The life science supply chain shouldn’t be the same as it was 10 years ago. Reengineering is imperative to deal with pressures that include transforming the industry from a volume-based to value-based model; ensuring profits despite reduced margins and the patent cliff; and addressing the complexities triggered by increased regulations, new product types, and globalization of both R&D and markets.
The big players estimate reengineering will reduce distribution costs by at least 25 to 50 percent,” says Siddharth Dutta, Ph.D., life sciences industry manager, Frost & Sullivan.
Savings will be accomplished through a combination of cost reduction and new opportunities. For example, Reenita Das, partner and senior VP of healthcare and life sciences at Frost & Sullivan, points to expanding products’ scope to lower costs and streamline logistics. As products are approved for more indications, she says some organizations can “expand beyond the acute care setting to create models” to compete with Walgreens and CVS, which are increasing the numbers of their instore clinics and turning healthcare into a retail experience.
“Online ordering of drugs, customized delivery, and reduced delivery time will be the new paradigm in the supply chain,” Dutta adds. Already, the 2014 Biopharma Cold Chain Sourcebook reports that it is becoming increasingly popular to see a direct distribution model that mails individual doses directly to patients or specialty clinics. Like other pharmaceutical shipments (from APIs through finished products), these shipments to individuals and clinics often are managed by third-party logistics providers.
Leverage 3PL Insights
Leading third-party logistics providers (3PLs) understand the need to do more than move packages. Many have developed life science divisions capable of providing logistics and consulting support to help clients transition from volume to value. “The supply chain must be solutions- driven,” says David Bang, CEO of DHL’s LifeConEx unit. “Shippers need an integrated, whole-package solution.” He advocates one solution that incorporates infrastructure, networks, and standards to provide visibility into each link in the chain rather than a host of options that must be cobbled together and managed.
The complexity of the products may require special handling. For example, shippers need to account for differences between “room temperature” and “ambient temperature” requirements, as well as the increasing number of products that need 2° to 8° C, -75° C, or deep frozen -150° C temperatures and the purpose-built packaging and temperature monitoring solutions that are tailored for those specific temperature ranges. Also, as packages travel globally (even for clinical trials), shippers must be aware of customs requirements and policies regarding work schedules, holidays, and storage facilities at customs clearance facilities to help ensure temperature-sensitive items aren’t left sitting.
“Go back to the regulatory environment and the basic quality agreements. Shippers and carriers need to agree to maintain GDP-based quality (which, increasingly, is an extension of GMP practices) throughout the supply chain. Life science KPIs (key performance indicators), for instance, go beyond typical transportation KPIs and may require additional analysis.” In life sciences, it’s not enough to know that packaging is effective; it must be certified effective, along with any changes to that material which may occur if manufacturers change suppliers of foam, foil, or other protective packaging elements.
Changing suppliers or countries of origin for APIs or products also creates potential hazards. While APIs from India, China, or Turkey, for example, may be identical, customs clearance documentation may differ. When suppliers are changed rapidly, importation documents may not be updated to allow timely clearance. Even if the change is just from one manufacturing site to another within the same company, additional site inspections and due diligence may be required to ensure that the facility and its suppliers meet GMP standards. APIs also may need to be reevaluated. For example, the skikimic acid extracted from the pods of star anise grown in four regions of China is notably more potent than skikimic acid extracted from anise grown anywhere else in the world. If a supplier changed its source of skikimic acid, the potency of the drug (in this case Tamiflu) would be diminished.
Learn from Other Industries
The life sciences industry can learn a lot from the automotive industry. As one example, Bang points to automotive forecasting systems, which enabled just-in-time delivery. CSL Behring takes a similar approach to manufacturing. “We postpone product differentiation as long as possible,” notes Mary Sontrop, EVP, manufacturing and planning, CSL Behring LLC. CSL holds product at various processing stages, filling final product containers at the last possible moment. This increases shelf life and flexibility. The pharmaceutical manufacturer also applies one multilingual label for multiple markets, increasing inventory flexibility by letting one product be shipped to many destinations as needed. Before, small batches with different labels had to be produced and inventoried, taking extra management time. CSL uses predictive analytics to preposition goods where they will be most needed. The company also is installing equipment in its warehouse to simplify order fulfillment and is implementing a paperless inventory management system that is expected to minimize inventory fluctuations.
Additionally, Dr. Dutta advises life science companies to develop one inventory system rather than multiple inventories managed by different divisions of the company and an electronic catalog that lets customers order from the entire catalog, day or night.
Accommodating Local Regulations
“Emerging markets’ GMP, GDP, serialization, and customs standards are similar to those of industrialized markets, but the infrastructure is not the same,” Sontrop says. Operating in Brazil, for example, requires a warehouse there because of concerns about temperature control, cargo theft, and poor inland infrastructure. “This is a big inefficiency that requires additional CSL energy to manage and ensure that products shipped to that country receive adequate protection,” Sontrop says.
