Welcome to the first instalment of our Supply Chain Leaders Series of expert interviews. Organisations are asking urgent questions about supply chain resilience and how to learn from the events of the past few years.
At 7bridges, we're looking for answers to those questions. We'll be interviewing people in leadership positions from across industries, to learn from their experiences and understand their vision of supply chain transformation.
Our first expert interview is with Sam Herbert, Chief Operating Officer of Clinigen Group, a global pharmaceutical and services company. Sam's going to be talking to us about learnings from the COVID pandemic and how he's building resilience within his own supply chain to prepare for future shocks.
"We took the opportunity during the pandemic to build internal and continuous optimisation capability into our business, based on data."
Sam Herbert, COO at Clinigen Group
Q: Let's set the scene. It's January 2021, a year into the pandemic that changed everything. The Brexit transition has just completed. And you join Clinigen Group - an interesting time to start a new role. What was that like?
The biggest thing both of those events demonstrated was the need for a supply chain to be responsive and dynamic.
COVID resulted in fewer transportation options, that were more expensive. It also caused unpredictability in the supply chain driven by delays at manufacturing sites (for us, this was either due to prioritising COVID projects or a result of reduced capacity due to worker restrictions). We had to respond to this unpredictability, as did our logistics partners, but what was routine suddenly wasn’t. We have been working to adjust to this new normal and whereas at times focus was on the quality and time, we are now back to optimising with cost and inventory.
With Brexit, although there was a specific date for the end of the transition period, some of the impacts of Britain leaving the EU are evolving over time as we see the interpretation of various guidelines develop. Now that the implications are clearer, we are further reviewing our infrastructure and optimising flows. While much planning went into Brexit and business continuity, forward-looking plans will always need to be adjusted as new information becomes apparent. For us, this has meant shifting from thinking about one-off projects related to this type of 'event' (and others, like procurement) and investing in a continuous capability as we believe a lot of the value comes through multiple, small incremental gains over time rather than big chunks.
Having spent a large part of my career in supply chain, the pandemic and Brexit were not the first large disruptions I have seen, just the most sustained. The Icelandic volcano eruption in 2010 and the NotPetya cyberattacks in 2017 caused significant short term disruption in the supply chain and many companies at that point began adding additional resilience into their planning. The logical next step is to integrate more real-time tools to optimise in constantly changing situations.
Q: What was the impact of the pandemic on global logistics networks? What was the most painful for pharmaceutical businesses?
Internally, the biggest impact we experienced was fewer options and a higher cost. We managed without any major issues, but it did mean we were often carrying more inventory than previously as a buffer.
Externally, demand patterns shifted considerably, which meant all the planning that had previously been done by pharmaceutical companies shifted. Clinical trial recruitment slowed, some trials shifted to a decentralised model (direct-to-patient) to maintain the protocol, certain therapeutic areas had a drastic reduction in demand due to hospital capacity and other COVID-related therapies suddenly went into shortage in various countries due to the surge in demand.
As a company, we exist to connect patient and healthcare professionals with the medicines they need, which meant we were constantly adapting to the demand and rebalancing supply where we were able. There were also various disruptions through the supply chain including Active Pharmaceutical Ingredient (API) manufacturing, packaging and finished products. Capacity was prioritised for COVID and the vaccines in particular. Various countries also stockpiled medication as a contingency for potential future waves.
Q: Did any of these challenges pre-date the COVID-19 pandemic?
Having led a logistics company prior to joining Clinigen, I have seen the evolution and maturation of the pharmaceutical supply chain from both sides. Procurement was, and continues to be a challenge for most businesses.
Through the 2010s, a lot of focus and emphasis was leveraging overall spend to realise cost savings. While this was somewhat effective, this approach achieves diminishing returns over time. Furthermore, the complexity of pharmaceutical supply chains make the activity incredibly challenging.
