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The authors review current industry challenges and trends in managing global supply chains and propose best practices for improving visibility into those networks.
The age of a US-centric vertically integrated life-sciences industry has, for the most part, come to an end. During the past several years, executives have seen the need to move sourcing and manufacturing overseas in an effort to lower costs. In the process, many companies have recognized the potential of these emerging markets for creating and growing their own product pipelines and reaching new consumers. With these changes, however, come increasing demands on life-sciences manufacturers to manage and control their supply chains, which are now longer and more complex.
Axendia, an industry analyst and strategic consulting firm, recently conducted research on current trends in the life-sciences global supply chain. The study incorporated data from three sources: an advisory council, which provided background and perceptive on key issues; a survey of industry professionals; and individual interviews to review and refine the findings. Our research has shown the need for companies to shed the view of supply chains from a supplier–buyer mentality and to shift to intelligent supply networks that can provide information "on-demand." In this model, collaboration occurs during the entire product life cycle, from the raw-material supplier to the distribution company that delivers the final product safely to the end user. The model also supports the need for industry to view "competitors" as potential allies with whom information can be shared and leveraged to keep products safe and effective while managing costs. Finally, this model supports the need for industry and regulatory bodies to continue to work together to find practical and cost-effective solutions to ensure the quality, safety and efficacy of products.
Based on this research, titled "Achieving Global Supply Chain Visibility, Control & Collaboration in Life Sciences: Business Imperative, Regulatory Necessity," this article reviews current industry challenges and trends in managing global and outsourced supply chains (1). The authors also propose best practices, including the implementation of technologies, for improving visibility and control of life-science product supply chains.
New risks, new demands
The pharmaceutical manufacturing industry was built around systems and procedures that focused on using safe and effective raw materials, and on-time and cost-effective processes for manufacturing and packaging. Manufacturers had little visibility of their products once they left their facility. Today, postmanufacturing activities such as counterfeiting, product diversion, and theft have industry executives concerned. More than 60% of Axendia's survey respondents—primarily industry executives—reported that they view counterfeiting as a high or moderate risk, and product diversion as a significant or moderate risk to their supply chains. Forty percent of all respondents that produce life-science products (i.e., pharmaceuticals as well as healthcare products) said that their company's products have been counterfeited or illegally diverted. Along these lines, Axendia survey respondents said they are concerned about the following supply-chain threats occurring during the next five years: counterfeits (44%), the lack of ability to trace products (43%), and product diversion (35%) (see Figure 1).
Figure 1: Top concerns among industry related to supply-chain threats over next five years.
A recent report by the US Intellectual Property Enforcement Coordinator (IPEC) points to the US government's eagerness to address some of these supply-chain threats (2). The report, for example, recommends modifying the Food, Drug, and Cosmetic Act to require that manufacturers, wholesalers, and distributors implement a track-and-trace system to allow for authentication of products. The report also recommends the creation of a standardized electronic pedigree (ePedigree) using unique identifiers. Finally, the report calls for increased enforcement efforts to guard against the proliferation of counterfeit pharmaceuticals and medical devices. Although FDA has initiatives underway to require serialization of pharmaceuticals, specifically Standardized Numerical Identifiers (SNI) that are based on a serialized National Drug Code (sNDC), the US IPEC report goes further by recommending the implementation of ePedigree. Several states and countries have begun the process of mandating their own track-and-trace, serialization, and ePedigree systems, including California, Turkey, Brazil, and France.
For its part, industry has been and continues to work to address the growing threats of counterfeiting and product diversion by implementing tracking technologies. One- and two-dimensional barcodes are commonly used to track products (see Figure 2). Many companies are implementing track-and-trace systems even before legal requirements are enacted to prevent economic losses, but these systems are not yet in use by everyone in industry as a result of the lack of clear regulatory direction on standardization and other implementation challenges. For example, survey respondents identified the following hurdles: cost of the technology, difficulty of implementing the technology, lack of industry standards about the technology, and lack of regulatory guidance about the technology.
Figure 2: Tracking technologies used by industry. RFID is radiofrequency identification. GPS is global positioning system.
