Forging an agile, secure supply chain - Ernst & Young...Using the following steps, firms can...
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Tom, the CEO of Big Pharmaceutical Co., had urgent questions after hearing about a possible contaminated lot of biologics at one of the company’s far-flung network of plants. If the lot was contaminated, the consequences for patients and the company — financial, legal and reputational — could be enormous. Just yesterday, he had asked Steve, the Head of Supply Chain, about the status of the company’s lots and batches, and Steve had said, “We don’t know.” Tom wondered: What if the lot made it to pharmacy before it could be tracked and destroyed? What if other batches at the same plant were contaminated? Which supply chain point was most vulnerable to fluctuations? What would this mean for product supply? Patient outcomes were at risk, and so was the company’s business. Was Big serving its customers in an optimal way in terms of time and profitability? Did it even know what its true cost to serve was? With Big’s new push into emerging markets, having supply meet demand had never been more critical. Tom started thinking more deeply about Big’s supply chain. Since the company went global a decade ago, there had been lingering concerns about an ever-expanding supply chain that had moved beyond the legacy blockbusters to encompass a much broader and more complex product line. Big was counting on a broader range of products to deliver the financial performance it needed. Insights for executives 5 Forging an agile, secure supply chain The case for combining performance improvement and risk management Life Sciences Of special interest to Chief operating officers Chief risk officers Vice presidents of tax
Transcript of Forging an agile, secure supply chain - Ernst & Young...Using the following steps, firms can...
Tom, the CEO of Big Pharmaceutical Co., had urgent questions after hearing about a possible contaminated lot of biologics at one of the company’s far-flung network of plants. If the lot was contaminated, the consequences for patients and the company — financial, legal and reputational — could be enormous.
Just yesterday, he had asked Steve, the Head of Supply Chain, about the status of the company’s lots and batches, and Steve had said, “We don’t know.” Tom wondered: What if the lot made it to pharmacy before it could be tracked and destroyed? What if other batches at the same plant were contaminated? Which supply chain point was most vulnerable to fluctuations? What would this mean for product supply?
Patient outcomes were at risk, and so was the company’s business. Was Big serving its customers in an optimal way in terms of time and profitability? Did it even know what its true cost to serve was? With Big’s new push into emerging markets, having supply meet demand had never been more critical.
Tom started thinking more deeply about Big’s supply chain. Since the company went global a decade ago, there had been lingering concerns about an ever-expanding supply chain that had moved beyond the legacy blockbusters to encompass a much broader and more complex product line. Big was counting on a broader range of products to deliver the financial performance it needed.
Insights for executives5
Forging an agile, secure supply chainThe case for combining performance improvement and risk management
Life Sciences
Of special interest to Chief operating officers Chief risk officersVice presidents of tax
The questions piled up: can we meet our market commitments? What about our relationships with our suppliers and contract manufacturers? Are we ready to deal with the potential for rising theft, diversion and counterfeiting while controlling costs? Do we have the right processes to balance global supply and demand in a more complex supply chain? And what about regulators across the globe — can we be sure we’re in compliance and that we’ll remain in compliance as regulations shift?
In other words, did Big Pharmaceutical Co. have the agile supply chain it needed to not just survive, but thrive?
Could the supply chain deal with unprecedented complexity and risk while focusing on customer service and costs as well as anticipating change? Was the supply chain compliant, reliable and flexible in this ever more volatile business climate?
Do we have the right processes to balance global supply and demand in a more complex supply chain?
Big Pharmaceutical Co. needed more visibility into its supply chain. Tom needed to understand Big Pharmaceutical Co.’s greatest supply chain risks and how to prioritize them. He reached for the phone to call Steve. It was time to rethink Big Pharmaceutical Co.’s approach to supply chain.
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Why now?Key customer satisfaction indicators include on-time order fulfillment. With global supply chains spread across continents, visibility in terms of product traceability, manufacturing facility reliability, product margins and ability to meet market demands is key. Companies with limited supply chain visibility risk moving blindly in a rapidly changing landscape. Many are reassessing which capabilities they should develop and which executives, such as chief marketing officers and chief risk officers, should spearhead the efforts.
Recent EY surveys reveal that while life sciences companies are consistent in their recognition and prioritization of industry issues, there are clear differences in how leading and lagging companies are mobilizing to address those issues. The industry is no longer moving as a single pack — the gap between leading companies and laggards in supply chain visibility is growing, and companies that don’t embrace the realities may soon find the gap difficult to close.
How does it affect you?A global supply chain amplifies a world of vulnerabilities — from local events such as disasters or strikes to differing tax and regulatory regimes across the world. Limited visibility into the supply chain increases the odds that your company’s response to new business requirements and potential
risks will be fragmented, limited and delayed. Inadequate understanding of the risks in managing a more complex global supply chain may lead to interrupted supply, or worse.