Running procurement as a periodic exercise doesn't work. Rate composition and surcharge utilisation varies significantly across providers, so you can't compare apples with apples. Additionally, origins and destinations change, lane volume varies, so it becomes very difficult to pinpoint what savings were truly made.
Bigger cost savings come from changing the actual flows and service utilisation of providers, while managing risk. Part of the challenge here is the amount of variables to consider in these making these changes. You need to identify and regularly implement many small improvements over a sustained period of time.
At Clinigen, this is a big ongoing challenge, but one we are actively working to conquer (as any extra cost in the supply chain ultimately gets passed to the patient directly or indirectly and it is our duty to make this as efficient as possible).
"Running procurement as a periodic exercise doesn't work... Bigger cost savings come from changing the actual flows and service utilisation of providers, while managing risk. Part of the challenge here is the amount of variables to consider in these making these changes."
Q: What trends impacting the pharmaceutical industry have accelerated by the pandemic?
There was a massive acceleration in a shift to direct-to-patient clinical trials. It was an area gathering steam for a number of years: it is better for the patient and has significant value to the sponsor (as recruitment rates are significantly faster and patient retention much higher due to the decreased patient burden).
The biggest barrier was a classic aversion to change. The change aversion was overcome when hospital sites could no longer be accessed how they had been previously, and the resulting growth was explosive. While undoubtedly some trials will return to the traditional model, it wont be at the same rate. As one friend in the industry said to me “the elastic band has been stretched so far, it will never return to its previous shape.”
The biggest change I see coming is that costs have escalated considerably, in transport in particular. I see pressure building in companies to bring this back down to more traditional and stable levels. Demand is still outstripping supply currently, so some of these service utilisation and other flow shifts will need to come into play to bring down costs as pharmaceuticals will continue to be heavy users of air transport.
"Transport costs have escalated considerably. Demand is still outstripping supply, so service utilisation and other flow shifts will need to come into play to bring down costs as pharmaceuticals will continue to be heavy users of air transport."
Q: What role did data and technology play in operating your supply chain during the pandemic? And how do you see this role evolving in the future?
We took the opportunity during the pandemic to build internal and continuous optimisation capability into our business, based on data.
We wanted to build a digital twin of our logistics infrastructure and movements, so we could better predict abnormal situations and inform decisions across the business. This would require access to big data and advanced machine learning. However, we faced a challenge - our ERP did not hold all of the data we required for analysis and some of that granularity resided with our carriers.
We sought a partner who could bring all of our internal data into one place, enrich it with external carrier data and use it to analyse our network to identify efficiencies. We issued an RFP and ultimately selected 7bridges for a phased implementation of their AI-powered logistics platform.
Phase 1 was focused on selecting the right logistics partners for our needs (as we had many) and negotiating prices. Now, all of the rate cards live within the 7bridges platform and invoices will be automatically analysed against the contractual rates to ensure billing reflects agreements. We used the 7bridges Digital Twin capability, the Procure and Audit modules to do this.
Phase 2 was looking at our infrastructure and simulating changes to its shape (such as our fulfilment locations and where we hold stock), which has resulted in a target operating model we are now working towards. Again, it was the 7bridges Digital Twin technology that enabled us to simulate our supply chain, and the impact of changes to it.
In Phase 3, we will be fully integrating the 7bridges platform into our ERPs for further optimisation of our inventory and our ecommerce platform (we'll utilise these insights to inform customers of shipping times, costs, and options etc).
Q: How are you looking forward to the future, having learned what you did about the businesses operations during a difficult time (and how is 7bridges a part of that forward journey)?
The key shift for me is shifting supply chain optimisation from project work to continuous optimisation. It is the old adage that if you make things 1% better every day (which doesn’t seem like a lot, and is very doable), you end the year 37 times better.
While 37 times better is a lofty ambition, the principle applies that many small decisions and shifts utilising large data sets and analytical tools are going to be our optimisation engine that will drive us forward.
Are you interested in contributing to our Supply Chain Leaders series? Get in contact with our team to find out more.
