Healthcare supply chains have experienced the worst nightmares perhaps in a Century. While companies made rapid reshuffle in their supply chains, the situation was still beyond control. With more than 24 months into the pandemic, pharmaceutical & healthcare companies seem to have a better grip of the situation and are striving towards a sustainable growth path backed by new-age technology adoption. Moderated by Dr. Lakshmi Jagannathan, Chief Executive Officer, DERBI Foundation, this panel discussion, hosted by NASSCOM CoE during SCM Enterprise Innovation Challenge, unraveled many intriguing facets such as companies’ resilient attitude that sailed them through unprecedented times, their journey towards digitalization during & post-pandemic, the future of therapeutics, and India’s stronghold in global vaccination success. Read on…
The pandemic's disastrous impact on the healthcare system can't be expressed in just a few words: hospitals on the verge of collapse with overflowing capacities, critical item supply chains disrupted, Central and state governments struggling to figure out preventative measures, and the list can go on. While governments and private sector organizations did have disaster plans and stockpiles in place the pandemic laid bare open several significant supply chain vulnerabilities, including shortages of personal protective equipment (PPE) and testing kits during the start of the pandemic. Fearmongering and stringent lockdown only added to the woes.
Dr. Lakshmi Jagannathan, Chief Executive Officer, DERBI Foundation : Healthcare supply chains are complex structures spanning across multiple organizational and geographical boundaries - providing a critical backbone to the services vital for everyday life. The inherent complexity of such systems can introduce challenges, including inaccurate information, lack of transparency and limited data provenance. India is going through a very interesting phase, especially in terms of the global pharma industry.
Companies are fearlessly embarking on a growth trajectory, aspiring to become a low-cost hub for manufacturing and R&D. Yet, of course, they are facing a huge set of opportunities, both local and global, specifically on the supply chain. Forward thinking firms are turning their attention to build their capacity and their capabilities. The supply chain’s effectiveness and efficiency are emerging as a new paradigm in the entire pharma industry.
Why do we need real-time supply chain visibility and traceability?
Mr. Debashish Roy, Former Head – Digital Innovation & Strategic Initiatives, Abbott: At a high level, in supply chain parlance, there is a famous saying, “What gets measured, gets done”. That is where you will hear industry stalwarts saying, “You give me a better forecast visibility and I will give you a better supply chain”. So, which is nothing but alignment of supply with demand and that is where most of us struggle in our day-to-day life. Visibility generally allows enterprises to identify disruptions up and down the supply chain and synchronize supply and demand both at the point of sale and at the required time of delivery. At the same time, it also helps companies reduce risks and costs throughout the supply chain while improving the overall service levels.
How do you decide on evaluating the key elements that will help to fully integrate innovations such as smart factories and digital planning throughout the value chain?
Mr. Deepak Bisht, Head - Strategy & Innovation and Environmental Sustainability, Novartis: I think we all agree with the fact that digital technologies are expected to transform every link in the supply chain whether we talk about R&D, sourcing, factory operations, marketing, etc. But when you really look at the value creation from an innovation perspective across the value chain, there is no particular element, but we really need to look at a more holistic perspective.
As the saying goes that a chain is as strong as its weakest link. So, what really happens if you try to over-optimize one part of your value chain? Typically, the bottleneck shifts, so let's say if you over-optimize your sourcing process, the bottleneck really shifts to the manufacturing, and if you try to overoptimize manufacturing, the bottleneck further shifts to your distribution network.
So, as a company, we are really making a mindful investment to build a high-tech manufacturing and supply chain network with technology as a key enabler. We are partnering with some big tech companies to really transform our core supply chain manufacturing and distribution network. One of the interesting use cases, which we are working, is establishing an Insight Center that really allows us to view our whole value chain from the start to the end in terms of how we source, how we do demand forecasting, how we operate at a short scope and how we really supply our products. To summarize, if you really need to bring the value from the digital innovation across the value chain, one really needs to look at a more holistic perspective, from choosing the right strategy and look at the right areas where the value creation becomes more tangible.
How has the digital imperative had an impact on the entire globalization of procurement and manufacturing and its allied impact on the supply chain itself?
Mr. Vickram Srivastava, Head of planning – Global Supply Chain, SUN Pharma: Digitization is here to not just impact every value node of the supply chain, but the entire value chain of the pharma. Just to share a quick anecdote on how digitization and digital transformation is really helping pharma – we typically talk about S&OP (Sales & Operations Planning) cycles, which have a longer planning horizon from three to six months. The entire digitization imperative – smart forecasting, demand sensing – right from MRP, production scheduling to procurement process has been squeezed into one seamless activity like IBP (Integrated Business Planning) and has enabled us to be more agile. The three to six months are now squeezed to about four to six weeks. This is all digitally enabled, which helps us to be closer to the market, so we manufacture what is needed in the market and we can better sense what the sales and marketing team needs to do. We have become more agile, flexible and at the same time, we are more accurate with respect to how we service our demand. So, it's a win-win.