New approaches. While local and national governments work to clarify and harmonize requirements and guidance for supply- chain tracking systems for pharmaceutical products, industry can also take steps to make the best use of current technologies to better manage and control their supply chain. Axendia has identified three key approaches in this regard: increase on-demand visibility; change the view of your company's supply chain to a supply network; and strengthen collaboration.
Current challenges and trends
Lack of information. Historically, the major drivers for visibility and analytics in the life-sciences industry have been process understanding and control, as well as corrective-action programs to address adverse events, recalls, and other unexpected problems after they occur. The value of visibility was often measured by "how quickly can you get the data to fix the problem." Historical data, although valuable when "fixing problems," did not support the proactive and predictive approaches needed to support today's agile and fluid pharmaceutical manufacturing environments. Having postfacto visibility alone is not a viable option.
When asked, "What is your visibility into your external suppliers', distributors,' or shippers' practices?" 77% of industry executives responding to the Axendia survey stated that the primary method used is a periodic audit (see Figure 3). Only 25% of respondents said they share common practices and information with suppliers, and only 3% have access to suppliers' data in real-time. This trend is a bit higher with contract manufacturers, with 51% of executives reporting that they share common practices and information. The downside of a periodic audit is that it only demonstrates what's happening at a given facility at one time, and often, it only takes place once every year or two. After performing an audit, companies often do not receive new data from their suppliers or contract providers until they get a batch of product along with some form of a quality certificate or certificate of analysis.
Figure 3: Brand-owner visibility into external suppliers’, distributors’, and shippers’ practices.
Lack of control. When asked about their ability to gain global visibility into the supply chain (i.e., across multiple locations), only 19% of survey respondents said they can get data in real time. Another 15% said that obtaining real-time information was not possible, and 66% said they can get the information but then have to manually aggregate the data (see Figure 4). It becomes even more difficult to maintain quality control over products when your company is not the one producing or manufacturing the active pharmaceutical ingredient or component, as is the case when sourcing/outsourcing. With so many processes and raw materials manufactured outside companies' facilities, however, it is crucial to maintain contact with all parties in the product's network.
Figure 4: Usefullness and timeliness of currently used industry systems for retrieving data from multiple locations and sites.
When asked, "How useful is your current supply-chain process or system for managing your business?" only 21% responded that their current systems or processes are useful. Thirteen percent said their current systems do not provide help in managing their supply chain, and 57% reported that obtaining the information needed to run the business is slow, although their current systems are helpful.
As expected, the vast majority (96%) of large organizations (those with revenues more than $1 billion) responding to the Axendia survey say they have implemented systems or processes to manage their supply chains. However, industry executives of those larger companies have lower satisfaction levels with their systems; only 17% ranked their systems as useful.
Most companies said they use enterprise resource planning (ERP, 65%) and quality management systems (QMS, 55%) to gain visibility into their supply chains (see Figure 5). Thirty-one percent still use homegrown systems, such as spreadsheets, custom systems, and databases, and 27% still rely on paper.
Figure 5: Systems used by industry to support global supply-chain visibility. (Note: Homegrown includes spreadhseets, databases, etc. ERP is enterprise resource planning, QMS is quality management system, CRM is customer relationship management, LIMS is laboratory information management system, SCM is supply-chain management, ECM is electronic content management, MES is manufacturing execution systems, and PLM is product life-cycle management.)
When asked, "What information can you currently track related to key/critical components of your product?" the vast majority of executives said they could track manufacturing location (84%) and genealogy (73%) such as the raw material, ingredient, or component. On the other hand, less than 50% said they could track critical information for key components, including: transaction history, chain of custody, record of ownership, environmental storage conditions (i.e., when critical to for product safety/efficacy), or ePedigree.
Businesses are no longer isolated in today's global environment. Industry groups such as Rx-360, the international supply-chain consortium, and regulators recognize this new environment and are now more than ever embracing partnerships aimed at sharing information and harmonization initiatives. Our research shows that industry executives are relying less on internal stand-alone initiatives and instead, are seeking out regulatory and industry best practices and standards (see Figure 6). To support these initiatives, we recommend implementing the following approaches and systems.
Figure 6: Preferred drivers among industry executives for supply-chain management best practices. (Note: PhRMA is the Pharmaceutical Research and Manufacturers of America; BIO is the Biotechnology Industry Organization.)
