Supply chain experts typically know what it takes to setup supply chains in effective ways, optimizing processes and applying technologies to increase operational efficiencies as well as ensuring flexibility and enhanced visibility.
However, there is a big difference between having the theoretical knowledge and being able to execute. The professionals and organizations that amidst the COVID-19 pandemic have successfully applied all this theory in practical ways are the ones that can really walk the talk.
The Problem Statement and The Landscape
Among many challenges imposed to the Healthcare sector, we can highlight the following critical ones:
- When uncontrollable events happen, such as the COVID-19 pandemic, demand drastically changes, product availability is compromised, essential goods need to move in unprecedented ways, causing a direct impact into an already sensitive balance between supply and demand.
- Healthcare is known as a high regulated sector, but in the past few years with digitalization efforts promoted by health authorities worldwide, this scenario has grown in complexity. Some examples are the Unique Device Identification, Product Serialization and Traceability, Electronic Leaflets and Electronic Product Licensing regulations.
- Even within a regulated sector with existing controls, illicit trade based on counterfeited or diverted goods is significantly increasing year after year. According to the Pharmaceutical Security Institute (PSI), in the past five years the number of incidents related to illicit trade have increased by sixty-nine percent (69%). ¹
Trying to manage all these main challenges at the same time is definitely not an easy task.
It’s estimated that medicines illicit trade alone generates a revenue between US$ 75-200 billion annually, and is responsible for hundreds of thousands of deaths.²
The World Health Organization (WHO) in 2019 convened a group of regulators with the intention to develop a normative guidance on the establishment of traceability systems and policies needed in national levels. Also, since 2010 more than 60 countries created their own laws and regulations requiring better digital and automated controls for the Healthcare sector and the interest is only growing with health authorities worldwide.
How Are The Healthcare Players Responding?
In order to cope with such challenges, external pressure and expectations, in a volatile market scenario, Healthcare is more and more relying on supply chain digitalization. Solutions vary depending on business needs, but in general they use concepts embedded into the overarching Industry 4.0 domain. To name a few of these concepts: IoT (Internet of Things), Data Science and reliance of AI (Artificial Intelligence) and Machine Learning, shop floor automation integrated with Cloud solutions, and others. 
One thing is certain, Industry 4.0 is a trend that is somehow becoming a business norm worldwide.
A common issue identified in many organizations, is the lack of certainty of what pieces of technology, and what adjustments within the business operating model would make more sense to each particular situation. All of these new disruptive technologies can solve real business issues, as well as create competitive advantages if, and only if, they are properly applied to the correct use cases.
It is not difficult to find executives scratching their heads trying to find meaningful use cases for capital that just became available for digitalization and innovation initiatives. And here it comes one of the most important things we need to remember: digital transformation should not be dictated by the buzzwords and technology alternatives, by its evolution, but should be based on the business strategic vision and business differentiators, both planned and implemented over time to create competitive advantage.
Technology as a tool should not be understood as a hammer looking for available nails in a construction site. It is about understanding first of all where the construction is heading to, what exactly are the objects that need to be brought together, what is this new “building” to be created, what the best connection method would be (e.g. nails, screws, joints, glue), and finally what tool or combination of tools should be used throughout the process.
In that sense, technology is not a differentiator by itself, but it can be a valuable tool to a well-defined business model, and when applied as part of a robust tactical roadmap.
Investments in technology are only growing. According to the Pharmaceutical Commerce Magazine, Pharma companies only in 2018 invested around US$ 4.4 billion in packaging and instrumental solutions, and the figure is growing year by year consistently.³
According to a new McKinsey study with global executives, their companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years,⁴ and this may be only the beginning of an acceleration yet in early stages.
But how can these executives ensure these investments are maximized to their full potential? How organizations are getting prepared for this new disruptive reality? What do they need to keep on mind when getting prepared to embark into this journey to increase control and visibility over supply chains? How can they look into ways to engage customers and consumers within such integrated digital ecosystem?
Make vs. Buy Options
A typical Make vs. Buy analysis takes into consideration what is the best setup for an organization in each situation or context. Within the IT domain, decisions are related to investment on internal development or subscription of Software as a Service platforms (SaaS), hiring employees or working with consultants/contractors, managing your own IT infrastructure, or establishing contracts with Infrastructure as a Service (IaaS) vendors, managing your own IT support teams, or depending on Managed Services agreements.
Solution providers and vendors bring their own core capabilities that doesn’t necessarily cover all aspects of such business transformations, so most of the times not holistic, or comprehensive enough.
Complex projects would naturally require a centralized and end-to-end coordination of functional teams as well as solution providers within an overall project plan with key deliverables spread across its deployment. This type of responsibility can be assumed by a consulting firm specialized in business and digital transformations.
The following questions can help to generate ideas on how to position the business when it comes to Make vs. Buy options:
- Does the organization currently have an internal HR structure robust enough to absorb specialists with the required technical knowledge?
- What is the right balance between Insourcing and Outsourcing technology operations for the organization?
- How to conduct an assessment to look for partners who can be cost effective and flexible enough to become a long term strategic partner, aligned with the business goals?
- Is it an option to count on external support and expertise for short term needs, envisioning an internalization process in the medium or long run?
- What is the strategic knowledge, or technological skillsets that would create a differentiation from the competition, and thus to be kept in-house?
- Is the core knowledge and expertise the organization needs something required to be kept in a long term perspective? Would the demand for this expertise fluctuate over time?
As seen, the answers should be tailored to each organization depending on its reality, goals, internal maturity, digital expertise and long-term strategy.