Customers are expecting immediate deliveries of their orders, which has led to the springing up of a lot of aggregators such as Pharmeasy. Are they boon or a bane for the pharma industry? What supply chain constraints are they solving?
Vickram Srivastava: My personal view is that this is the New Normal. The Gregorian calendar talks about BC&AD - So I talk about the new BC and AD - Before Corona and After Disease. This phase that we are living in now is going to be the way forward, the way we are going to interact with our doctors is also going to get digitized along with the way we procure our medicines via e-commerce. But that's not the end of it, this is just the tip of the iceberg in my view because all this is going to further get aggregated and consolidated into a single platform where you will get your insurance, doctors will view reports, testing will go online, medicines will be online and you will get them delivered ASAP to your doorstep and then the doctor will also – through smart packaging – monitor how you're consuming your drugs and monitor your vitals through smart gadgets. So, this is the way our healthcare is evolving, it is going to enable access to critical lifesaving medicines, and enable a lot of people to consult doctors, which wasn't feasible in the past.
On the supply chain part of it, the upstream part of it does not really get impacted because procuring of the material and manufacturing will remain the same. On the other hand, sensing the demand through apps and tools, forecasting what is needed, logistics and distribution, these are the key elements that will change a little. We are going to start looking at smaller stores, not huge warehouses where we store millions of dollars of medicines. We are going to store the key fast-moving medicines closer to the consumer, so that the moment you add order on the app, within two hours, you get the medicines. In my mind, this is just the start, it must evolve a lot more and it's going to get consolidated and aggregated to a far greater level.
Any take on how it would impact the existing players in terms of managing the new dynamics…
Debashish Roy: While we continue to work on optimizing our internal processes, it's very important to keep an eye on the evolving marketplace:
Large stockists are aggressively acquiring to increase or retailer reach. There is an increased competition among the stockists that we have seen.
Chain and E-Pharmacies already constitute 5-10% of the Indian Pharma market sales and are growing at two to three times the market, so that is something we should be cognizant of.
Especially post-Covid, the government is taking keen interest in trackable supply chain by leveraging digital solutions.
Competitors have already started to invest in capturing secondary sales data, using it as a decision and performance parameter.
We are also seeing multiple regional vendors cropping up with solutions offered to stockists and retailers.
Talking about the implications on the other hand:
Digital analytics will play a key role in bringing efficiency, reducing the cost, increasing reach and managing the inventory complexity.
Pharma companies are already moving towards harnessing supply chain as a strategic differentiator.
Upward trend in vendors seeking partnership with pharma companies for scale.
With the emergence of innovative personalized therapies (focus on individual treatments), how do you manage the supply chain complexities?
Deepak Bisht: As the name suggests, personalized therapies are tailored therapies to individual patients. Here we make use of the individual genetic profile and that really guides the medical treatment for the person. The supply chain for such treatment gets complex because they are meant for one individual usage. To give an example, we draw the blood from the patient and extract a typical type of cells. Then these cells are genetically engineered in the labs to become “smart cells” that can identify and destroy the cancer cell when they're infused back in the patient. Here, the source and the consumer are the same, which is the patient. In such a case, there are number of challenges that need to be considered when designing a supply chain for such advanced therapies:
The shelf life of such a treatment – everything needs to be turned around within a week, unlike the typical manufacturing process cycle for conventional therapy, which takes months to years.
The temperature needs to be maintained not only during the transit, but all throughout the manufacturing and through different nodes of the supply chain.
End-to-end visibility so that all the activities across the stakeholders – doctors, patients, manufacturing, organization, or quality team should be in one place.
High data integrity, full traceability and auditability
In the future, we need to see how best we can really scale and make sure that the affordability and the accessibility of such therapies can be broadened so that a larger patient pool can be addressed.
What are your thoughts on incremental innovations around traceability driven by tech such as blockchain? Are we there yet in terms of tech maturity and tech adoption in pharma?
Deepak Bisht: I think Blockchain is one of the promising platforms we are seeing in terms of track and trace. One use case that we are working on with PharmaLedger, which is a consortium of 28 partners coming from the public and private sectors – around the paper leaflet usually found in a medicine packaging box, which contains product information that is meant for the patient or the healthcare professional.
We print billions of these leaflets every year, and the challenge we have seen is that no one really knows how many of us have really read those tiny, printed leaflets, right? Since it must go through the entire cycle of manufacturing, the updates cannot happen instantaneously because it is linked with the production cycle. And there is a cost in terms of the environmental impact because we need paper, printing, ink and logistics to transfer those materials, and the paper waste that happens at the consumer's end. So, we are working on a concept called e-leaflet, which is electronic. Basically, how can we transform the paper leaflet to a QR code on the product itself so that the patient can get all the important product information related to the treatments on their smartphone.
