In the last five years we have seen a very rapid growth in recalls and drug shortages. The ramifications are not only a lack of life saving drugs for patients but also a rise in drug prices and counterfeiting. The recent issues with Avastin counterfeits and Doxil supply shortages clearly indicate the problem is growing and becoming more life-threatening. The situation keeps getting worse and the root causes need to be understood and addressed.

In parallel, we have seen the biopharmaceutical supply chain undergo massive changes based upon a fundamental change in the business model and organizational structure. Historically, biopharmaceutical companies were predominantly vertically integrated where they owned their own active pharmaceutical ingredient and bulk product manufacturing plants as well as their own packaging plants. In recent years, however, supply has become globalized and production virtualized. This has rapidly created a significant increase in the inherent risk in the supply chain. Products can now be manufactured in stages from all over the world and through a network of complex relationships. While the manufacturing network has grown in complexity the global distribution network has substantially grown in volume. China, India, Brazil and Turkey are all major growth markets, however their distribution networks are inherently vulnerable to diversion and counterfeiting. The US and EU markets are also threatened by the larger global distribution market with the diversion of counterfeits through importation or distributors engaged in illegal practices.

In order to address the growing risks in the supply chain, biopharmaceutical companies need to maintain the oversight of and collaboration with manufacturing partner companies as if they were their own plants. Many urge even greater visibility and tracking since partner companies have to manage the needs of multiple customers simultaneously. Coordination and visibility across the entire production lifecycle, including visibility into production status, quality reviews, material availability and current inventory levels, are essential to maintain the supply of quality products to the market. From a distribution perspective, China, India, Brazil and Turkey are now requiring both serialization and track and trace of products. The goal is to empower the pharmacist, the clinician and even the patient with the tools to verify the authenticity of the product before dispensation or administration. The US and EU are also moving towards comprehensive adoption of serialization, track and trace with authentication.

At TraceLink, we are working with major biopharmaceutical companies to address the need for superior collaboration, visibility, track and trace in order to achieve the supply quality, capacity and integrity required by the industry. Our approach is to create tight collaboration between supply planning, quality, logistics and manufacturing across companies in order to deliver quality products on-time and in-full. Our track and trace solutions use emerging GS1 standards being adopted by almost all countries for ePedigree and authentication delivered either through enterprise integration or mobile solutions available to patients via iPhone, Android or SMS phones.

With rapid adoption of the solutions that the industry has been developing, we can eliminate drug shortages and counterfeits from our global supply chain.

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Most people know that I spend at least 60% of my time in the field with customers. For instance, this week I will be in the office on Monday and the rest of the week listening and working with customers to solve their problems. The source of all our innovation comes from customers. Many are fond of telling me when and where we thought of that specific feature or capability.

As I was reflecting on my past few weeks of fairly intense travel and interactions, it became clear to me that the pace, magnitude and criticality of change at our Pharma/Bio customers is accelerating. The reality of $267 Billion of product sales losing patent protection over the next 6 years has shifted from planning for the impact to executing on a strategy to lead the organizational changes at the company. One thing is certain; there are no magic bullets since there are no new blockbusters that will fill the large revenue holes.

In the last five years, there have been many strategies openly discussed and shared within the industry. Therefore there is no secret strategy that one company has as its secret sauce. The following press release, IMS Forecasts Global Pharmaceutical Market Growth of 5-8% Annually through 2014, indicates the approaches the industry will take for continued growth. These strategies include:

• Growth from emerging markets
• Personalized medications and complex therapies
• Graduated approvals with on-going evidence of outcomes

The supply chain organizations are the most impacted by these changes, because they need to transform. A recent PwC report, Pharma 2020: Supplying the future, concluded by saying: “The supply chain is simultaneously becoming more important, as the medicines the industry makes get more complex and the opportunities for generating value from pure product offerings diminish”. These changes thrust the supply chain organizations into a strategic role within their company.

In all cases, the transformation of the supply chain involves driving more visibility and collaboration upstream all the way to raw materials suppliers, downstream to patients and across geographies into emerging markets. Here are some quotes from the field that demonstrate the imperatives:

• “The company is banking on emerging markets for revenue growth and we need to ensure secure distribution”
• “Emerging markets have 10x the counterfeiting and diversion and the trust factor is material to our revenue opportunity”
• “Three out of five new product launches this year will be with products manufactured by outsourced providers”
• “We need to track outcomes in order to enter the market and maintain FDA approvals for most new medicines”
• “We want to be at the center of our virtual network and have all our partners connected to us with real-time visibility”

In the technology industry, we went through a similar stage for personal computers when the value of product innovation merged with the value of operational excellence. Dell and HP emerged as winners because they were able to combine product innovation with supply chain execution excellence. Change and transformation was not a matter of optimization but a necessity for survival.

Of the companies we work with, the ones that understand the moment are moving at a fast pace with determination that clearly sets them apart as leaders. They recognize that change is accelerating and Wall Street is very unforgiving of execution failures. Traditional and safe decisions are not acceptable when they don’t deliver the results necessary for the business. There is no buffer for mistakes or being a year behind.

