By Grant Woolf, Solution Architect Director, TAKE Supply ChainOutsourcing continues to remain a dominant force throughout the pharmaceutical industry, as more companies than ever move to the "virtual world" of contract manufacturing. By incorporating outsourcing — a cost-effective, flexible approach to resource allocation and investment — into a company's overall business strategy, pharmaceutical companies gain new opportunities to sustain long-term growth and competitive advantage. But the increasing globalization of the contract manufacturing market can lead to a rush to expand practices in low-cost countries, straining brand owners' ability to manage and control their manufacturing, packaging and supply chain operations.
Despite outsourcing growth and the availability of Web-based tools, few manufacturing companies have successfully automated communications and operations to collaborate with suppliers, distributors and contract manufacturers. Instead, they still continue to rely on outdated processes that contribute to delays, errors and excessive inventory and costs.
To succeed with pharmaceutical outsourcing, a company must collaborate closely with partners. In order to succeed with collaboration, a company must have in place technologies and processes that improve control, visibility and velocity across the outsourced network — namely barcoding, radio-frequency identification (RFID) and track and trace capabilities.
Challenges Facing the "Virtual World"
With today's global, virtual world of contract manufacturing, how do pharmaceutical companies maintain high levels of quality, traceability, customer service and brand integrity, while reaping the cost savings and agility of outsourcing operations? While wrestling with these issues, today's virtual pharmaceutical manufacturing and supply chain environments face additional concerns with:
• Partner adoption and collaboration related to technology
• Managing compliance and product safety risk
• Customer service/relationships
• Cost control
Pharmaceutical companies must also overcome a number of cultural and technological challenges in order to succeed with outsourcing, namely:
• Change Management – Companies must adjust competencies and culture in order to work collaboratively;
• Supplier/CMO Factors – Aptitude for change, technological capabilities and partner stability all play a part in the success or failure in outsourcing; and
• Technology Challenges – ERP systems were not designed for today's supply chain, so integrating partners is often a difficult, time consuming, expensive process.
Collaboration: The Name of the Outsourcing Game
Collaboration may not be a new idea, but it is critical to outsourcing success. Brand owners know they must collaborate with partners in order to compete in today's global business climate. But historically, outsourcing partners have resisted making the necessary technology investments and changes within their organizations to enable collaboration because of a perceived unequal benefit distribution. Partner companies often believe technologies benefit the brand owner, offering them a limited value proposition. Resistance to change within the partner and brand organizations has also been a major factor limiting adoption, as has security risks associated with sharing ERP data. As a result, the potential technology and cultural problems related to collaboration are perceived as so significant, few companies have truly achieved collaboration on a meaningful level.
In order to successfully streamline cross-company processes, pharmaceutical companies need a collaboration solution that fulfills their organizational requirements, while also providing value to partners. Facilitating price discovery or reducing partners' own costs of acquisition isn't enough. Dramatic cost reductions will only occur when inefficiencies are removed from the total system, with benefits accruing to all parties. This "win/win" scenario provides an incentive for suppliers to make the process and technology changes that will ensure success for each company.
Key to any partner collaboration is matching the technology with each partner; the process cannot stem from a "one size fits all" approach. The level of technology sophistication will vary across any partner network, as will the means by which integration should occur. Pharmaceutical companies must ensure their partners are provided choices when it comes to implementation (Web portal integration, Web services integration, file sharing integration are among the most common) and how the technology can best work for and with their systems, staff and processes.
Collaboration Framework
Collaboration can take many forms; three primary areas in the pharmaceutical industry include:
Collaborative Demand Planning
• Sharing of demand forecasts for raw materials
• Longer term demand signals
• Tracking of schedule commitments and changes
Collaborative Replenishment
• Replenishment of raw materials for manufacturing
• Purchase order (PO) based demand signal
• Tracking of PO negotiation and material movement and related invoicing
Collaborative Manufacturing
• Sharing of manufacturing schedules and instructions
• Demand signals based on PO's and/or manufacturing batches
• Tracking of raw and finished goods inventory, manufacturing progress and related invoicing
Cross-Company Control, Visibility and Velocity
Once partner buy-in is secured, pharmaceutical companies must incorporate business and technology components that enable control and real-time visibility across the collaborative network. Visibility, control and velocity can be achieved by business processes and technology that focus on:
• Enforcing process discipline between all parties;
• Establishing real-time connectivity to the brand owner's ERP system to ensure that revenue, manufacturing, shipping and inventory information is reflected instantly;
• Validating key data such as lot status with and prevent controls at manufacturing and shipping;
• Built-in compliance labeling and RFID tag generation, controlled by the brand owner, but produced at the partner sites when needed; and
• Real-time visibility to key partner documents such as certificates of analysis and batch records for quality control and product release.
Blending Business Processes and Technology for Outsourcing Success
Cross-company control, visibility and velocity help ensure accurate inventory/product data collection and labeling, which are essential to today's global, outsourced supply chain. Proper item/material tagging throughout receiving, inventory, manufacturing and shipping processes is critical to maintaining the transaction throughput required to stay competitive and meet customer/market demands. In addition, pharmaceutical companies must stay current with ever-changing customer and regulatory requirements regarding labeling and traceability. Penalties for non-compliance can include per shipment fees, regulatory penalties, or worse, the inability to identify items in the event of a product recall.
The problems associated with product labeling and tagging grow exponentially when dealing with multiple outsourced shipping and warehousing facilities. Typically, each location has its own labeling solution, which means that changes must be replicated across each site, duplicating effort and increasing the risk of errors and non-compliance.
By implementing track and trace processes across supply chain operations, pharmaceutical companies can gain the visibility needed across all cross-company manufacturing and/or supply chain operations. This real-time visibility leads to better control over the processes by which the company works with partners, resulting in higher efficiencies, fewer errors and enhanced compliance.
Barcoding and RFID are the key technologies that enable track and trace capabilities. At each step throughout the manufacturing and supply chain processes, barcoding and RFID capture the data needed to track and trace equipment, materials, inventory and products across all operations.
Tools of the Trade
Leading pharmaceutical companies today are revamping their processes and leveraging barcoding and RFID technologies in conjunction with Web-based software integration to capitalize on the opportunities presented by the outsourced partner network. Technology that delivers visibility, control and velocity to achieve collaboration across a common platform must include the following functional requirements:
• Scalability for management across the entire enterprise and partner organizations;
• A variety of integration options to support connections to all types of supply chain partners;
• Easy integration into a variety of ERP and WMS solutions;
• Pre-defined industry standard RFID tags and barcode label formats to reduce implementation time;
• Management of both local and Web-based product labeling, supporting compliance labeling among trading partners;
• Support for product serialization and lot number management; and
• Flexible configuration options the support a variety of business processes without customization.
Building Strategies for Long Term Success
Outsourcing growth across the pharmaceutical industry shows no signs of slowing as companies realize that the evolving global landscape presents a whole new realm of possibilities for sustaining long-term growth and competitive advantage. Realizing and optimizing these possibilities requires achieving collaboration by leveraging strategies and tools that provide real-time visibility, velocity and control and across the global network.