This month my focus is on Supply Chain in Life Sciences. As we head towards the end of the year budgets are being planned and IT projects are being prioritized for next year. Many companies are reviewing their current IT investments in light of mergers and acquisitions and projects that will add to the company’s business ability. My discussions have been around how best to improve your operations at a minimal cost. No one seems to want to buy new IT systems and they want to extract ‘value’ from their current IT systems.
Time to ‘Tune-up’ your Supply Chain
Ask yourself if you are getting the most from your current Supply Chain? Do you feel you’re gotten significant return from your SAP or Oracle investment? It seems everyone had one of these IT solutions. I believe the reason most companies should be looking at their Supply Chain is as follows:
- Most firms have invested in IT solutions to help react quickly and expect demand. We now are moving to ‘collaborative’ business processes as a means for extracting added value from your partners.
- Companies need to give supply chain ‘visibility’ so that the organization can make faster and better decisions.
- Business process improvements need re-training for your people.
I get this now how do I get there?
The answer is to create a ‘road-map’ for your supply chain that includes opportunities (projects) specific to your business systems. The key is how to develop this road-map. You need to have the following:
- Supply Chain experts that can analyze your data and processes.
- IT ability to look at how your SAP or Oracle solutions have been installed.
- Our company has developed a unique set of tools that can analyze your Demand, Supply and Inventory.
We’ve created a project approach to this kind of analysis. Over the next few months I plan to promote this approach for Life Sciences and yet this approach is not just for this industry. I know this can be applied for any industry that is looking to get more value out of their IT investment in supply chain. As we gain traction in the market I hope to offer some proof points to this approach.
I would be interested in your comments and suggestions on this topic.
Last month I spoke about the ‘model’ for integrating clinical operations. In this blog post we’ll review the solution that was presented at the Oracle “OpenWorld” conference held earlier this month. There is also two links to collateral that you can use to help understand how the solution works at the end of this blog post. I welcome your reaction and comments.
I’ve written about ways to improve R&D from the idea of “ERP for R&D” through “Integration” of key business processes. In summary the background issues that I think drive this solution are:
- Access to relevant data
- Getting out of the IT business within R&D
- A solution that is scalable to meet tomorrow’s business needs
How does this solution solve these issues?
Starting with ‘Access to relevant data’ – there have been many attempts to create an IT landscape for R&D. This best-of-breed approach favors decisions that support the best solutions to meet a specific need. Yet if you take a step back and ask how I can get access to facts to make ‘key’ decisions this approach falters. The solution approach being offered starts with the premise that the user needs access to key data. Based on an individual’s role you get access to key data and permission to upload new data. This removes the user from having to make the required ‘conversions’ between solutions to create the information needed. The benefits include:
- Adaptive trials can now be easily facilitated
- Financial decisions tied to key outcomes of clinical trials can be reviewed and decided upon
- Users get to focus on the science of creating new medications and treatments and not the nuances of the technology
Getting out of the IT business – the biggest advantage to this solution is that Pharmaceutical companies can focus on their core business goals of producing new products to complex diseases.
You now have a scalable approach to R&D. This solution not only accommodates your scientists and statisticians you can also invite clinical research organization (CROs). Data security is also key to this solution since you may be adding other teams to help in the development of new clinical products. The solution also takes globalization into consideration as a result of today’s clinical trials.
Admittedly this is not a new concept. When enterprise resource planning (ERP) was first introduced the focus was on integrating finance/accounting, manufacturing, sales and service. ERP provided the means for ‘integrating; the business processes within an organization. So why raise the topic of “ERP for R&D?” Pharmaceuticals and Medical Devices develop new products in an environment that is driven more by science than a ‘business process.’ Scientists will suggest that forcing a business process into R&D limits their creativity. Today we are well aware of the problems facing R&D: lack of new products, reduced productivity, significant capital cost with diminishing results in terms of new products.
