Tag Archives: Supply

The importance of ‘Supply Chain Integrity’ in ‘Global Supply Chain Management (GSCM)’ process

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Since the last decade with increasing pace of change, mostly in the western world has accelerated the globalization process in the Pharmaceutical Industry across the world. The key drivers to these changes are as follows:

1. A large number of patent expiration hugely impacting the top-line growth
2. Research pipeline is drying-up
3. The cost of bringing a new molecule from ‘the mind to market’ has now touched around US $ 1.75 billion
4. Regulatory requirement to get the marketing approval is getting more and more stringent, basically for patients’ safety, making clinical development more expensive and time consuming
5. Cost containment measures of various governments around the world is putting an immense pressure on product price, significantly affecting the profit margin

Changing Business Process:

All these factors are triggering other sets of consequential strategic events of enormous significance. Among those, following key corporate strategic steps indeed stand out:

1. More mergers and acquisitions of various size and scale to achieve both revenue and cost synergy, with new products and newer types of resources

2. Transformation in the fundamental operating models, e.g. R&D focused companies like Pfizer, GSK, sanofi aventis are extending their business interest in the pharmaceutical generics space, as well

3. Increasing globalization process and more focus on the emerging markets of the world like, Brazil, Russia, India, China, Turkey, Mexico

4. Growing emphasis on partnering, as we see in India, like for example, between Pfizer and Aurobindo, Claris and Biocon, GSK with Dr. Reddy’s Lab (DRL), AstraZeneca with Torrent, sanofi aventis with Zydus Cadila etc.

5. Global outsourcing in the ‘Contract Research and Manufacturing Services (CRAMs)’’ space

Increasing importance of GSCM:

In today’s evolving scenario, Global Supply Chain Management (GSCM) process has assumed a key importance. The need to reduce costs significantly and minimize the risks associated with the procurement activities of the business, have compelled many innovator companies to extend the activities of their Supply Chain management process to the Global arena, instead of just confining to the local space.

The changing requirements of all hues and types in various areas of the business, like in sales and marketing, manufacturing, research and development etc., have created a challenging, if not a rather volatile operating environment.

Such an evolving scenario will make the GSCM to increasingly play a key role in the overall business process of an organization to ensure that the right products are available at the right place, at the right time, at a right price and following the right processes…Always.

Emerging GSCM hubs:

There is at the same time, a new trend emerging to provide world class outsourcing services, especially from countries like India and China. These initiatives, which in turn will make these two countries the key global outsourcing hubs, are definitely not due to just cost arbitrage. It encompasses increased integrated value proposition for the overseas customers. Cost is just one of the key factors, others being quality, speed and suppliers’ integrity and reliability. Nothing in this value chain is mutually exclusive. GSCM will need to go through a set of complex algorithms to strike a right balance between all these vital parameters.

Importance of GSCM integrity:

In the days to come by, one of the greatest challenges in GSCM will be to improve the supply chain integrity and security. An appropriate definition of integrity for supply chains could be:

“…the requirement that the system performs its intended function in an unimpaired manner, free from deliberate or inadvertent manipulation.”

A safe and secure supply chain is definitely not a new requirement. However, in the list of priority of importance, it has now come up significantly, compared to what it was just a few years back. Though the issue of improving supply chain integrity and security has now assumed global importance, unfortunately, any uniformity in national regulatory requirements for this vital parameter is glaringly missing. Such a lack of regulatory uniformity clearly highlights that the pharmaceutical companies, engaged in manufacturing, are still not aligned with each other on what will be the right way to ensure absolute integrity, safety and security in the supply chain operating process to guarantee patients’ safety.

Globally, many Pharmaceutical Companies are getting engaged in improving supply chain integrity, security and patients’ safety with the introduction RFID. This, as many may know, is an inventory tracking system for improved product traceability, which in turn extends some protection to its customers with genuine products from the genuine pharmaceutical manufacturers. It is worth noting that RFID is just one component of overall patients’ safety initiative.

Along with high tech measures like RFID, to improve supply chain integrity, I reckon, pharmaceutical companies will need to further enhance their respective ‘supplier qualification process’. The process of supplier audits should include all important and critical areas of manufacturing, testing and quality, related to each individual product.

