementations or less than $100,000 for manual hand-packing operations. While investment amounts would vary dramatically depending on the selected solution or the country/location, this compliance program is for sure one of the most expensive investments pharma companies are ever making.
The world’s leading pharmaceutical drug manufacturers have already started implementing major capital investment programs to comply with regulations. Turkey, Argentina and China were among the first to require these investments, followed by larger western economies, such as the United States and the European Union. According to Supply Chain Wizard surveys and research, by the end of 2016, more than 50 percent of pharma manufacturers and Contract Manufacturing Organizations had some level of their capital budgets allocated to complying with the initial U.S. serialization deadline of Nov. 27, 2017, and the EU serialization deadline of Feb. 9, 2019. Considering more than 10,000 pharmaceutical packaging lines in the world to be eventually upgraded with capital equipment, plus additional IT systems at the site and enterprise level, the total global capital investment required in the next 10 years would be estimated at tens of billions of dollars, with cost per packaging line upgrade reaching up to $1 million for most complex implementations or less than $100,000 for manual hand-packing operations. While investment amounts would vary dramatically depending on the selected solution or the country/location, this compliance program is for sure one of the most expensive investments pharma companies are ever making.
The
complexities and high costs of these serialization implementation projects are
creating economic difficulties for the majority of small- to medium-size
manufacturers. But the upside is that this is fomenting dialogue about how
companies can improve their trade-partner collaborations for minimum
disruption, and how they can turn these challenges into opportunities by leveraging
their ongoing serialization infrastructure investment projects.
SOME
DELICIOUS LEMONADE
When initially faced with the challenging deadlines and sticker shock of the investment needed to comply with serialization mandates, many manufacturers experience the five stages of grief: denial, anger, bargain, depression and, finally, acceptance.
When initially faced with the challenging deadlines and sticker shock of the investment needed to comply with serialization mandates, many manufacturers experience the five stages of grief: denial, anger, bargain, depression and, finally, acceptance.
The
good news is that leading manufacturers have started to emerge from this cycle,
accepting the new reality. Many are now realizing that the huge amount of data
and insights generated via serialization systems can be used to increase their
level of connectivity and collaboration with global trading partners.
Manufacturers
who have started to see the big picture are turning perceived lemons into
lemonade by moving toward “compliance-plus” programs. They are coming to
understand that focusing on “internal” compliance programs to protect downside
compliance risk is not enough, and have started expanding their programs to
their “external networks” through collaboration with their CMOs and CPOs.
Leading
large manufacturers, for example, have launched formal “CMO Serialization
Programs” to support their partners in their compliance journeys, while
proactively managing the costs and IT connectivity aspects of their partner networks.
This is where the sorts of tools introduced by companies, such as Supply Chain
Wizard, can become vital. Through a set of solutions that includes a
first-of-its-kind Management Dashboard and Supplier/Customer Portal, pharma
manufacturers are being introduced to web-based/cloud solutions that not only
sufficiently address collaboration among trading partners, but significantly
enhance them.
Hundreds of companies have since experienced what a “digital supply chain” might look like when supply chain partners exchange information on project/program status, product readiness and other pertinent management data via digital technologies at increased efficiency, lower cost and fewer resources.
Hundreds of companies have since experienced what a “digital supply chain” might look like when supply chain partners exchange information on project/program status, product readiness and other pertinent management data via digital technologies at increased efficiency, lower cost and fewer resources.
As
these companies have begun to focus on upside opportunities (both internally
and externally), some of the early initiatives of a digital factory and digital
supply chain have emerged - ones that focus on more “operational visibility”
and “efficiency improvement” on the factory side, and on “end-to-end supply
chain visibility” and “supplier/customer collaboration” on the supply chain
side.
The
adoption of global standards, together with the global macro trend of
implementing serialization and track-and-trace infrastructure demanded by all
major countries over the next few years, are all coming together to set the
foundation for a digital pharma supply chain.
JOURNEY
FROM DATA TO DASHBOARDS TO DECISIONS
While the digital supply chain transformation has begun, it will take multiple years to get to where it needs to be. There is a clear path for companies to pursue, as they learn to make the connections and begin the journey from data to dashboards to decisions. A massive infrastructure is being put in place to track supply chain movements at the “unit level,” which is set to generate thousands of times more data than previous supply chain mode of operation at the “batch” level. Therefore, the transformation journey starts with the abundance of data in the new world of a serialized supply chain, and evolve into business and management “dashboards,” and finally to “decisions” to complete the three major pillars of digital transformation to add real value.
While the digital supply chain transformation has begun, it will take multiple years to get to where it needs to be. There is a clear path for companies to pursue, as they learn to make the connections and begin the journey from data to dashboards to decisions. A massive infrastructure is being put in place to track supply chain movements at the “unit level,” which is set to generate thousands of times more data than previous supply chain mode of operation at the “batch” level. Therefore, the transformation journey starts with the abundance of data in the new world of a serialized supply chain, and evolve into business and management “dashboards,” and finally to “decisions” to complete the three major pillars of digital transformation to add real value.
Data
The journey starts with data as the new currency of the world. Serialization systems and the infrastructure surrounding them establish a great foundation, but serial number data and the visibility of products in the supply chain is just the beginning. Rapid emergence of Internet of Things technologies, such as wireless sensors and gateways, are providing unlimited opportunities to enhance the datasets collected by traditional “transaction-based” systems like ERP, MES and WMS. Environmental and location-based data, as well as product and unit-level specific data sets, tremendously enrich traditional data sets and make them accessible, which was previously not possible. As a result of these new technologies, tomorrow’s supply chain executives will have access to significantly larger data sets at far greater granularity.