In my last blog post “Improving the Business of RandD” the focus was on the impact that cloud computing could have on R&D. Platform as a service (PaaS) and Infrastructure as a Service (IaaS) are alternatives that can help IT supplement their existing business process. Today contract / clinical research organizations (CRO) are being used to supplement R&D in the area of clinical development. Basic research and clinical manufacturing (in some organizations) are also being ‘outsourced.’ Given this quilt of organizations and separate business processes I’ve concluded the need for “ERP for R&D.”
Ultimately change will occur. I read an interesting article “Pharmaceutical Innovation Hits the Wall: How Open Innovation Can Help” by Henry Chesbrough. He writes about the need for changes to the industry’s innovation process. You may already know about the industry’s focus on ‘blockbuster’ drugs where the business is using science to find that next billion dollar product. Which comes at the price of research in seeking medications for smaller patient populations, so I contend that the business processes with R&D need to be ‘integrated’ with visibility to the data across the organization. I do agree with the point that Henry makes in his blog post that ‘there needs to a change in the innovation process.’
I have begun this journey to offer ERP for R&D as several of my customers have asked our company to give end-to-end services. I would like to see the industry focus more on new treatment and medication innovation and leave the IT to systems integrators (SI). Unlike software development companies SIs is pretty much agnostic to the software solution and more about how to drive out cost and improve IT performance.
A lot has been written about Cloud Computing. In “Tech Giants look forward to Cloudy Days” this speaks to the competition between Apple, Google and others that want you to store your files on their technology. In “Here’s Why Cloud Computing Is So Hot Right Now” talks about the shift from client-server to ‘shared’ hardware located away from the corporate offices. In a earlier blog I wrote called “Managing my data…”I detailed my experiences with my data after my laptop was damaged. Learning to use and apply cloud computing is the focus of this blog post with an emphasis on Pharmaceuticals and Medical Devices R&D.
Lately I’ve been working in the R&D area and specifically on the business processes that extend from Basic Research through New Drug Application (NDA). Most of you have heard about the impending loss of revenue due to patent expires of branded pharmaceuticals. The question is what can be done to “Improve the Business of R&D.” For starters most companies have realized that IT is not their core business. IT is just an enabler of the business processes within a company, and most executives I know want to focus on the core business of creating new medicines and treatments. Then there is the high amount of effort needed to make sure ‘compliance’ is maintained to the local regulations, when it comes to making these products. Add to this situation if IT develops a ‘homegrown’ solutions within R&D.
In the past information technology (IT) was used to serve the needs of the R&D. Today there is a need to see how IT can accelerate the business within R&D. The example that comes to mind is how kids use technology (cell phones, laptops, tablets, etc.). They just use it to do whatever it is they are looking to do. Make it simple and the user will consume more of this technology. Today we’ve come to the conclusion that IT is not keeping up with the demands of R&D. So how can we improve this?
Cloud computing offers the ability to expand IT capacity in an ‘on demand’ fashion. We’ve begun to take this concept one step further. What if IT services providers created an infrastructure or platform ‘on demand?’ Google Mail (Gmail) is an extreme example of this where users can get access to their email through cloud computing. As more users go to Gmail capacity expands to meet the needs of the users. I say this is an extreme because the cost model for Gmail is different from a R&D model.
Imagine a day when you can ‘rent’ a process – add database capacity – replicate existing IT landscapes in the cloud. We refer to this as process-as-a-service (PaaS) where you can use any given process via the cloud. Allowing you to add new users to a business process on an as needed basis. We can also provide infrastructure-as-a-service (IaaS). We’ve had clients ask if we can offer the servers organized in a specific fashion to support their business process. Companies can leverage these services and get out o the IT business of maintaining and supporting these systems.
Is this a novel idea? Not really – other industries have enacted similar PaaS and IaaS solutions. What makes this different is that within Life Sciences (especially Pharmaceuticals and Medical Devices) you have to discuss the regulatory aspects of your IT systems. And ‘yes’ we can support a cloud computing environment that is compliant to the FDA regulations. IT services providers would have to offer this in order for Life Sciences customers to use these solutions.