Stringent supplier qualification standard is of prime importance:

Only a stringent supplier qualification process will be able to guarantee integrity, safety and the quality of outsourced products from the suppliers.

An example of a GSCM related tragedy:

Before I conclude, I would like reinforce my recommendation with the example of the ‘Heparin tragedy’ where the supply chain integrity was violated and seriously challenged thereafter.

In the beginning of 2008, there were media reports on serious adverse drug events, some even fatal, with Heparin, a highly-sulfated glycosaminoglycan of Baxter International. Heparin is widely used as an injectable anticoagulant. Baxter voluntarily recalled almost all their Heparin products in the U.S. Around 80 people died from contaminated Heparin products in the U.S. The US FDA reported that such contaminated Heparin was detected from at least 12 other countries.

A joint investigation conducted by Baxter and the US FDA ascertained that the Heparin used in batches associated with the serious adverse drug events was contaminated with over sulfated chondroitin sulfate (OSCS). It was reported that his Heparin was supplied to Baxter by Scientific Protein Laboratories, Changzhou, China.

The cost of OSCS is just a fraction of the ingredient used in Heparin. Being driven by the criminal profiteering motive the manufacturers in Changzhou, China had reportedly used OSCS for highly-sulfated glycosaminoglycan as the former could not be detected by the pharmacopeia test in use, until 2008. This is because OSCS mimics Heparin in the pharmacopeia test. Post this criminal event, at present, all over the world more specific pharmacopeia test methods have been adopted for Heparin.

Conclusion:

Let us all ensure that such a tragedy does not get repeated in future due to a breach in the supply chain integrity, anywhere in the world…for the patients’ sake.

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Create, Deliver and Realize maximum value from a new product launch with an innovative Supply Chain Management system

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Like in many other industries, effective supply-chain management (SCM) in the pharmaceutical industry involves a systematic process, spanning from procurement of raw, packaging and other related materials, converting those materials into finished goods stock keeping units (SKUs), inventory management of both raw and packaging material, as well as finished goods and finally the distribution of these SKUs to wholesalers/ stockists/ distributors, C&F Agents.Now a days, with intense cost containment pressure all around, effective SCM is gaining a critical importance in the overall business process of the pharmaceutical companies. Besides all these, SCM also plays a very important role in maintaining regulatory compliance and help preserving product quality and safety standards.Key deliverables of a good SCM system:

The key deliverables of a good SCM system are to ensure availability to the customers:

Of RIGHT Product
At RIGHT Time
In RIGHT Quantity
At RIGHT Place
At RIGHT Price and
Of RIGHT Quality

However, in this article, I shall not dwell on these well known and basic parameters. Instead I shall deliberate on three other very important aspects of the supply chain management for your consideration:

1. What will a great SCM system mean?
2. What is the emerging role of SCM system in launching a new product
3. Innovation and measuring SCM effectiveness

1. What will a great SCM system mean?

In my opinion this will cover three important points:

- The SCM system should have an excellent feel of demand fluctuations and its robust measurement system.
- The cost of running an efficient SCM system should be kept at its minimum.
- The SCM structure should always be without any organizational flab.

I repeat, to be effective, a good SCM System must always be demand driven. Customer demand must be ascertained and quantified first and only then company specific supply chain requirements to be worked out and not the other way.

Various research studies confirm that there are certain common qualities for the demand-driven companies, namely:

- Reaction time to gauge and respond to the customer needs and demand is very quick
- A robust IT infrastructure is in place to facilitate delivery of the key Supply Chain
deliverables

SCM helps in value creation, value delivery and the value realization process:

As we know that value creation is the first step for a demand driven organization, followed by value delivery and value realization.

Pfizer Inc ranked high towards these efforts with Lipitor. If by any chance Lipitor gets out of stock, doctors usually do not switch over to other statins; the patient may possibly come back to the Pharmacy next day and hope he/she will get Lipitor. Such type of value creation for the product had made Lipitor over US$14 billion brand today despite the presence of other newer statins in the market and a very efficient SCM system of Pfizer Inc.

In an ideal scenario there should be an overlap between product management, demand management and the SCM systems.

Need for interaction between SCM and Product Development/Management Teams:

In my view, some sort of close interaction between the Supply Chain with Product Development and Management teams is very important for any innovative company to succeed in the market place. This I reckon will be unavoidable in not so distant future. Currently there could be some such link, as mentioned above, existing in some organization, but certainly not what it ought to be.

