Key Concerns in the Pharmaceutical and Healthcare Supply Chain - D.Quinn April 2013


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This is the output of a recent Achilles sponsored round-table on Supply Chain Risk Management at the ProcureCon Health 2013 event in Zurich - hope you find it interesting. Regards, Dan.

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Key Concerns in the Pharmaceutical and Healthcare Supply Chain - D.Quinn April 2013

  1. 1. © 2013 Achilles Group Limited 1Total Supplier Management ServicesPharmaceutical & Healthcare Sector Solutions
  2. 2. Dan QuinnProcureCon Healthcare, Zurich, 19th March 2013
  3. 3. © 2013 Achilles Group Limited 3Content• Introduction• The round table questionnaire• The analysis/key findings• Indirect analysis• Direct analysis• Combined analysis• Suggested strategies and tactics• An overview of Achilles (2 minute online video)• Pharma & Healthcare Team Contact details and links toadditional Achilles Resources
  4. 4. © 2013 Achilles Group Limited 4IntroductionAt the recent ProcureCon Healthcare event in Zurich senior level attendees at the Achillesround table on Supply Chain Risk Management were asked to complete a simplequestionnaire indicating the greatest challenges and pain points they see in their ownProcurement and Supply organisation’s, and perhaps most importantly, how well theybelieve their companies are managing these challenges.The groups were divided into Direct and Indirect professionals and this document brieflysummarises the key findings of these questionnaires.Thank you for your input, we hope you find the analysis interesting, please don’t hesitateto contact us if you have any questions or would like to find out more about the Achillessolutions.Dan Quinn, March 2013Sector Development Director, AchillesAbout the Author: Dan is a Director with Achilles and is currently focussed ondeveloping new industry sectors, in particular Pharmaceutical & Healthcare, he is anMBA and experienced procurement professional with both direct and consultingexperience across multiple sectors. Dan’s interests include linking Procurement/SCM tocorporate strategy and the economic value added (or destroyed) in particular by supplychain and risk management activities. You can see Dan’s LinkedIn profile here.
  5. 5. © 2013 Achilles Group Limited 5Instructions to complete the questionnaire...
  6. 6. © 2013 Achilles Group Limited 6The Questionnaire...1. Security4%2. Data Accuracy15%3. Evolving SC11%4. Mgt Control16%5. Regulations9%6. Supply Continuity8%7. Economics7%8. Cost Mgt23%9. Reputation7%1. Security2. Data Accuracy3. Evolving SC4. Mgt Control5. Regulations6. Supply Continuity7. Economics8. Cost Mgt9. Reputation
  7. 7. © 2013 Achilles Group Limited 7The analysis....There are notable differences between the Direct & Indirect functions,key differences include:• Direct: greater focus on continuity of supply (highest total score)and the effects of changing industry economics• Indirect: greater focus on supplier information accuracy, theevolving supply chain and management controlUnsurprisingly both have a very high focus on cost management.
  8. 8. © 2013 Achilles Group Limited 8All ‘Concern’ scores versus ‘Effectiveness in managing’......
  9. 9. © 2013 Achilles Group Limited 9Themes....Analysis of the responses divides the issues intoFour clear “zones”:1. Under Control2. Effective Risk Management3. Tomorrow’s Problems4. Today’s Problems1. Under Control – is the lowest risk area, problems here have relatively lowimpact and are generally managed well.2. Effective Risk Management – indicates where higher risks areacknowledged and generally being managed well.3. Tomorrow’s Problems - indicates an area recognised as having potentiallylower impact risks, but the ‘How well is your organisation managing thisissue’ score implies a lower investment in time and resources, importantlyall of these risks are dynamic and can change quickly, the under investmentcould indicate risks in this zone could grow in impact (effectively moving tothe right on the chart) and threaten business economics/reputation.4. Today’s Problems – reflects high impact risks that appear to be underinvested in and have the greatest potential threat to the businesses.1. 2.3. 4.
  10. 10. © 2013 Achilles Group Limited 10Direct results split out...
  11. 11. © 2013 Achilles Group Limited 11Direct areas of concern....The Direct function appears to consider theirmanagement of the key risks to bepredominantly below the ‘minimum effectivelevel’ required to mange the risk effectively(with Supply Continuity and Reputation beingroughly at the minimum level).Cost management is common to both functions which is a function of the similarly commonconcerns around industry economics, but in the Direct function the largest concern by far isContinuity of Supply (e.g. delay, disruption, natural disasters, supplier failure etc.), it isperhaps surprising that this is only scored at the ‘minimum effective level’ which may indicatesub-optimal investment in risk management. Whilst it is difficult to predict natural disasters,good supplier information management and supply chain mapping solutions can identifymanufacturing clusters and make disaster planning and post disaster recovery quicker andmore effective, thus reducing the economic impact significantly. Supplier failure can also bepredicted with using supplier financial stability forecasting and modelling, thus identifyingfailure risks in key suppliers before they happen and threaten supply.The regulatory environment was also highlighted with gaps in management effectiveness,this is clearly a complex and dynamic area, but again good supplier information managementcan be used to manage existing accreditation and compliance and drive better visibility acrossthe organisation (for sourcing and risk management), but is also an effective tool tocascade/communicate new legislative/policy/codes of conduct changes down the supply chainand report on acceptance/compliance.
