Coronavirus (Covid-19) Pandemic · Serialization and Internet of Things (IoT) capabilities to track and trace material and product flows in real time ‘from mother earth to point

© 2020 LLamasoft, Inc. All rights reserved.

INDUS TRY PER SPEC TIVE

Coronavirus (Covid-19) Pandemic: A Wake-Up Call for the Life Sciences Industry

LIFE SCIENCE S

Business unusual


Despite warnings from medical experts that a serious pandemic was inevitable, the outbreak of the novel coronavirus COVID-19 has taken the world by surprise. In these times of already unprecedented complexity, volatility and uncertainty, other more immediate and pressing business demands have kept organizations from preparing for this eventuality. Above all else, the pandemic is an unprecedented humanitarian crisis, directly affecting millions of people worldwide and causing the largest quarantine in human history. Tragically, the human cost is already immense and still growing. But as the World Health Organization, governments and bio tech companies work to develop a coronavirus vaccine, businesses in all sectors and geographies are also suffering major disruption, much of this centered on the supply chain. With international travel under restriction or, in some cases, prohibited, air freight capacity is irregular and highly constrained. Conversely, there is better availability for charter freight as airlines deploy passenger aircrafts to move essential items as they scramble to recover lost revenue. Although the impact on sea freight capacity has been relatively less, uncertainty remains around the smooth operation of major ports should the situation worsen in key locations. As with the coronavirus, failure to properly manage the flow of products through the supply chain can lead to chaotic and uncontrolled proliferation and a major risk to the health of a business. In globalized supply chains, this is not just about disruption in supply from the higher echelons but the cascading down through the lower tiers, with interruptions likely to show up intermittently over a prolonged period, even after the pandemic has subsided. While China’s manufacturing and economic activities are recovering, much of the rest of the developed world is under lock down and still experiencing our own human and business disruption. At this time, no one is in a position to predict the duration and final social, human and economic impact of this global pandemic. One thing that is certain however, is that this will lead to a ‘new normal’, or, more accurately, a ‘never normal’ environment in a similar way that 9/11 redefined our perception of the world in 2001.

What does it all mean?


For the life sciences industry and businesses

While it is encouraging to see pharmaceutical factories in China resume production, the life sciences industry’s awakening to the multi-layered dependency on one region have been heightened. In response and to protect their own, India is restricting the export of dozens of active pharmaceutical ingredients (APIs) and the medicines made from them, the UK has banned the parallel export of more than 80 drugs to protect supplies during the coronavirus outbreak, and the US and the EU are looking into bringing more manufacturing back to their own soils. As a result, the life sciences industry is facing substantial impacts including significant API shortages, as well as price hikes and shortages of medical devices, equipment and supplies. Panic stock piling of drugs that may treat the disease by individuals and governments is exacerbating the situation, leaving patients with critical needs in short supply. Shortages are likely to continue for a fairly long period driven by both demand and supply events and will result in a spike in the cost of drugs (especially generic drugs), medical devices, equipment and supplies, in turn leading to revenue and profit impacts due to the short supply and underlying price increases. It is also worth noting the entry of new, non-traditional players in some areas through the contingency actions of companies and governments, as manufacturers such as Siemens and Mercedes turn their attention to making non-traditional products such as ventilators to help fight the virus.

For life sciences supply chains

While COVID-19 is an unprecedented tragedy in terms of the loss of lives, for life sciences organizations, it has uncovered the stark reality of the fragility of their supplier networks, risk management competence and challenges from unforeseen disruption to the resiliency of their supply chain. Unfortunately, risk management is rarely a priority until it is needed, by which time it is often too late to implement effective mitigation measures. Many organizations spend too much time on ‘fire fighting’ and not enough time on ‘fire prevention’. Simply switching sourcing location, say from China as many companies are trying to do, is not the answer as the risk profile only changes and does not go away. The solution is to embrace ‘Murphy’s Law’ and build resilience across the end-to-end supply network during the better times in order to be well prepared for what will inevitably be another disruption – although hopefully, not of this magnitude.

Many organizations spend too much time on ‘fire fighting’ and not enough time on ‘fire prevention’.

So, what should life sciences companies be doing?

Right now: Crisis management to restore operations


Contingency planning as the disruption of the supply of key ingredients like API and many essential drugs will happen given the outbreak and its impact have been ongoing for over three months and looks set to continue Full analysis of inventory positions of all key materials (especially sourced from China and India) across all storage nodes and inbound supplies Simulating the impact on their manufacturing and logistics operations in various scenarios accounting for disruptions in different locations, timings and duration Stock piling key materials sourced out of China and India and releasing them judiciously to product and inventory locations based on human health and business criteria, often times working in conjunction with governments Constant monitoring of product and material flows to quickly detect any disruptions, excessive consumption and diversions to take mitigating actions quickly Commence deployment of risk management strategies immediately, especially activating and/or expanding alternate supply sources. Companies will need expertise to manage the large number of product transfer and new source validation projects. Evaluating various product demand scenarios using the best information available to prepare for smarter allocation of limited inventory or rapidly ramp or reduce capacity based on new demand signals.