A robust IT system is a major requirement:

A robust IT system is a major requirement for such interaction process between Product Management, Demand Management and the SCM. Those companies, which will be unwilling to invest in a robust and rapidly scalable IT infrastructure that provides process integrity, transaction reliability, data visibility and intelligence for decision making may find it difficult to implement such an important business process.

2. The role of SCM System in launching a New Product:

In the twenty first century, as we all are aware that quality of innovation determines the sharpness of the competitive edge of any company in the marketplace. This aspect of competitiveness will be increasingly more and more important. Unfortunately, despite having this cutting edge many highly innovative companies have been experiencing great problems while launching their innovative new products in the market.

As we have seen from the recent media reports, two examples indeed stand out:

- Delays in the launch of Airbus 380 wiped off five billion euros of the value of its parent
company.
- Another important example was the enormous problem that Sony faced to make adequate
number of Play Station 3 consoles for the holiday season.

These illustrations indicate that conceptualizing, developing and finally launching new products is becoming increasingly more and more difficult. It is now widely believed that the key issue is inadequate understanding of the critical role that the supply chain plays in the innovative process of an organization.

SCM – a key success factor for a new product launch:

In most of the companies, the world over, the marketing team decides on the product launch decisions. Fortunately now we have started understanding though gradually but surely that the success of a new product launch very heavily dependent on effective co-ordination on all aspects of the supply chain from design to sourcing to manufacturing to distribution.

Therefore, in order to succeed with a new product launch, concerned company will need to ensure that Product development, Sales and Marketing, operations planning and supply chain work very closely together as a coherent team. Such co-ordination between these functions is now an absolute imperative. Close co-ordination even within the various activities of SCM systems play a critical role on the quality and nature of an innovative product or services and thereafter for an effective logistic support to the finished new products.

3. Innovation and measuring SCM effectiveness:

Quality of innovative ideas implemented in various levels of the SCM process along with the operational excellence will determine the ultimate effectiveness of a SCM system of a company.

Operational excellence is usually measured through the effectiveness of various parameters set for the same like. These parameters may include order fill rate, cost of the SCM process followed and the speed that it adds right from the material procurement process to the delivery of required SKU’s right up to the retail chemists.

Similarly effectiveness of innovative steps taken in the SCM process is measured by many on parameters like, the return on new product development and the speed of launch.

Conclusion:

To make a new product launch successful, companies will increasingly require to work out not only an effective process for launch, but will also need to ensure that marketing, finance, operations and SCM with innovative steps built into it, work very closely together to help create, deliver and realize both tangible and intangible value of a new product, most effectively, to contribute significantly to the stakeholders’ value.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion

To avoid “Heparin” like tragedy in future, a robust “supply chain integrity and security” system is of critical importance

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Globally the pharmaceutical industry is going through a metamorphosis. The types of changes that are taking place today globally, perhaps has no precedence..

The key drivers of these changes are mainly the following:

1. A large number of patent expiration hugely impacting the top-line growth
2. Research pipeline is drying-up
3. The cost of bringing a new molecule from the ‘mind to market’ has now touched around U.S$ 1.75 billion
4. Regulatory requirement to get the marketing approval is getting more and more stringent, basically for patients’ safety, making clinical development more expensive and time consuming
5. Cost containment measures of various governments around the world is putting an immense pressure on product price, adversely affecting the profit margin

Strategic measures of enormous significance:

All these are triggering other sets of consequential events of enormous significance. Among those following key corporate strategic measures indeed stand out:

1. More mergers and acquisitions of various sizes and scales to achieve both revenue and cost synergy, with new products and newer types of resources
2. Transformation in the fundamental operating models, e.g. R&D focused companies like Pfizer, GSK, sanofi aventis are extending their business interest to the pharmaceutical generics space
3. Increasing globalization and greater focus on the emerging markets of the world like, Brazil, Russia, India, China, Turkey, Mexico
4. Growing emphasis on partnering, as we see in India, like for example, between Pfizer and Aurobindo, Claris, GSK with Dr. Reddy’s Lab (DRL)
5. Global outsourcing in the ‘Contract Research and Manufacturing Services (CRAMs)’’space, mainly to rationalize costs and deliver the bottom lines, when the top line is under immense pressure.

