IBM: Pharma Is Good on Supplier Coordination, Poor on Customer Collaboration

A new survey from IBM Global Business Services (conducted with AMR Research) characterizes the current industry perspective on supply chain management, a topic IBM business units address both for consulting IT services and with software and hardware offerings. According to Phillippe Cini, management partner within IBM GBS, “The biopharma industry recognizes that it is in the midst of a business transformation, and the chief supply-chain officers we polled recognize that they have a role to play in that transformation.”

The summary results (Figure) compare current supply chain priorities among global life sciences companies with those of industry at large. The life sciences industry is right at the top for visibility into supplier relationships (column 1 in the graph), but respondents perceive a need to invest more in customer-facing applications (column 2). Specific polling shows that 65% of respondents collaborate with suppliers on demand planning but only 31% do so with customers, often resulting in an overstock of supplies or missed sales targets. “Supply chain visibility” as a business function translates into such capabilities as integrating real-time ERP transactions with business intelligence, having multi-partner collaborative platforms, a “sense and respond” supply or demand signal notification, and smart devices and sensors (such as RFID systems) in warehouse or delivery processes.

The survey also shows that biopharma has focused extensively on risk management (column 3). While nearly three-quarters of respondents formally monitor risk and supply chain performance in some manner (to a degree higher than the average of all industries, as befits a heavily regulated industry like biopharma), most do not have integrated monitoring and risk management (such as measuring the financial impact of supply chain activities)—an area of potential improvement.

Operating in a global market

Globalization (column 4) is in the top five challenges for biopharma for obvious reasons—companies have been scaling up their international sourcing and marketing efforts aggressively in the past few years. In analyzing results from top-performing supply-chain organizations as opposed to industry followers, IBM defines a scale of globalization “positives” (such as increased sales) and “negatives” (such as increased lead times for supply or distribution processes). On the whole, the positives outweigh the negatives, especially for the top-performing supply chains, especially in reducing lead times and keeping costs under control. (Interestingly, though, both leaders and followers claim to have the same overall margin improvement achieved through globalization.)

The last top concern (column 5) is integrating cost control into supply chain activities, an area that life sciences companies rate as significantly less challenging than the average for all industries. One factor at play here is that life sciences companies rate product quality, overall capabilities, and delivery capabilities significantly higher than overall cost, as compared to all industries. Another is that life sciences supply-chain managers rate “support of growth enterprises” much more highly than the average of all industry supply-chain managers, indicating an emphasis on ability to meet evolving market demands as opposed to driving costs to the lowest levels.

Trust dominates

While the IBM survey did not delve into specific IT tools for managing supply-chain activities, it does lay the foundation for where IT investments are most desirable: customer (demand) visibility; integrated risk management; global connectedness. But the fundamental issue is trust, says Hussain Mooraj, a VP at AMR Research (see also p. 7), whose organization assisted in the IBM survey, and who personally participated in a webinar IBM sponsored on the survey during September. “Although the situation is improving, our surveys show a fundamental lack of trust between biopharma companies and their customers. This is a hindrance to information sharing and collaboration, which drives costs and inefficiencies up,” he says. Creating shared incentives is one way to accomplish this.

Industry action

The focus on collaboration up and down the supply chain is reinforced by some of the latest industry activities. The Rx-360 organization, a nonprofit trade association (Pharmaceutical Commerce, June, p. 7), plans to incorporate supplier audits and performance, in addition to downstream monitoring of product tampering or counterfeiting, as part of a comprehensive supply-chain improvement process. And TraceLink, the company that acquired the assets of pedigree pioneer SupplyScape (Pharmaceutical Commerce, July/Aug, p. 27), plans to broaden its scope by developing software tools for improving coordination between contract manufacturers and biopharma companies. “Our first priority is to maintain the necessary level of service with SupplyScape’s existing customers,” says Shabir Dahod, TraceLink CEO. “In the first half of 2009, we expect to be coming out with a set of tools that reach across manufacturing processes and even into the clinical trials processes.”

Another spinout from the SupplyScape breakup is AutoID Consulting, headed by Robin Koh, SupplyScape’s former chief strategy officer. “We want to jump-start the industry around the core value of serialization for business value,” says Koh.

Meanwhile, software vendors such as Apriso (Pharmaceutical Commerce, July/Aug, p. 27), Systech (p. 9, this issue) and Axway (Scottsdale, AZ) continue to implement systems that collect and communicate product data for use in trading-partner relationships. While many of these activities started with the intention of meeting regulatory mandates, they are now being adopted for their inherent business value. PC