The Power Of Change Management
Normally, digitalization programs or projects are disruptive by nature. They touch the core of the supply chain operations and directly impact downstream trading partners, either positively or negatively if not well planned and executed.
They provoke a shift in terms of operations mindset, so one of the key steps is to plan and execute the required transformation under a strong Change Management strategy. It should embed details such as:
- Communication: a detailed plan and execution positively impacting the organization, making it clear what the change is about, how it will transform the organization for the better and how people would play a key role throughout this transformation.
- Governance: roles clearly defined among stakeholders, sponsor, project/program manager, core team and sub-teams, how progress would be communicated and evaluated with actions feeding back the overall project plan.
- Change champions: internal personnel being identified to act as a bridge between a deployment team and the organization. Typically the change champions are the most respected employees, not necessarily in a high organizational position, but playing a key role on measuring the success of the deployment, motivating people on their circles of influence, and providing valuable feedback to the deployment team.
- Measuring success: From time to time a survey executed with the internal workforce, or another formal way to measure how well the new digital culture and mindset are being adopted, could be valuable instruments on determining how fast a change can happen and how the overall strategy needs to be adjusted to cope with expectations from all levels of the organization.
- Training: this is probably one of the most important aspects of a change management strategy. The word speaks for itself and a solid execution would ensure the proper level of readiness for the new technologies, solutions, processes and ecosystem to come.
Innovation & Value Beyond Compliance As Accelerators
If an organization needs to act in response to a regulatory requirement, it is important that during the definition of the key project objectives and scope, value beyond compliance is also explored. The most relevant examples of healthcare digitalization requirements mandated by health authorities worldwide in the last few year are the Serialization & Traceability and the Unique Device Identification (UDI) regulations.
Many benefits can be explored out of these programs, that go beyond just complying. These benefits are focused on more visibility within supply chain operations, more automation of warehousing processes, relying on serial numbers and aggregation codes. Barcodes, RFID tags and other technologies are placed at different packaging levels such as: sellable unit, bundles, shipper cases, pallets.
Supply chain players globally speaking are therefore enhancing their operations using this technology as an enabler. Some examples are worth to be mentioned:
- Automation of warehousing operations, inbound and outbound operations, reverse logistics, real-time product flow visibility, enhancement of planning capabilities, etc.
- Real-time inventory visibility throughout the supply chain, waste reduction and more effective allocation of capital.
- More engagement with final consumers, marketing strategies looking to retain consumers, loyalty and brand reputation.
- Initiatives focusing on sustainability, transparency, carbon foot-print information, in combination with regulatory and ESG (Environmental, Social and Corporate Governance) compliance.
The results are translated into positive operational outcomes and KPIs, better managing returns (reverse logistics), more insights, data & analytics to better support the organization as a whole, exploring customer engagement and loyalty opportunities using mobile technology leveraging barcodes or smart labels, better recall management, and others.
Making The Right Technological Choices
There is a big buzz around fancy solutions and terminologies such as Industry 4.0, IoT, Blockchain, Cloud Computing, Artificial Intelligence, Machine Learning, and others.
However, in practical terms these solutions are still maturing, and many organizations are struggling to apply them for real problem statements. There are many tools out there that may be overkilling for the actual existing business needs.
It means there is no need to put time and effort to understand and act upon all these technologies, but instead, effectively understanding what the business hurdles are and looking for relevant solutions that would be tailored to these specific needs. One specific solution may suffice, and in some cases a more sophisticated approach combining different concepts and technologies would be the answer.
Reshaping The Business Model
Maybe one of the most important aspects of deploying such programs or projects, is to realize this is not about adding steps into your current business operations.
When it comes to digital solutions, the product identification mechanisms (e.g. 2D barcodes, RFID, Smart Labels), along with the new business steps and IT tools, need all to be in synch with a new business model.
Rethinking business operations, removing non value-added processes, re-imagining the level of integration and collaboration with key partners (CMOs, customers, 3PLs, patients, final consumers), thinking long term, are all things that can be explored and will ensure a higher chance of success in terms of digitalization initiatives.
Technology adoption, as well as business changes, are never a one-shot implementation, but a never ending, smart and controlled strategy.
The Importance of Global Standards
Local and small manufacturers (SMEs) are more exposed to financial challenges, and as already mentioned the healthcare sector is heavily dependent on regulatory requirements for some of these digital projects.
Under this context, there is a big risk if health authorities across the globe don’t keep relying on global standards and best practices for product serialization and traceability as well as UDI regulations for example. Standardization is a mandate for supply chain operations, and it is the foundation of streamlined operations, cost savings, efficiencies and many other benefits proven throughout decades of experience from global players.
GS1 is the non-for-profit organization that typically defines all the international standards and common language for product identification, traceability and trading partners integration. (https://www.gs1.org/)
The Open-SCS Working Group has defined rules and best practices for solutions and vendors interoperability as well, relying solely on globally recognized standards. (https://www.open-scs.org/)
So, keeping using what’s already working worldwide and not reinventing the wheel is the main goal. Every supply chain professional should promote best practices, international and global standards. Trading associations and external working groups are great partners to keep promoting this consistent message, and a path to effectively decrease complexities.
Conclusion
The future is right here. Digitalization is not an end on itself, but it’s an enabler, it’s a tool. The business strategy and the innovation roadmap are the key differentiators. Supply chain digitalization is not a trend anymore but a norm, and if an organization is not ready soon, it will be set to become irrelevant under the “new normal”.
Success would never be defined by the amount of different technologies implemented, but based on the near-future business model to be adopted along with a digital deployment roadmap. With the correct mindset and strategy, it is possible to get there!