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Mid-Term: Build critical capabilities to survive and thrive


End-to-end, right time visibility of the network to detect any unexpected disruptive event Seamless and real time connectivity to all partners in the eco-system providing transparency to the global network (down to hospitals/pharmacies) Serialization and Internet of Things (IoT) capabilities to track and trace material and product flows in real time ‘from mother earth to point of care’ Artificial Intelligence and machine learning for advanced predictive analytical capability to capture and analyze big data along with qualitative, contextual intelligence, and provide rapid response options for dynamic incidents across the entire network Advanced decisioning capabilities to model scenarios and direct execution of the most effective/profitable scenario across the end-to-end network. Test and optimize the policies and assumptions that guide planning decisions. Comprehensive risk management strategies accounting for all known risks (including pandemic risk) and well developed, executable action plans to mitigate the impacts. Ensure risk and resiliency is an integral part in assessing and designing supply networks. Rapid deployment capabilities for management of unknown risks by building the appropriate human, process and technology infrastructure for timely response Risk aware culture of “bringing bad news early”, transparency of risk tolerance and empowering employees to perceive and react to external changes

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Longer Term: Transform to meet the ‘never normal’ business


Re-design operating model(s) across the entire business continuum, encompassing commercial, operations, supply chain and all supporting functions

Eliminate silos across functions to enable seamless and coordinated execution

Build new workforce competencies and organization design for the digital enterprise

Build the new digital culture and embrace advanced analytics to support decision making at all layers of the enterprise

Develop and implement a technology architecture that is capable of integrating diverse platforms in a cohesive way to complement unique capabilities and design IT around end-to-end processes, not functional silos

Build an enterprise-wide capability roadmap that can drive multiple programs in a coordinated and sequential way to deliver new, required capabilities

Implement the roadmap in a ‘bi-modal’ manner to simultaneously optimize and transform

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A wake-up call for the life sciences industry


While much is being written and said about the short-term supply chain challenges posed by the coronavirus outbreak, the ongoing situation is also bringing to the fore the need for systemic changes in the life sciences supply chain. The current crisis only underscores the importance of having full, real time visibility of the end-to-end supply chain; the ability to analyze and develop multiple mitigation scenarios and then, have the capability to rapidly deploy alternate product flows in a controlled and coordinated way. While many life sciences companies have been investing in supply chain digitalization and transformation programs to improve visibility of their end-to-end product flows, building advanced capabilities around synchronized planning and sophisticated analytics, progress has been slow and patchy. Even for those companies relatively well vested in risk management, events such as the current crisis cannot be foreseen and the impact on their supply chains can be significant.

However, they can be a catalyst for positive change.

For organizations in a position to capitalize on bringing a treatment for coronavirus to the market, the regulatory approvals to get the drugs to the market can be fast tracked. Needless to say, these companies will need to be operating at peak capacity. They will need the supply chain rigor and intelligence to understand the trade-offs of what such a fast ramp-up means to rest of their portfolio. This brings further focus on why the life sciences industry must rapidly invest in enhancing their supply chain capabilities - not just for sake of their own businesses but, as socially responsible global citizens, to contribute to society’s fight against deadly diseases and outbreaks. Coronavirus must be a call to action for the life sciences industry to quickly and purposefully create the necessary capabilities to deal with such disruptions in the future. This will require not only board level priority, but also committed sponsorship from the C-suite to drive a holistic re-design of the business and operating models and new capabilities.

Adapt and evolve supply chains with AI-powered analytics

Although supply chain events such as the COVID-19 pandemic are impossible to predict, life sciences organizations can, at least, be prepared. By taking an intentional approach to risk management, response and supply chain design, enterprises can better identify vulnerabilities, determine risk tolerance, and redesign their supply chains to balance risk, service and investment.

AI-powered analytics software systems enable enterprises to:

Respond to rapid changes in demand and market conditions by optimizing sourcing strategies to ensure greater flexibility and scale.

Optimize the supply chain to drive greater efficiency and performance today while laying the foundation for responsive change to meet evolving market conditions. Generate a digital representation of the end-to-end supply chain to enable you to fully explore options, assess risks and evaluate trade-offs to speed or automate decisions.

By creating both near and long-term plans, life sciences businesses can enhance the resiliency of their supply chains and develop strategies to safeguard their organizations against future disruptions. CONTRIBUTORS: Madhav Durbha

Group VP, Industry Strategy

LLamasoft

Atul Tandon

Former SVP, Global Supply Chain

Management

Mylan N.V.

LLamasoft, Inc. 301 South Division Street, Suite 200 Ann Arbor, Michigan 48104, USA Phone: +1 866.598.9831 LLamasoft.com | [email protected]© 2020 LLamasoft, Inc. All rights reserved.

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Coronavirus (Covid-19) Pandemic · Serialization and Internet of Things (IoT) capabilities to track and trace material and product flows in real time ‘from mother earth to point