What’s the issue?In today’s global business environment, supply chain reliability and agility are more critical yet less assured than ever. Supply chains have become more complex, they involve more risk, and cost and margin pressures have never been greater. The competitive stakes are higher, especially in gaining access and share in emerging markets.
Life sciences supply chain management in the current complex, fast-paced, cost-conscious environment requires a comprehensive, disciplined approach and relentless application of the organization’s tenacity to implement it. The first vital steps are to improve the accuracy and transparency of customer, item, batch and inventory data. Companies that can see clearly across their supply chain operations can be more flexible and respond quickly to get the right product at the right time to the right customer.
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What’s the fix?Using the following steps, firms can leverage performance improvement and risk management simultaneously to create agile, reliable, compliant supply chains:
1. Determine the current state of your supply chain operations. Take a candid look at the health of your planning environment through a multidimensional framework that includes review of products, cost, regulatory non-compliance risks, tax impacts, vendors and traceability management. Define your cost and service profile across global markets. Evaluate your risks, governance processes and controls. Use the results of your evaluation as a starting point for analysis and action.
2. Determine where you need to be. Establish desired standards for reliability and quality along the supply chain. Define the service performance standards you and your service providers need to meet or exceed and how doing so will impact what’s needed to get the right product, to the right place, at the right time the first time.
3. Identify the gaps. Prioritize based on compliance needs, immediate and short-term business requirements and objectives, competitive differentiation and longer-term support for your company’s business strategy.
4. Address the challenge with:
• An integrated team approach with shared objectives. Manufacturing, commercial, quality, compliance, finance and supply chain must collaborate; supply chain cannot go it alone.
• A relentless focus on improving performance in supply and demand planning, customer service, manufacturing efficiencies and logistics.
• A risk assessment framework. Determine what needs to be managed, as well as the metrics to help you measure execution against your goals. Develop methods to collect the right data, and develop the analytics to make sense of that data.
• A governance mechanism, including a dashboard for ongoing performance management. The mechanism should allow you to understand priorities at any point and allow you to make needed adjustments in a timely fashion.
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Supply chain
Social media comments
Health authority inspection
Consent decreeDo not make
product. Do not collect revenue
FDA makes new rule — Evaluate options
Warning letter — Regulatory response needed
Competitor has product
availability issues. You sell more!
Inflexible supply agreements with
suppliers, third-party manufacturers
European labeling not
approved, delay shipment
Poor master data definitions —
not sure which product to
ship to which customer
Demand outstrips
supply — sales forecast
accuracy and volatility
Quality issues with API sourced
in Asia
Supplier facility suffers storm damage and key material is delayed
Plant in North Carolina has utility
(power, water, waste) issuesCMO can
meet new serialization
requirements!
New plants in
Ireland and Singapore —
invest $1 billion
Post-merger process
integration and reliability
issues
Unexpected FDA inspection —
only minor Form 483s
Mix-up in specifications and labeling — rework
product
Supply network design not tax
effective
Identified suspect fraudulent returns
and credits — save $15 million
DEA finds product mix-ups
in warehouse and returns
Cost to serve outstrips margins
in emerging markets
Successful pilots of UDI/UDID
Product launch
Start
PlanLo
gistic
s
Procure
Make and test
What’s the bottom line?Increasing visibility and leveraging risk management can help your company develop and sustain an agile supply chain that is compliant, efficient and flexible. The benefits are substantial — increased shareholder value, the ability to be first to market in emerging markets and an operations landscape that is fertile ground for increases in productivity.
Companies that don’t strive for an agile, transparent supply chain are putting the company, shareholders and even patients at risk. A consent decree or warning letter can significantly damage a company’s value and make it vulnerable to a takeover, wanted or not. In today’s complex environment, life sciences supply chain leaders are finding ways to create agile, cost-effective, safe and secure supply chains by leveraging performance improvement and risk management at the same time.
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Want to learn more?
For related thought leadership, visit www.ey.com/lifesciences
The answers in this issue are supplied by:
Jamie HintlianPrincipal, Americas Advisory Life SciencesErnst & Young LLP +1 617 375 [email protected]
Frank BaroneSenior Manager,Americas Advisory Life Sciences Ersnt & Young LLP+1 732 516 [email protected]
Ed TomlinsonSenior Manager,Americas Advisory Life Sciences Ernst & Young LLP+1 215 448 [email protected]
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Breaking down silos, identifying the risks that matter most, automating internal controls, and using advanced data analytics and GRC technology give organizations the ability to do more than protect themselves from the worst. These steps also give organizations the agility to seize the opportunities that create lasting value across the enterprise. Learn more at www.ey.com/protect
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