What is exciting to me is that we have the opportunity to apply cloud computing for the industry and create a fully ‘integrated’ process which, I believe, will improve the business of R&D.
Most of us are excited about the changes occurring in healthcare around mobile applications, electronic health records and the advent of social media just to name a few examples. Yet there is a mounting concern with the rise of drug shortages now reported at “178 a 3x rise since 2005!” A look at the FDA web site for drug shortages shows a list of both generics and branded products with the reasons for the shortages (including manufacturing delays, increase in demand, etc.). We’ll look at the background of the industry, the traditional view of supply chain, current factors facing the industry, and what companies can do to ‘improve’ their operations. Recognizing the need to convert your improve your existing operations will be good business and the consequences will directly impact you and I.
Key facts about the industry
According to IMS Health pharmaceuticals sales in 2011 is expected to reach 880 to 890Billion USD, which is a growth of 5 to 7%, and is 1% higher than the 2010 expectations. The current view of the supply chain includes:
- In the US market the top 10 pharmaceutical companies give some 60% of the total US sales.
- As products come off patent Generics control the prices of these products.
- The wholesalers may also negotiate prices between the manufacturers and the Pharmacies.
The traditional view of the supply chain
The driver for any supply chain is to offer:
- Product at a ‘reduced’ cost
- Faster to market
- Delivered at a high quality
Apply this to the previous diagram and you can see the challenges that face healthcare. As the view of the patient and pricing for these products are disconnected. This diagram gives you the full view of the Healthcare supply chain:
Current factors influencing the industry and the Healthcare supply chain
The following factors have influenced the market:
- Mergers and Acquisitions – have reduced the number of manufacturers as companies have consolidated to make up for the loss in patent expiry and look to increase market share (Merck and Shering Plough, Pfizer and Wyeth, and Teva and Barr Labs are just a few examples)
- Regulatory issues – it is harder for manufacturing sites to recover from an FDA violation. This delay can lead to drug delivery delays.
- Government control over pricing – as the cost of healthcare rises many governments are dictating the price of drugs (Spain, Canada, Turkey and Greece). This puts the supplier at a disadvantage to be able to deliver products at these ‘reduced’ prices given the cost for raw materials.
- Globalization – in response to some of these factors many companies have already moved their operations to off-shore locations. India for API manufacturing.
- Risk Management – having the ability to ‘view’ any of these problems can lead to drug shortages. Supply chain operations must therefore give this visibility so the right changes can be made.
Taking these factors into account and with a view of the ‘future’ of the healthcare supply chain from Gartner:
How can I ‘improve’ my operations?
I now work with a variety of companies that look for solutions to ‘improve’ their processes. We began his discussion trying to understand why there are so many drug shortages, and I would suggest the following as a means of enhancing your supply chain operations:
- Refocus business growth and performance across the entire healthcare supply chain. This includes both the patient as providers of healthcare with a C level sponsor that understands that the aspects of healthcare lie outside of your companies boundaries.
- Collaboration. Look to improve demand from both your suppliers as well as your customers. Provide visibility and metrics that you can mutually share.
- Leverage IT as an enabler to meet the first two points. Make investments that promote organizational visibility. Specifically analytics solutions that provides management with a view the business as a result of this investment.
- Governance. This process does not happen overnight. Change management is an ongoing process and you will need leadership and support to sustain these processes as they evolve over time.
- Invest in skills and talent within your organization. I’m in the IT services business and you would think this takes away from my opportunities. There is a tendency to think that these processes can be solved through off-shore support capability. While this is true I am taking about the need to enhance your folk’s ability to understand the entire healthcare supply chain.
I am convinced healthcare can improve yet the threat of drug shortages can impact any course of treatment if the right products are not available. What I hope to do with this blog post is a summary of the problem and possible solution. I welcome your suggestions or comments to improving this blog post.