Special Notice: Kinaxis would like to invite the public to participate in an open Twitter chat about S&OP trends and strategies. Follow the discussion tomorrow (Oct 5th) from 1:00pm – 2:00pm EDT using the hashtag #SOPchat. Come participate in what we hope will be a lively and valuable conversation by posting your questions and opinions.
Companies in the life sciences industry now see tremendous growth opportunity around the world. Consequently, many of them are expanding aggressively into these markets with new global and outsourcing strategies designed to keep costs low and bring products to market faster. One of the problems, however, is that as the supply chain grows more complex, it correspondingly becomes more difficult to know where drugs—for example--and their active ingredients originate. In fact, according to the Government Accountability Office, up to 80 percent of the active ingredients used in U.S. drugs are now made overseas, and, in many cases, often in countries where regulatory oversight does not meet U.S. standards. That doesn’t necessarily mean there will be manufacturing quality issues, but accumulating evidence certainly indicates that there is the potential for problems. While much has been said about high-profile drug recalls, it’s the number of less publicized recalls that’s of note. In fact, in 2009, there were 1,742 drug recalls, which is a four-fold increase from the prior year. Most of those recalls were related to manufacturing quality and testing. A second key challenge is to minimize the threat of counterfeit pharmaceuticals entering the supply chain. In less developed countries, there are gaps throughout the supply chain because standards are not as strict as they are in more developed regions. Indeed, the World Health Organization (WHO) estimates that counterfeit pharmaceutical levels range from less than one percent in the developed world to more than 30 percent in less developed regions. Accounts vary, but in China, for example, counterfeit drugs can account for as much as 50 percent to 85 percent of the market. With those challenges in mind, it was interesting to read an article that ran in IndustryWeek a few weeks ago, where the author, Duane Sword, who is a vice president at Thermo Fisher Scientific, wrote about technologies used to safeguard the drug supply chain. These include, first, electronic pedigrees (e-Pedigrees) and RFID, which provide a documented and complete history of a given product’s chain of custody--from the manufacturer to the point of dispensing. A second technology increasingly used within the pharmaceutical supply chain, is spectroscopy, which is used to accurately identify chemicals through sealed glass, plastic bottles, plastic bags and blister packs, and can be used to ensure product integrity. Use of e-Pedigrees and RFID tagging delivers the means to secure the legitimate supply chain because product information such as national drug codes, lot numbers and expiration dates is gathered from the original manufacturing process, Sword notes. These codes are then securely linked to extensive transaction detail covering the changes of possession that a drug undergoes from manufacture on to final distribution. If serialized products are shipped, these numbers are also incorporated into the pedigree. As a result, Sword says, the e-Pedigree secures the chain of custody, which ultimately prevents phony transactions and products from getting into or remaining in the legitimate supply chain. The other technology seeing increased usage, spectroscopy, can be used to accurately identify the chemical make-up of raw materials and finished products at ports of inspection, loading docks, points of sale and manufacturing plants, Sword explains. The benefit of this technique is that raw materials and finished products are analyzed at the chemical level to ensure they indeed are the materials and products they are supposed to be, Sword says. In the end, Sword says that the ideal solutions are those capable of tracking and authenticating product from the earliest point in the supply chain all the way until it reaches the consumer to ensure quality and safety. He concludes that, for many companies, the winning formula will incorporate some combination of technologies. While I believe that to be true, I also think there’s more to overcoming these obstacles than the application of these technologies. Another vital aspect is supplier relationship management. By that, I mean having a good relationship with reputable suppliers and partners—and understanding who their downstream suppliers and partners are—as well as having visibility into their operations. The other important thing that will be required in order to implement a cost effective and efficient tracking system will be proper system integration. This means the supply chain will need some way to bring all these disparate data points together, in order to ‘speak a common language’ among different systems and suppliers. This will require greater discipline across the supply chain. What do you think? I’d like to hear from you.