Expert review: supply chain innovation in the life sciences industries

Steve Wilson

ISPM (UK) Ltd

Information – the driver of change

Before challenging the direction of the life science supply chain of the next 3–5 years, I believe we must first look at how the supply chains in the consumer led and other industries have changed in the past 5–10 years and consider the impact of globalisation and social pressures that are shaping the minds and ideas of the people who work in them. In particular consider how fresh foods are reordered, and replenished at supermarkets.

Tesco and Sainburys for example have for years used point of sale data to replenish the shelves by linking this information direct to their distribution centres and to the manufacturers. With the relative short shelf life of fresh products this needs to be done in hours not weeks. It’s the growth of technology that has allowed this to happen.

We live in an ever changing world where consumers respond through a desire for instant gratification, where new fashions, new concepts and freshness are the key words. The world population is now ever more connected with ‘i’ in front of everything, so much that I’m sure there will soon be an ‘isupply chain’ with a phone app to get anything from anywhere and to anywhere.

With the globalisation of knowledge, consumer demand and the impact of manufacturing based in countries such as India and China, the world of the supply chain manager is increasingly becoming more fragmented and complex and will soon become a strategic driver of business.

In the last few years technology has improved such that information about consumer, manufacturers and distribution is stored in the ‘cloud’, (the latest buzz word meaning a massive data storage repository). Supply chain professionals use the data to make the flow of goods more directed at the needs of the end user whilst minimising cost and providing information the consumer in real time.

What does this imply for life sciences?

This is not something the pharmaceutical industry can ignore, it’s happening now. Although it is true that a lot of the big pharmaceutical companies such as GSK, Baxter Healthcare and others are making this happen, many others are not and are dragging out the acceptance of this shift toward information flow.

Tomorrow’s competitive business arena in the life sciences industries will be more about who has the most innovative and dynamic supply chain because cost and quality are a ‘given’ – no one is going to accept cheap, low quality goods (or services). Optimising inventories and order fulfilment on shorter life cycle products will rely more on information flow, the third of the key flows in any business after goods and cash.

“We live in an ever changing world where consumers respond through a desire for instant gratification…”

Until recently many companies believed the supply chain was something associated with purchasing, or general planning departments, few organizations had the forethought to put supply chain at the heart of corporate strategy. Ask yourself, how often in your business is the supply chain involved in product innovation, R&amp,D or even commercial strategy? In many cases I would guess that it is after product introduction and the orders come in, when the operations team struggle to meet demand that only then will the supply chain manager be criticized for failing to supply! Supply Chain development has to be seen as the critical link between R&amp,D and the patient.

What is needed, and is becoming the case in leading businesses is the ‘end to end’ integrated supply chain. Not just inside your business but from the customer’s customer through to the supplier’s supplier.

At the same time businesses need to cut costs, they need to specialise and focus on core competencies while outsourcing non core activities such as packaging and distribution – this is leading to the development of the ‘integrated network’ – making the whole movement of goods more complex and across geographies.

We are seeing a rise in the number of contract manufacturing organizations CMOs (significant floor space at the International Contract Services Expo in Frankfurt testifies to this), and it is likely this will continue. In addition there is a rise in the number of third part logistics (3PL) companies supporting life sciences both locally in the UK and globally. This will support the drive to reduce costs, remain a sustainable business and manage to serve the patients all at the same time but increases complexity in the supply chain. To take advantage of this businesses will need to invest in new information systems to make it work.

The main drivers for the changes in supply chain for the future will come from, society change, consumer behaviour, fears for the environment and improvements in technology. I believe this explosion in technology is the key element to watch in the coming years. Consumers have access to information on demand, the impact of social networking will drive demand as it impacts the ‘we want it now’ culture.

“…few organizations had the forethought to put supply chain at the heart of corporate strategy.”

Organisations will need to prepare for the future now if they are to avoid being swept aside by others who are listening more and more to their customers and their consumers. Businesses will have to invest in understanding not just what their consumers want today but where they are heading tomorrow. This is true for all businesses not just the consumer goods industries. A concept that has been going for a few years now is that of personalised medicines delivered direct from the manufacturer to the patient, should this become a reality then the complexity of the supply chain will ramp up even further.

Pharmaceuticals businesses need to understand and work with patient groups and be able to support ‘at home’ treatments. Government pressures to drive down cost per patient are leading to new challenges to supply, whilst supporting patient safety. The UK central medicines unit (CMU) have introduced a requirement for all who wish to tender to state their intentions to provide information on their processes for eOrdering and Barcoding. In the USA the California state epedigree laws will be in force by 2015 which means pharmaceutical companies must supply the information electronically to assure products are genuine together with data on shelf life, lot and batch information.