On-demand visibility. On-demand visibility is the ability to assess data and product information when you need it when someone else is storing and managing it. On-demand strategies and systems provide the ability to obtain relevant information about the product at the appropriate time to enable decisions with a high degree of confidence based on the analysis of contemporary data. On a day-to-day basis, on-demand visibility enables authorized parties to "spot audit" suppliers by reviewing contemporaneous data and changes potentially impacting product safety, efficacy, and quality. These real-time views into supplier or contract-provider activity can complement periodic on-site audits of facilities. To get this level of visibility, companies should move away from paper and spreadsheets and instead use information systems and technology. Interfacing internal systems such as ERP and QMS with suppliers' operational and quality systems can provide a complete batch-history record of the products delivered, including critical quality attributes (CQAs) and process parameters (CPPs). These interfaces also allow the sponsor company to take full advantage of business intelligence, analytics, and planning software to bring together data residing in different systems to control finished good quality and better adjust downstream processes.
Network control. Companies that outsource processes or source materials must take the view that their product's life cycle incorporates an entire network, not just a thin chain. This perspective is crucial for total product control. A network approach requires changing the mindset from one where brand owners pressure suppliers to "do it my way" at the lowest possible cost. Instead, it calls for tighter collaboration and increased communication with all parties involved (e.g., suppliers, distributors, packagers, contract service providers). These partners should be involved at the earliest stages of the product life cycle and should be viewed as extensions of the brand owner.
With the reality of limited resources, companies should adopt risk-based supplier management strategies. This involves assessing partners based on a total risk profile and the potential impact to the process, product, and patient. Adequate control often requires deep process and product understanding as well. Therefore, companies should collaborate with their supply network to gain deep understanding of and implementation of systems that provide visibility into process control based on CQAs and CPPs. Process control is another area where technology can play a major role to promote the exchange of information to enable partners to become an extension of the company's own facility, using standards-based and interoperable systems.
Collaboration. Industry and regulatory bodies must work to form new partnerships to manage this new industry complexity and its accompanying costs. The use of cross-functional teams are a key to successful global supply networks as the interactions between pharmaceutical companies as they shift from casual exchanges to long-term, stable relationships. To establish an open dialogue, brand owners and their partners must clearly see the value the impact of their relationship. Key to this relationship is the opportunity for the partner to challenge assumptions and work together with the brand owner toward improved solutions.
To succeed in today's global environment, collaboration strategies must also embrace reasonable and common-sense approaches that can be broadly leveraged by all stakeholders. Increased collaboration requires changing the internal structure of companies to better manage the cross-functional skills and staff used to support global supply chains. The focus should no longer be seen as a purchasing exercise to save costs. A balanced team approach is necessary to minimize risk, maximize value, and ensure product safety, efficacy, and quality.
Better collaboration also means that interactions with suppliers and contract providers needs to begin earlier in the process. It means engaging suppliers who are willing to share information in real time and on demand because they understand it is in the best interest of all stakeholders to do so.
Collaborative approaches such as these can: drive reduction of redundant, costly audits; create a transparency of relevant information to ensure product safety; and help to develop measurable scorecards to aim at improving performance and mitigating risks.
To realize the benefits of globalization, companies must implement new strategies that capitalize on the benefits of globalization and outsourcing while reducing and controlling risks. This article has outlined key challenges to managing global life-sciences product supply chain and proposed approaches for maintaining better visibility and control over those product life cycles. Simply put, it requires the use of information that is readily available, managed correctly, and shared to help to ensure the safety, efficacy, and quality of products for all parties involved.
David J. Lennard is vice-president, and Daniel R. Matlis is founder and president, both of Axendia, firstname.lastname@example.org.
To read Matlis' report on outsourcing's effect on process analytical technology and quality by design, see "Has Outsourcing Derailed PAT and QbD?"
1. Axendia, "Achieving Global Supply Chain Visibility, Control & Collaboration in Life Sciences: Business Imperative, Regulatory Necessity" (2010), www.axendia.com/2010_LS_GSC.html.
2. US IPEC, "Joint Strategic Plan on Intellectual Property Enforcement" (Washington, DC, June 2010).