“Manufacturers must prove that product storage technology is robust enough to ensure adequate protection,” Sontrop says. Particularly in emerging nations, storage capabilities vary among customers. “Some have a refrigerator and thermometer they check daily. Others have a 24/7 monitoring and alert system.”
Serialization introduces another hurdle. “As introduced globally, serialization regulations won’t be harmonized. Nor will the technology,” Sontrop predicts. “Companies may have to adhere to different standards for different countries.” That implies deploying technology and solutions that can adapt and respond to multiple standards. “That’s challenging,” she says. “We’re working with serialization requirements in about 30 countries.”
Shipping options for life science products are increasing. “Marine shipping is a new, lower cost option for the life sciences,” Bang says. “The top five marine operators are the core carriers,” and others that never transported pharmaceuticals now are allowing these high-value products as cargo. The catalyst has been the introduction of more reliable reefers and temperature monitors that offer high-performance temperature control or monitoring and visibility to both the carrier and the shipper.
CSL Behring ships some of its mature products by sea. “Plasma from the U.S. to Europe ships at -30°C, and products return at 4° to 8°C or room temperature,” Sontrop says. “To further reduce shipping costs, we do the first processing steps in the U.S. to remove water from the plasma and then ship the intermediate concentrate to the EU. It’s about one-fourth the cost of shipping whole plasma.” Marine transportation between the U.S. and EU adds about three weeks to the transportation cycle.
When changing transportation modes or destinations, “You may need to change packaging,” Sontrop adds. “In the U.S. we ship palletized products with cardboard on the outside in temperature-controlled trucks.” To ship the same products to developing regions, the polystyrene packaging is thicker, and temperature indicators or monitors are used to document temperature excursions.
Whichever mode is used, “Look at the overall picture,” Bang advises. “Know the carrier and container companies, the handoff process, and the technology used to maintain and monitor the environment. If monitoring provides real-time visibility into the status of shipments, learn whether intervention is possible if things go wrong. Know, for example, whether cold-chain items can be re-iced before they are ruined by too warm temperatures and whether damaged products can be diverted before reaching the customer. “Real-time visibility is valuable, but for it to be most worthwhile, monitoring technology must be integrated into the cold chain platform rather than merely slapped onto a package and checked upon arrival.”
“Global life science regulatory guidelines are mandating temperature control — often before the infrastructure to ensure it is in place,” says Mark Seegres, president and CEO of BD (formerly Becton, Dickinson and Company). For example, Brazil mandates temperature control, but temperature-controlled warehouses are not yet routinely available nationwide to support a wide range of temperature thresholds. Instead, as in many developing regions, facilities are available mainly at major ports.
DHL, like many major carriers, is working with local authorities to expand its temperature-controlled infrastructure globally. “In Mumbai, Bangalore, and Hyderabad, for example, we have 2° to 8°C facilities in a bonded warehouse with more than 1,000 square meters,” Bang says. “That’s not something we just built. We did this in consort with the airport authority to develop solutions that will remain viable for many years.” DHL has taken such long-term, cooperative approaches in many locations globally.
Pharmaceutical companies are trying to eliminate temperature issues, particularly for new products, by designing ambient temperature formulations. CSL Behring developed an immunoglobulin product that can be stored at room temperature versus the usual 4° to 8°C, for instance. “However,” Sontrop adds, “there’s only limited opportunity to do this because if you make changes in the process, you may need to redo clinical trials or, for minor changes, demonstrate comparability.”
Asia-Pacific Shifts Slowly
Z“In the Asia-Pacific (APAC) region, distributors are developing integrated business models to enhance efficiency,” Dr. Dutta says. “For example, the large Indonesian distributor PT Enseval Putera Megatrading has opened one-stop healthcare chains like Mitrasana Clinics, which combine a family doctor, pharmacy, laboratory, and convenience store.”
PT Enseval Putera Megatrading uses a unified inventory system to shorten distribution channels, saving time and expense. According to Dutta, APAC distributors are investing heavily in IT to increase efficiency and allow access to customers for online purchasing. He calls IT investment, which minimized inventory fluctuations, a major catalyst for PT Enseval Putera Megatrading’s growth and 12 percent market share in Indonesia.
Mid-to-large players in India and China also are planning cold chain investments, particularly near major metropolitan areas. In Indonesia, Dutta continues, “Only selected distributors have cold chain facilities. APL Zuellig is the only company handling cold chain with international certification, with the assistance of a German monitoring system. The other big distributors are planning similar arrangements.”
Reengineering is Planning
“There’s no magic bullet solution to supply chain optimization,” Bang says. Reengineering the supply chain requires detailed planning that takes into account the new options, new challenges, and broad contingencies faced by a global, highly regulated, cost-pressured industry. Don’t attempt to redesign the supply chain alone. Instead, work with reliable logistics experts who know your business and with your suppliers and distributors to design a system that addresses today’s pain points for well into the future.