Demand on all round effectiveness of the “Supply Chain”:
The changing requirements of all types, in sales and marketing, manufacturing and research and development have created a challenging, if not a rather volatile operating environment. In this situation supply chain will increasingly play a key role to ensure that the right product is available at the right place, at the right time, at a right price and following the right process…always.

Outsourcing initiative is not just about cost:
There is at the same time, a new trend emerging for increased outsourcing initiative, especially from countries like India and China. This initiative, which in turn is in the process of making these two countries the key global outsourcing hubs, is definitely not all due to just cost advantages. It encompasses increased integrated value proposition for the customers. Cost is just one of the key factors, others being quality, speed and suppliers’ reliability. Nothing in this value chain is mutually exclusive. Supply Chain will need to go through a set of complex algorithms to strike a right balance between all these vital parameters.

Robust “supply chain integrity and security’ will assume critical importance:
In the days to come by one of the greatest challenges in supply chain management will be to improve the supply chain integrity and security.
An appropriate definition of integrity for supply chains is:

“the requirement that the system performs its intended function in an unimpaired manner, free from deliberate or inadvertent manipulation.”
A safe and secure supply chain is definitely not a new requirement. However, in the list of priority of importance, it has now come up significantly compared to what it was just a few years back.

Are the pharmaceutical companies aligned on this issue?
Though the issue of improving the supply chain integrity and security has now assumed global importance, unfortunately, any uniformity in national regulatory requirements for this vital parameter is glaringly missing. Such a lack of regulatory uniformity clearly highlights that the pharmaceutical companies, engaged in manufacturing, are still not aligned with each other on what will be the right way to ensure absolute integrity, safety and security in the supply chain operating process to guarantee patients’ safety.

RFID is just one component of supply chain integrity:
Globally many Pharmaceutical Companies are getting engaged in improving supply chain integrity, security and patient safety with the introduction RFID. This, as many may know, is an inventory tracking system for improved product traceability, which in turn extends some protection to its customers with genuine products from the genuine pharmaceutical manufacturers. It is worth noting that RFID is just one component of overall patients’ safety initiative.

Suppliers’ qualification process through stringent ‘supplier audit’ is of critical importance:
Along with high tech measures like RFID, to improve supply chain integrity, I reckon, pharmaceutical companies will need to further enhance their respective supplier qualification process.
The process of supplier audits should include all important and critical areas of manufacturing, testing and quality, related to each individual product. Only a stringent supplier qualification process will be able to guarantee integrity, safety and the quality of products from the suppliers.

Heparin tragedy, where the supply chain integrity was grossly violated:
Before I conclude, I would like reinforce my recommendation with the example of Heparin tragedy where the supply chain integrity was violated and seriously challenged thereafter.

In the beginning of 2008, there were media reports on serious adverse drug events, some even fatal, with Heparin, a highly-sulfated glycosaminoglycan of Baxter International. Heparin is widely used as an injectable anticoagulant. Baxter voluntarily recalled almost all their Heparin products in the U.S. Around 80 people died from contaminated Heparin products in the U.S. The US FDA reported that such contaminated Heparin was detected from at least 12 other countries.

A joint investigation conducted by Baxter and the US FDA ascertained that the Heparin used in batches associated with the serious adverse drug events was contaminated with over sulfated chondroitin sulfate (OSCS). It was reported that his Heparin was supplied to Baxter by Scientific Protein Laboratories, Changzhou, China.

The cost of OSCS is just a fraction of the ingredient used in Heparin. Being driven by the criminal profiteering motive the manufacturers in Changzhou, China had reportedly used OSCS for highly-sulfated glycosaminoglycan as the former could not be detected by the pharmacopeia test in use, until 2008. This is because OSCS mimics Heparin in the pharmacopeia test and thus could not be detected in the case in question.
Post this criminal event, at present, all over the world more specific pharmacopeia test methods have been adopted for Heparin.

Conclusion:
Let us all ensure that such a tragedy does not get repeated in future due to a breach in the supply chain integrity, anywhere in the world…for the patients’ sake.
In today’s deliberations I am sure this issue will be touched upon to ponder over the possible implementable steps to address such future threats effectively.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.