“DEPLOYMENT OF ERP SYSTEMS IN LIFE SCIENCE IS A LIFE-SCIENCES-CENTRIC CHALLENGE”, THE ESSENCE FROM AN INTERVIEW WITH STEVE CLARKE, THE FOUNDER & PRINCIPAL OF BIOSUPPLY CONSULTING
November 9, 2021, Calabasas, California: In view of the gradual restoration of normalcy in the supply chain of healthcare, life science companies are engaged in transforming their people, processes and technologies to achieve a quantum leap. Devendra Mishra, the Executive Director of BSMA, seized the opportunity to interview Steve Clarke, the Founder and Principal of BioSupply Consulting, who brings a vast stove of experience and knowledge in successful deployment of information technology.
Steve Clarke is a 30-year veteran of the biopharma industry. He has been the Global Supply Chain Program Manager at BioMarin Pharmaceutical, Site Head of Materials Management at Molecular Devices (Danaher Corporation), and Materials Manager/Director of Global Supply Chain at Bio-Rad Laboratories. Steve Clarke is a supply chain executive with extensive experience in global GMP organizations, lean six sigma, ERP and MRP implementation, and optimization of the supply chain end-to-end. Recognized for thought leadership, goal-oriented innovation, and change management, Steve has been an APICS certification and Lean Six Sigma instructor for over 20 years. He has a Master of Business Administration degree from California State University (Hayward) and Bachelor of Science, Biochemistry from Sheffield University (England).
Here are the highlights of a wide-ranging, comprehensive interview:
MISHRA: The post-COVID-19 world is a very challenging time for supply chain leaders in life sciences. You have had an extraordinary experience systematizing biopharma businesses. How can process redesign principles be leveraged to improve effectiveness and efficiency of the supply chain?
CLARKE: In life sciences, business processes are complex with excessive controls. R&D often favors structured processes and works in siloes. In process redesign, the first step you must follow is to map out the current state process and then challenge everything. Here are some examples:
- Consignment Inventory: Why not ask suppliers whether inventory can be stored at their site? Normally, it is issuance of a PO first and shipment second, whereas under the consignment model these steps are switched. This virtually eliminates supplier lead times and reduces inventory for the buying organization.
- Reserve Capacity: How about giving your suppliers usage forecasts and blanket purchase orders? Now, they become aware of your demand much earlier so they can be better prepared. In return, you ask them to reserve capacity and purchase raw materials in advance. Your lead time is much shorter, and since they can now in turn make firm commitments with their suppliers, you should expect your supplier to lower their costs.
- Risk Reduction: Sit down with your Team and look at the process map and for each step ask them what could possibly go wrong, how likely is it to occur, if it did how severe would be the effect, and how easy will it be to detect the problem? Based on these results, you will quickly identify your largest risks.
- Supplier Differentiation: Instead of treating all suppliers the same, redesign the supplier quality process to differentiate suppliers by risk profile. For those with the most risk, conduct periodic audits, regular business reviews, whereas give far less attention to those with low risk. This quickly transformed the supplier quality program from “under-performing” to “effective”, with much fewer defects and better on-time delivery.
I have developed a list of 100+ supply chain related examples of how these redesign principles can be used to transform your performance.
MISHRA: From an operational perspective of efficiency, quality and service, what tools can be used to address the challenges?
CLARKE: Generally, we react badly when things go wrong, and our project efforts are not focused on actual problems. The approach that “every defect is a treasure”, and only make improvements when specific data supports the initiative. The overall philosophy is completely contradictory to standard approaches to management. One reason that this approach is so much more effective, is that if you take the time to look at the data, you’ll often find that what you THOUGHT was causing the problem, was NOT the cause at all. Very often there are one or two gaps in the process, which are causing most of the issues. How do you find these gaps? It’s straightforward! First gather “defect data”, just like you would if you were analyzing the quality errors in a manufacturing process. In this case though, the defects are being created by the broken supply chain business process.
For example, if your customers are suffering from your inability to deliver on-time, what “defect data” would you analyze? Correct, you should look at your late shipments over a period and ask the team to discuss and determine what caused each delay. You only need to do this for about 30 late shipments, and patterns will emerge, and you will soon be on your way to understanding your chronic issues. Then, and only then should you select and prioritize projects. As you can see from the table below, the beauty of this approach is that it can be applied to almost any supply chain issue.
MISHRA: Do you envision that there are phases of Systems Adoption or Maturity Levels, as a startup company conducting a clinical trial grows up to become a major enterprise with several drugs?
CLARKE: To help companies make the transition from R&D to Commercialization, I have developed a supply chain maturity model with the following domains in order of priority – People, Process, Data, Technology, Metrics and Lean. You start by hiring good people. Your effort must be centered around your business processes first. Your process will always rely upon accuracy of key data, as will technology, so design robust processes, and identify which data is most critical.