With this implementation, we are saving paper in terms of printing and reducing waste because of the outdated labels. Also, we can update all the information in terms of safety and clinical information in real time and it offers real benefit in terms of anti-counterfeit checks as well. More and more companies are coming into this space because I think it's a clear value not only for the patient but for them as well in terms of reducing their costs and for the environment.
The pandemic is forcing organizations to rethink just-in-time sourcing and manufacturing. Compared to 24+ months ago, how has the process of sourcing raw materials changed in the pharma industry?
Vickram Srivastava: This is pivotal to how we are going to de-risk our supply chains going forward. Pharma being heavily regulated, we hardly had just-in-time. But just-in-time is getting coined as a different connotation – it has now become Just-In-Case. Having alternate vendors or alternate sources of manufacturing is both costly and time consuming because anything that we change in terms of our raw material or active APIs (Active Pharmaceutical Ingredients), or any primary component needs to go through a stability cycle or regulatory approval cycle because we are probably the third most regulated industry in the world after nuclear and aviation. And rightly so, because we are dealing with critical lifesaving drugs, which are meant for human consumption.
Having said that, in the last 24 months or even before that, a lot of companies have been looking at localization and onshore sourcing to derisk supply chains and make global supply chains a little more localized. I've heard a term which I would want to share is – Deglobalization. Earlier we used to talk about globalization, now we're talking about localization or deglobalization where we are trying to be much more in control of our supply chains. A lot of digital initiatives are helping over here because we are trying to get information about not just our suppliers, but also the suppliers’ suppliers and have that kind of visibility through platforms and technologies like blockchain.
In the future, there are going to be a lot of transitional shifts with respect to how we source our material? Which areas do we source from? How many vendors do we have for critical products? Which are the top line blockbuster products for a particular organization? We must look at all those things, but it is going to be a long-drawn process.
Currently, we are sourcing almost 65-70% of our API and raw materials from China.
India is the pharmacy to the world – about 30-40% of the drugs which are generic drugs consumed in USA are supplied by India.
More than 30% of the drugs which go to Europe are coming from India.
A lot of world healthcare is relying on India right now. We can see in the vaccine space also – how quickly we were able to develop the vaccine and deliver it (the AstraZeneca model), and how many people we've been able to vaccinate all over the globe. So, the onus is really on us as an Indian pharmaceutical industry to look at initiatives which can make our supply chains a little less complex. I don't think they will become completely complexity free but make them a little less complex and so that we as supply chain managers have better control on the critical nodes of the supply chain.
Debashish Roy: I will just take one example about how we have been struggling with accuracy and agility – these are the two terms which have been long debated in the demand planning world. Agility is something which is post occurrence of an event, which is the reaction agility and trust me, this is very difficult to achieve because it increases the cost of the overall supply chain. While reaction agility in execution is very important, anticipation agility in demand planning is also possible.
So, what if instead of reacting to an already occurred event, one could anticipate the event well in advance to either mitigate or leverage the impact of that event? And in such a methodology, is where technology comes into play. With AI and Machine Learning, empowered with the right business context and forecasting models, teams can be equipped with the ability to anticipate future changes or exceptions, empowering them with the true agility that helps them be better prepared and improve both accuracy and consistency together.
Touching upon Blockchain, especially from a counterfeit standpoint, we are doing some pilots just to see how it can help us evolve the overall track and trace, tracking secondary sales data, all the way to tertiary sales. In addition to that there are certain other areas, which have evolved a lot post pandemic. One of which is operational effectiveness. When I say operational effectiveness, it is helping us enable tracking of near expiry of goods sold to ensure liquidation and reduce expiry claims. Then the second is Insights, which is helping us have a dashboard type of view on the sales performance at a territory level to have more informed decision making. Then there is better customer engagement that can help increase influence over distributors plus increasing efficiency by reducing order intake times.
Which are the technology enablers that could play a very important role going forward specifically in the pharma supply chain industry?
Vickram Srivastava: There are multiple things, but in my mind, optimum demand sensing and forecasting could be a good start. I feel that if we can look at that one piece, the starting piece of information that can have a cascading effect down chain, in terms of how we are building capacities, what kind of technology/tools we are keeping ensuring procurement happens smoothly, what kind of inventory levels we look at and the kind of warehousing we have.
Deepak Bisht: I think technologies are just tools of achieving what you really want to achieve, but I think more fundamentally, we are making things more transparent, whether we were able to communicate, onboard our suppliers and understand where the gaps are. I think the focus, for us, has not been looking into the supply chain, manufacturing, or distribution, but really looking more from a product perspective, only then can we look at where are the opportunities to really serve our patient with less costs, with less inventory and at the same time, manage high service levels. So, I think a product management view is very important rather than a technological view. Technology is our enabler, but we need to have an end-to-end product view, at least for the major brands, to really support our patients at the end of the day.
Debashish Roy: We have spoken about various technologies, but the one thing common to all are the stakeholders. The shift that is required in the industry – researchers, academia, drug manufacturers and all the distributors in the supply chain network would need to work together to make things happen. And that is a big change from how we operate today.
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