At TraceLink, we are embracing the change and working with the industry to support their transformation. The velocity of the transformation will hit higher levels every day and we will be there with you delivering the visibility and collaboration your business needs.

NoBullWhip!

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Today, we announced our strategic partnership with Catalent. Over the last six months we have learned significantly from each other and developed a clear understanding of the functionality and information that needs to be shared between a global contract manufacturer and packager with their thousand customers. Instead of getting distracted by the complexity of each relationship, we focused on functional simplicity and broad utility.

Companies have complex business processes and inter-company process integration is often a tug of war between two companies trying to force-fit one company’s process with another company. The semantics surrounding these conversations is also confusing, since business process names and information fields are interpreted differently by both parties. Expand the conversation to all your supply partners and you soon have a massive challenge in basic communication. The standards approach with EDI and proprietary portals only makes matters worse, because it requires too much process and information integration to get even the basic level of visibility.

In reality, we just need to use a single business application for processes that cut across all the supply chain companies. By using the same application that has a common definition of data, business rules and collaboration tools, we can eliminate the many-to-many, multi-enterprise issues. The purpose of a common application is not to supplant current business applications at each company but instead to put into a common application framework the processes we already conduct via our informal activities using fax, phone and email.

In any large-scale network application, the value is based on commonality of capabilities. Inter-operability and uniformity, enabling collaboration with all partners, is far more important than special features for specific members. Large-scale network applications focus on core features that enable valuable capabilities across all users. At the core, Facebook and LinkedIn are very simple applications that enable its users to connect and share information across a set of relationships.

Our approach at TraceLink was to focus on the core functionality needed to facilitate communication, coordination and collaboration for well understood business processes. In order to keep it simple and valuable for our customers we established three guiding principles for designing functionality in our service:

1. We are the communication vehicle between contract suppliers and their customers for their shared business processes.
2. We facilitate the shared execution of those business processes by enabling each party to push and pull information in a format and manner best for themselves.
3. We link and instrument the related business processes to show mutual dependencies and overall analytics.

These principles enable us to fill the capability gaps between companies without imposing one partner’s IT requirements on another. We believe our approach and solution will deliver the true benefits the industry seeks from a Cloud Supply Chain. Our partnership with Catalent will enable us to lead the adoption of a solution that will create a more predictable supply chain.

No BullWhip!

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The industry is abuzz with Cloud and SaaS applications, but most of them take the same enterprise solution design and provide it in a new deployment model. A conventional application available in the Cloud still requires IT to configure and manage at significant time and cost. When we look at Web-based applications that truly transformed industries (such as Google and Salesforce.com) their approach was to design a new solution centered on providing immediate access of a service to a business user. By empowering an individual to use, learn and share experiences of a business service, we can eliminate the time and cost required from IT to deploy and manage solutions. Instead, we place the solution directly in the hands of the business users via a simple registration process.

Any individual or department leader can use Salesforce.com to manage a sales pipeline or customer service through a simple registration process and credit card payments. In 2000, my VP of Sales at our company came to my office to inform me that he had decided to use a new online sales management tool. Salesforce.com’s tag-line at that time was: “Just Sign-On”. Within a week all the sales people were productively using the sales automation tool. Today, Salesforce.com has over 51,000 customers and other software companies are using a similar solution design for many enterprise business processes.

At TraceLink we also broke the conventional supply chain application model by providing access to a shared workspace, business processes and partner management directly to the individuals that manage supply chain relationships. Anyone can execute any business process with any partner. In the end, we recognized that the people who need the solution everyday are both the best judge of applicability to their business problems and most effective at managing the adoption.

Furthermore, the people centered approach also enables an incremental adoption path for large organizations and complementary access to the smallest organizations. The benefit for constructing a Predictable Supply Network is that we can gracefully scale from the smallest company to the largest enterprise. The benefits of growing application functionality and no-cost of deployment are universally available to everyone on the network.

For a Predictable Supply Network to be effective, people need to be at the center of the solution, since it is their insight and experience which is the best judge for interpreting information. The network needs to support communication of their perspectives and instructions to all the relevant team members. The construction of the team itself can vary from collaboration to collaboration and the tools need to enable the individual team members to identify the appropriate individuals that are required from both companies to successfully manage supply chain operations.

By breaking the traditional model of IT-based application deployment and management, we put the controls directly in the hands of the business user. There can be concerns about overall policies and procedures and these can be addressed by providing management and IT with the tools to monitor and inspect usage for security and cost purposes. Therefore administrative functionality is available to observe the adherence of corporate rules.

Finally, complete traceability and accountability of all actions are available to all the team members. A self-policing team is a far more effective mechanism for compliance than instituting endlessly finer level of access controls. Complete visibility of all actions by users provides preventative protection which is cheaper to implement and maintain.

Empowering business users with immediate access is the first step in transforming the supply chain.

No BullWhip!