  12. 12. © 2013 Achilles Group Limited 12Indirect results split out....
  13. 13. © 2013 Achilles Group Limited 13Indirect areas of concern....The Indirect function appears to consider theirmanagement of the key risks of Cost, Continuity, andSecurity to be generally well managed, with Reputationand (the high impact) Data Accuracy hitting the borderlineof ‘Minimum Effective Level’ of how ell they consider theorganisation at managing it.The highest impact issues that the Direct teams feel could be managed better include: DataAccuracy – this is a common issue as typically supplier information management is theresponsibility of an over burdened Category/Buying team, who have much higher value-adding priorities than the essentially administrative task of collating, validating and updatingsupplier information. In addition, even when the task is done well it becomes out of date veryquickly and unreliable/unusable for important business decisions. Achilles provides a systemicsupplier information solution that collates, validates and monitors supplier informationdynamically , leaving the category teams to focus their time and energies in areas that deliverbusiness value.Management Control – is not a dissimilar issue, if we look to the old tenant ‘What getsmeasured, gets managed’ its weakness is that its almost impossible to measure (and thusmanage) without visibility, Achilles provides supply chain visibility across sibling companies,geographies, business units, categories and even across sectors, and increasingly downsupply chain tiers – with this visibility comes an increased sphere of influence and providesopportunities for volume aggregation, risk management and contract compliance. TheEvolving Supply Chain was also highlighted as a risk, supplier information management canalso be helpful in identifying, qualifying and risk assessing new suppliers when seeking newsources of supply in new markets, products, geographies etc.
  14. 14. © 2013 Achilles Group Limited 14Suggested Strategies & Tactics......Pro-Active Risk Management• Systematic approach to risk management• Continual risk scanning for early warnings• Ensure information updated and accurate• Maintain visibility & control• Share best practice/process/systems• Potential to manage to wards Steady State or MonitorzonesMonitor• Early warning system -continual risk scanning &forecasting for increasedseverity / impact• Leverage investment inhigher risk managementprocesses /systems• Ensure up to dateinformation/accuracy• Maintain visibility &review periodically• Manage higher potentialimpact issues towardssteady state zone.Steady State• Continual risk scanning• Share best practice/processes/ systemsPriority Action• Quantify risk impact (economic & reputational) to the company• Invest in a process for systemic information management, includingfinancial health & business continuity plans (potentially include suppliersbelow tier 1 who represent hidden risk)• Segment suppliers by risk profile and customise supplier qualificationand contract management processes accordingly• Drive improved enterprise wide visibility of good quality supplierinformation to allow effective management & decision making• Formal annual high risk assessments/audits/reporting (including on-site) to ensure current compliance and data accuracy• Map the supply chain to identify risk clusters & target/ incentivisecategory managers (and higher tier suppliers) to formally identify,manage & monitor risk in the supply chain• Consider formal scenario planning techniques to identify significantimpacts and subsequent business/reputation repercussions, thencreatively plan to mitigate, eliminate, manage or transfer them.• Manage performance to drive continual improvement• Link to spend analysis/sourcing to unlock additional value• Consider a pan-sector community approach to drive whole of industrycost/risk benefits and ‘collective immunity’.
  15. 15. An Overview of Achilles
  16. 16. © 2013 Achilles Group Limited 16Achilles Overview.....“Partnering withAchilles is a keyelement of ABB’sGlobal strategy, insimplifying andimproving oursupplierqualificationprocess.”Nils TengbergHead of Quality and SupplyBase Management“Shell values itsrelationships withsuppliers. WithAchilles’ assistancewe will maintain asingle source ofsupplierinformation. Thisintelligence andinsight into oursupply base willenable us tocontinue to formand maintainstrong relationshipswith our suppliers.”Jim Pearson, Shell CPSystems & ProcessesManagerClick the Achilles Logo to run the 2minute Achilles Explainer Video(Requires internet connection & sound)
  17. 17. © 2013 Achilles Group Limited 17Why our customers use Achilles solutions…Risk ManagementCost ReductionRationalisation ofSupply ChainStandardisation &ImprovementRegulatory ComplianceTo raise industrystandardsBetter DecisionMakingSupplier MonitoringSupply Chain AuditSupply Chain VisibilitySupply Chain Control(Internal & External)Quality validatedsupplier informationManage their internalsupplier master file…to better manage cost & risk
  18. 18. © 2013 Achilles Group Limited 18Thank BrooksRobert.Brooks@achilles.comM: +44 (0)7824 138323Dan QuinnDan.Quinn@achilles.comM: +49 (0)7557 859235Rudiger FabianRudiger.Fabian@achilles.comM: +49 (0)1712345359