In terms of the next step, Technology, focus on the functionality required to support your business process. You should understand relevant software functionality but know how much effort will be needed before you decide to use it. Remember that “Rome wasn’t built in a day”, so decide what is critical for phase 1, and you can decide later about other functionality. Once you have successfully completed phase 1, you will have developed a much better understanding of your future needs. Next, you should focus on leveraging your accurate data for monitoring your company’s performance, through the development of metrics and analytics. An effective performance management program also requires a higher level of organizational maturity to be able to discuss metrics in a healthy manner without finger-pointing and data manipulation. Finally, embark upon a “lean” program that reduces wasteful practices and streamlines workflows. Gradually, your supply chain operation will transition from “under-performing” to “effective” for each domain. This transformation will take you a few years.
MISHRA: Can the principles of Kanban reduce supply chain inventory while mitigating risk?
CLARKE: Yes. Kanban puts a limit on the maximum amount of inventory in the system (Kanban cards) and will trigger a replenishment as soon as you fall below the reorder point. Because it is visual, input errors in your ERP system won’t screw things up with a premature replenishment signal or give no signal when one is badly needed. Kanban can do what you asked: less inventory and less risk. However, Kanban requires discipline, otherwise it is no more accurate than your MRP system. You must ensure that there are daily Kanban audits, a level-loaded production schedule, real time changes to issues found, and daily meetings to discuss the results of the audits, among other things. One company I served was a manufacturer of expensive bioanalytical instruments, we transitioned the planning method from MRP to Kanban, with impressive results. Production line- down events dropped by almost 40% while inventory was reduced by around 30%. In addition, all materials were delivered directly to point-of-use and warehouse storage was no longer required.
MISHRA: ERP solutions generally have significant functionality gaps for life science supply chains. How can they be adapted to improve value to life sciences?
CLARKE: For example, let’s take supply chain planning. I have yet to walk into a life science organization that is performing most of its planning in an ERP system. I recently conducted a LinkedIn poll for life science supply chain leaders and 73% of respondents said their organization was performing most of their planning in MS Excel. In another poll, 75% of respondents indicated that they were dissatisfied with the attention given to supply chain planning technology requirements throughout their career. In terms of supply chain planning, ERP solutions have one primary job – tell us how much to order and when. Yet, they often struggle to achieve this basic task. Here are some very specific reasons why:
- Projected Expiring Batches: Most ERP systems will not consider expired lots in their MRP calculation, but few will take into consideration that lots may not be projected to be fully consumed before they expire and remove them from available inventory on the expiration date. Without this functionality, it can be risky to use MRP outputs, as it may be relying upon lots that may not be available when needed, causing considerable supply risk.
- Minimum Remaining Shelf Life (MRSL): Most customers will require so many MRSL months between the ship date and the expiration date. These requirements often differ by customer. ERP systems are required to have controls that respect these rules at the customer level before a specific lot is allocated to a customer order. In addition, it is necessary that finished good batches that are not projected to be fully consumed, must not be considered after the MRSL date.
- Attribute Based Planning (ABP): There are a few scenarios in life sciences where planning at the item level is insufficient, since there are lot level details that must be accounted for. One pharmaceutical company that I served spent several years attempting and failing to address this issue. Here are two classic examples:
1. Specific lots were manufactured at a new manufacturing site that has not been approved by all regulatory jurisdictions, in which case it may be shipped to some regions, but not others.
2. A manufactured lot may not meet the standard for all markets, in which case it is restricted to where it can be shipped.
In both these cases, planning at the item level will not generate accurate messages, because lot level attributes will differentiate which available inventory can fulfill which market demand. ABP will take these lot level differences into account in the planning calculation to balance supply and demand and determine replenishment requirements.
- Quality Release Lead Times: If the release date is delayed there is no way to change the date in the system, so that MRP can consider whether this delay will cause supply risk.
- Sample Requirements: In some companies, especially those with smaller manufacturing volumes, the sample requirements from incoming inspection can often create higher demand on the raw material than manufacturing itself. I have not experienced an MRP system yet that will effectively address the additional demand requirements over the planning horizon.
MISHRA: As a result of the COVID-19 pandemic, is Lean dead?
CLARKE: As a result of the pandemic, lean inventory management got a black eye, because it was claimed that companies with less inventory had more supply risk. Intuitively this seems logical, but it is a myth! If you have high inventory levels it is a clear indicator that your supply chain is inefficient and unreliable. Companies that have been able to cut inventory with no loss in service performance have more reliable systems, processes and practices in place, with shorter lead times. These organizations will be able to recover from a major supply chain disruption more quickly. Maintaining excess inventory to buffer against unforeseen disruptions with immature practices, will not prevent shortages. Excess inventory levels mask broken processes and systems.
CONTACT Steve Clarke at https://biosupplyconsulting.com/