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At the heart of solving the fundamental challenges of managing a supply chain requires building a network for communicating and coordinating people, processes and information about product flow. All our visions of demand-driven virtues hit the friction-full realities of connecting people, processes and information flows. The time and cost to establish meaningful connections prevent widespread adoption, and the lack of predictability creates inherent loss of revenue, constraints on cash and greater expenses.

Today the industry is engaged in building connections using b2b links, trading hubs and portals. These approaches create many local proprietary solutions and don’t fundamentally address the many-to-many network problem. Each connection between partners becomes a major expense to establish and maintain. These costs limit deployments to some processes and some partners.

On a recent visit to a major BioPharma, they shared the time and costs involved in developing a portal for their contract partners. In the last two years, they spent greater than $3M dollars to develop a portal for one business process. To date, only one contract partner has agreed to use it. The following week, we had a meeting with a major contract service provider who indicated that they receive multiple requests for greater information and integration on a weekly basis. The contract service provider cannot jump from portal to portal for each customer nor can they service information requests in proprietary formats for each customer. What we need is an instant and common mechanism to establish collaborative processes with any partner at any time.

Our decades of experience in supply chain and technology combined with our very close relationship with companies and individuals provided us with a solid understanding of real world issues of production tracking, inventory visibility, partner management, distribution control and demand planning. To revolutionize the supply chain we needed to enable partners to establish secure collaborative workspaces, conduct shared business processes across companies, provide a common view of information within and across partnerships and empower people to manage the processes and teams independently.

At TraceLink we decided to look around and evaluate how large global networks are built on the World Wide Web. Google revolutionized advertising by building a massive network of advertisers and connecting them to content. Anyone can join that network with a credit card through a website. The value of Google is not just in the search engine but also in the advertising platform for the smallest to the largest businesses. In a New York Times article, the following growth of Google’s base was shared:

In a regulatory filing with the Securities and Exchange Commission, Google said it had 1 million advertisers as of 2007. If history is any guide, we can expect the number to be much higher now. The number of advertisers on Google has grown at a steady clip, from 89,000 in 2003, to 201,000 in 2004, 360,000 in 2005 and 600,000 in 2006.

The most impressive statistic was:

Interestingly, each advertiser, on average, spent a little more than $16,000 a year on Google. That figure changed little between 2003 and 2007.

In social networking, LinkedIn, Facebook and Twitter each established their own networks to enable information sharing and relationship building at unprecedented levels. These services established collaborative frameworks with information sharing, social process execution and sophisticated levels of permission management. The core concepts from these social networking giants establish a bold new path for inter-company business process execution and collaboration.

This analysis gave us new insight and ideas for how we can solve our supply chain challenges more effectively. Based on our lessons and understanding we established the:

Top Ten Tenets for Building a Predictable Supply Network:

1. People Network: put people not companies at the center
2. Functional Simplicity: provide only the most valuable capabilities
3. Shared Process: integrate processes across corporate boundaries
4. Connection Value: actively solicit connections to drive network effects
5. Long Tail: integrate and collaborate with all niches of partners
6. Be Discoverable: let people find you since it uncovers opportunity
7. Cloud Economics: share the cost and pay for only what you use
8. Self Managing Groups: let teams organize themselves based on their rules
9. Network Knowledge: leverage the information from all to make your decisions
10. Agile Adoption: start small, learn fast and grow quickly

These tenets establish a foundation for a supply chain leader to form a strategic direction and operational processes, which can rapidly grow the communication, coordination and collaboration with their partners. Our service intrinsically supports these tenets and enables rapid adoption. For instance, a user of our service can engage in collaborative production tracking with their contract partners in minutes after registering with our service.

In the coming weeks and months, we will discuss each of these tenets. Along the way we will identify the benefits and challenges in incorporating the Top Ten Tenets into your solutions and operations. Please share your ideas, issues and experiences so that we can learn from each other.

Together we will transform the supply chain. No BullWhip!

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The commonly known BullWhip Effect in a forecast driven supply chain is caused by variations in demand driving greater buffer stock as we move up the supply chain. The amplification of supply is also referred to as a “butterfly effect”. The root causes stem from behavioral and operational miscues due to a lack of collaboration and information about products and processes across the supply chain. In order to eliminate the BullWhip Effect, we need to create a Predictable Supply Network which will enable rapid communication and coordination across the supply chain.

This is an opportunity for us to share and learn within the industry as we create a Predictable Supply Network. Working with you we will transform the supply chain into a network of highly-integrated partners executing shared business processes and collaborating continuously to achieve greater levels of business performance. We can build the network ten times faster and at one-tenth the cost of current solutions.

In order to meet these objectives we need to not only apply our knowledge of supply chain processes and information, but we also need to learn from other solution providers that transformed their industries. Here we will discuss and apply lessons from Google, Facebook, Twitter and LinkedIn combined with in-depth analysis of challenges in distribution, manufacturing and outsourcing. Individual contributors, executive managers and business leaders will be able to understand, challenge and propose ideas that change the way we think about solving supply chain problems of excess inventory, long cycle-times, limited capacity, consumer safety, product security, forecast accuracy and overall lack of visibility.

Together we will transform the supply chain. No BullWhip!

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