The journey starts with data as the new currency of the world. Serialization systems and the infrastructure surrounding them establish a great foundation, but serial number data and the visibility of products in the supply chain is just the beginning. Rapid emergence of Internet of Things technologies, such as wireless sensors and gateways, are providing unlimited opportunities to enhance the datasets collected by traditional “transaction-based” systems like ERP, MES and WMS. Environmental and location-based data, as well as product and unit-level specific data sets, tremendously enrich traditional data sets and make them accessible, which was previously not possible. As a result of these new technologies, tomorrow’s supply chain executives will have access to significantly larger data sets at far greater granularity.
Dashboard
The journey continues with the ability to convert raw data into actionable insights through the use of business and management dashboards, which are made available to people at every level in the organization depending on their role and objectives. For example, a digital factory manager would be able to see a live dashboard of all her production lines, with access to pre-configured reports that analyze exceptions, trends and downtimes like never before. Using these dashboards, future leaders will be able to respond to undesirable situations faster and more effectively, while also identifying desirable outcomes and the conditions that created those outcomes. By providing a crystal-clear lens through which to view business operations, these dashboards yield a major increase in transparency and clarity. Digital factory leaders will also be able to design “automated” alert systems that are driven by the data and dashboards, and controlled by the business control limits set at granular levels (e.g., site head receiving an alert if Overall Equipment Effectiveness - OEE - of a specific production line falls below acceptable levels, or maintenance crew being alerted when a specific type of failure occurs).
The journey continues with the ability to convert raw data into actionable insights through the use of business and management dashboards, which are made available to people at every level in the organization depending on their role and objectives. For example, a digital factory manager would be able to see a live dashboard of all her production lines, with access to pre-configured reports that analyze exceptions, trends and downtimes like never before. Using these dashboards, future leaders will be able to respond to undesirable situations faster and more effectively, while also identifying desirable outcomes and the conditions that created those outcomes. By providing a crystal-clear lens through which to view business operations, these dashboards yield a major increase in transparency and clarity. Digital factory leaders will also be able to design “automated” alert systems that are driven by the data and dashboards, and controlled by the business control limits set at granular levels (e.g., site head receiving an alert if Overall Equipment Effectiveness - OEE - of a specific production line falls below acceptable levels, or maintenance crew being alerted when a specific type of failure occurs).
Digital
supply chain leaders, on the other hand, could design dashboards and live
controls to receive alerts on unit-level profitability for a specific product
falling below an acceptable level, and identifying the root-cause being
“expedited shipments,” having access to control levers to “stop” further rush
shipments to improve bottom line.
Decisions
The real value of the transformation journey is delivered by the decision-making capabilities of organizations, where data and dashboards are effectively used to make critical resourcing and prioritization decisions. For example, the scheduling of work orders at the shop floor using real time data and historical trends can bring much improvement in resource utilization and overtime/waste reduction.
The real value of the transformation journey is delivered by the decision-making capabilities of organizations, where data and dashboards are effectively used to make critical resourcing and prioritization decisions. For example, the scheduling of work orders at the shop floor using real time data and historical trends can bring much improvement in resource utilization and overtime/waste reduction.
For
one of Supply Chain Wizard’s clients, digital decision-making technologies
applied to a packaging-line scheduling problem resulted in 10 to 20 percent
reduction in required labor costs, by significantly reducing unnecessary
overtime due to more accurate and granular planning. This came about as a
result of better data (tracked by digital technologies, including IoT sensors)
provided to insight-rich dashboards to identify most-pressing problems,
combined with smart decision-making systems applied to solve these problems
utilizing advanced analytics and machine learning. For a medium-sized packaging
site of up to 10 packaging lines, the resulting annualized savings could reach
to $1 million.
For
another client, Supply Chain Wizard enabled collaborative decision-making on
how best to support struggling suppliers with their serialization programs
through the use of cloud-based supplier/customer portal solutions that made
data sharing, collaboration and data-driven risk assessments and prioritization
easier and more accessible to decision makers. Through these solutions,
required number of resources on the project has been reduced dramatically,
while the responsibilities of generating and maintaining accurate project data
is easily distributed to global internal and external stakeholders,
automatically monitored for regular updating, leaving program managers valuable
time to focus on core program actions and decision-making, rather than
data-gathering, analysis and reporting.
DIGITAL
SUPPLY CHAIN OF THE FUTURE
While a fully digitized pharma supply chain remains a goal of the future, today’s leading pharma companies are hard at work creating a connected, smart and highly efficient supply chain ecosystem. Those that stay at the front of the pack will not only measurably improve their business performance, but ultimately transform the way they do business with trading partners.
While a fully digitized pharma supply chain remains a goal of the future, today’s leading pharma companies are hard at work creating a connected, smart and highly efficient supply chain ecosystem. Those that stay at the front of the pack will not only measurably improve their business performance, but ultimately transform the way they do business with trading partners.
The
necessary prerequisites are now in place - thanks to the demands of
serialization - with a higher level of transparency and responsiveness now
attainable. The companies that can recognize and act upon strategic
opportunities will be able to provide their customers with the most efficient
and transparent service delivery, and the best will be able to develop new
business models and revenue streams. The opportunity for the pharmaceutical
digital supply chain to come roaring to life is there for the taking.
By Evren Ozkaya, Ph.D., Founder & CEO, Supply Chain
Wizard
https://www.pharmamanufacturing.com/articles/2017/pharmas-digital-supply-chain-transformation/?utm_source=hs_email&utm_medium=email&utm_content=64922627&_hsenc=p2ANqtz--HMNcWIScbI8cUXDjSADOGxgQw7zurInUmSqnIDJZ0VaRlPcjMt4ypLUdiFclvXXcBPf-9QzOtr9HgQYJCdtEYaptVLQ&_hsmi=64922627
No comments:
Post a Comment