Given patients are already familiar with technology developments, businesses will need to innovate and direct the supply chain towards the use of smart devices and cloud technology to provide information on demand to patients to inform of when to take medicine, if the medicine is genuine, if it is OK to use and inform clinicians that patients have taken the medicines.

For example Baxter Healthcare are developing the use of smart phones and smart fridges for patients to check the suitability of product and arrange for replenishment. This will increase as the technology to make it happen is improving and people want to use it. With the technology used in supermarkets based on barcodes it is expected that pharmacies and hospitals will soon want to know they can use a product, be sure of where it came from and be supplied all from a point of use scanner within a mobile phone.

Developing the integration needed for the supply chain of say 2016 (it’s too far to think of 2020 or beyond because so much will have changed and even better technology will be available) will take a whole lot of acceptance of change by businesses to evolve the network structures needed.

Concepts such as integrated, shared warehouses and transportation will require significant change at senior levels. Reaction to changes in product labelling and anti counterfeiting has been slow but this will have to move much faster to give patients the comfort they require that products are genuine.

“Supply Chain development has to be seen as the critical link between R&amp,D and the patient.”

The supply chain managers of the future will need to focus on several key aspects,

1. Supply ‘on demand’

Patients will expect to get medication both at reduced costs and at a time when they want them. The patients will need to be part of the solution through increased customer relationship processes. Could we soon see the ‘on line pharmacies’ equivalent of Amazon?

2. Collaboration on logistics

Shared warehouses and transport routes, leading to increased sustainability, lower carbon output and lowering costs. DHL and others are working with manufacturers to take on responsibility for distribution and consolidating shipments to hospitals and pharmacies.

3. Demand Management

Increased awareness of key drivers and response to fluctuations in a short life cycle market. High level processes such as Sales &amp, Operations Planning are a key driver of supply chain evolution and should be driven from the top down to the execution levels in the business.

4. Labelling

Increased use of barcodes to improve patient security, GS1 is becoming the ‘standard’ when developing the use of two dimensional barcodes to support the global drive toward full epedigree such as that required by the USA.

5. Network performances monitoring

To measure and demonstrate the extent of trading partners, no longer just the internal performance indicators but extended to include the full on time delivery from a contractor through distributor to the consumer.

Overall the world of the supply chain manager is one of rapid change. The first challenge will be for businesses to decide the strategy for their supply chain, will your supply chain fragment and outsource some or most of the non core activities or will these remain inside the business. The next challenge will be to leverage the supply chain as a strategic weapon and put supply chain against supply chain.

Finally it will be to invest in the technology which will make this happen and reengineer business processes and elevate supply chain management into the board room.

The next article in the ‘Expert review’ series on the topic of leadership will be published on 6th March.

About the author:

This article was written by Steve Wilson and was commissioned by PiR Limited.

Following a career of project management and business change initiatives and three years as project manager building a chemical plant in China, Steve was appointed in Jan 2000 as General Manager of International Flavours &amp, Fragrances Aroma Chemicals plant in the UK.

During the next 2 years he successfully led a change initiative and the plant team to develop the concepts of Business Excellence, introduced SAP and led the development of Sales &amp, Operations Planning. In 2002 he became an internal consultant/project manager introducing S&amp,OP and lean principles within the global chemicals business.

In 2003 Steve started his own business to provide management support during the development and implementation of supply chain improvement and outsourcing. In addition Steve advises and supports all types of business through the turmoil of change, leading projects and providing management support.

PiR is a brand synonymous with providing innovative senior resourcing solutions to life science organisations. As a result of our exclusive focus on the sector, we have an understanding of many of the issues faced by pharmaceutical, biotechnology, diagnostic and medical device companies in the 21st century.

PiR offer a range of resourcing services, core to these are senior permanent and interim staff.

• Permanent Resourcing Solutions

• Interim Management Services

• Talent Identification

• Board Evaluation &amp, HR services

PiR’s expertise is particularly evident across functions in high demand. These include Medical, Regulatory, Programme Management, Supply Chain, Market Access, Health Economics &amp, Outcomes Research (HEOR), Pricing &amp, Reimbursement and senior level Commercial roles.

Email: resourcing@pir-resourcing.com Phone: +44 (0) 844 880 4340

Website: www.pir-resourcing.com

How can we elevate supply chain management in the board room?