1. A NATIONAL SUPPLY CHAIN
The concept of a “National Supply Chain” is being recognized as a national asset where healthcare data visibility, quantum expansion of manufacturing capacity, allocation of scarce resources, and mitigation of the dependencies on other nations are some of the major considerations.
It is an undisputed fact that for every company of an industry to build manufacturing buffer capacity for a Black Swan demand is absurd. A requirement of the National Supply Chain will be to maintain a network of buffer inventory of products required at different stages of finished goods, work-in-process and raw materials. The Defense Production Act is a governmental enabler of scaling up of manufacturing capacity in a quantum manner. We have noticed the deployment of USNS Comfort to provide floating medical facility for the afflicted in the State of New York. The concept of floating capacity for manufacturing and service providers has become a relevant consideration because of the concentration of the US population along the coastal regions.
2. REGIONAL ECONOMIES OF THE WORLD TO DEFINE SUPPLY CHAIN BOUNDARIES
The conventional design of the global supply chain network of sources of supply, manufacturing, warehousing and distribution has been based on optimization of system-wide cost of manufacturing, distribution, transportation and carrying inventory for a required level of customer service. The current coronavirus has demonstrated that traditional methodologies of supply chain design do not adequately factor in considerations of risk for a Black Swan event whose adverse impact is colossal but probability of occurrence is infinitesimal.
The reality of a Black Swan event calls for the reconfiguration of the supply chain and redefinition of responsibilities for its execution. The issue of breaking down the global supply chain to regional ones is worthy of consideration to ensure shorter lead time and faster response to abnormal surge in demand. Major regional economies of the world have emerged to be North America, LATAM of South America, Europe (Western and Eastern), Russia and Asia, Australasia and Africa. The belief in the basic tenet of Globalization remains unshakable because its rising tide lifts all boats in terms of global innovation, prosperity and human wellbeing. But there is a reason to consider building supply chains of regional economies of the world as opposed to a global one.
3. VISIBILITY OF PATIENTS AND HEALTHCARE FROM END TO END
Foremost, the war on the pandemic has been stymied by the absence of real time demand signals of infected patients from China to Italy to USA and the rest of the world. Data capture, modeling, analytics and visualizations have proved to be inadequate and inefficient. The characteristic of “Exponential Growth” has never been truly understood until now when we experience the increase in the number of COVID-19 patients and lives lost.
Visibility in the supply chain has always been the Achilles’ heel of supply chain management. Fortunately, Internet of Things (IoT) and information system platforms can be huge enablers. The thermometer manufactured by Kinsa provides an intelligent heat map of potential COVID-19 patients across a million devices that are Internet-enabled. How soon the Apple Watch and other devices will generate signals for the infection for predictive modeling, along with Social Media data?
4. FURTHER ACCELERATION OF DRUG DEVELOPMENT APPROVAL
The Fast Track Act (2014) and Breakthrough Therapy Designation of the Food and Drug Administration are also coming to the rescue of patients as tests, therapeutic drugs and vaccines are being developed with uncommon speed. Similarly, phenomenal results have been achieved in reducing the time to test for the coronavirus, from days to minutes. We have witnessed the positive impact of the Fast Track on clinical trials for Cell and Gene Therapy cures and can expect a quantum leap with scientific ingenuity confronting the present crisis.
5. MARKET-CENTRIC JUST IN TIME MANUFACTURING
The Coronavirus has reaffirmed that the precept of being demand-driven with short lead time, rapid response and just-in-time manufacturing and distribution, has to be the guiding principle. Life Sciences warrants a higher standard of performance because life depends on the successful, execution in the end-to-end supply chain.
We can examine how the Japanese automotive companies reconfigured the supply chain in the US after disrupting the US market with exceptional quality passenger cars manufactured in Japan. The Japanese auto companies built manufacturing facilities in the US after the 1980s. Another consideration for the US healthcare is the practice of Just-In-Time manufacturing of the automotive company Volkswagen building the Beetle in Sao Paulo in 1993. They demanded that all the suppliers make sub-assemblies available within four hours while recommending that supply hubs be physically adjacent to Volkswagen’s manufacturing operation. Just-In-Time manufacturing was geographically positioned to be consumer-market-market-centric and not supply-market-centric. This responsible investment decision to ensure the security and resilience of supply is worthy of consideration by the US Healthcare industry. It is extraordinarily beneficial that the US bio-pharma industry is truly multi-national, thereby decentralizing its infrastructure and tapping into regional supplies with control of quality and availability.
6. TRANSPORTATION NETWORK
Lack of visibility of logistics capacity and stock levels in the end-to-end links of the transportation network has been a major failure in the current pandemic. The logistics industry has failed to comprehensively assess and report the magnitude of expired and counterfeit drugs, impact of delayed delivery and product out of specification, cost of product damage, and extent of excess inventory and out of stock. It’s been said that you can’t control what you don’t measure.
In case of Life Sciences, the supply chain to be considered includes Drug Manufacturer, Distributor, TPL (Packager, Freight forwarder, Airline or Ocean Liner, Customs and Ports) and recipient Customer of the drugs, namely Pharmacy, Mail Order Service Provider, Hospital, Doctor and Patient. Fortunately, the pharmaceutical and the biotech industries have maintained high levels of inventory of finished drugs as well as of necessary WIP and raw materials, often in excess of ten months’ supply as a whole. The industry needs to focus on strategic location of inventory through TPL services and overcoming the bottlenecks of the last mile. Finally, transportation capacity may prove to be adequate if the assets of passenger, cargo and government were Uberized.
7. DIRECT TO PATIENT DELIVERY WITH VENDOR MANAGED INVENTORY
The current supply chain of the biopharma industry is the classic multi-tier distribution model of drugs from the thousands of drug manufacturers to the doctors and their patients through Wholesalers, Retailers (Pharmacies) and Hospitals. A huge pipeline inventory supports the delivery of drugs with the goal of virtually avoiding stock-outs. Heavy dependence on wholesalers for drug distribution leads to a potential vulnerability if they were a victim of cyberattack or some other crippling event.
Vendor managed inventory, which is driven by patient demand, may prove to be a weapon in the war for rapid response. Direct to consumer delivery has been an effective strategy for trendy consumer products which are characterized by unexpected demand surges. The current supply chain of healthcare is designed for safe lead times, normal response and multi-stage buffer stock. The magnitude of expired drugs is only one barometer of the intrinsic phenomenon. In the ideal agile world, will the wholesaler be transformed? Are they too big to fail?
8. WORK FROM HOME AND DIGITAL COLLABORATION
Government edicts of Social Distancing and Home Shelter have forced people to work from their homes and students at schools and universities to learn online. It is amazing that the prevalent practices of certain Global IT and Silicon Valley Hi-tech companies have made the transition to work from home productive and desirable. Today there are many service organizations, like Insurance Companies, who have not lost a beat without physical customer interaction by utilizing their internal communication infrastructure.
How will the work split between an office and the home change for greater productivity and employee satisfaction become an outcome of this pandemic? How about a Zoom Day during the week when work is carried out from home through digital communication and collaboration tools?
9. SYSTEM INTEGRATION OF BUSINESSES OF STAKEHOLDERS
System integration between two entities offers greater cost efficiency, lead time reduction, establishment of single source of truth, and strategic alignment of businesses. Today, fortified silos exist in the healthcare ecosystem between a drug manufacturer, FDA, Payer, Insurer and Service Providers. Most importantly, the ability to respond to changes in demand, for whatever reasons they may be, will register a quantum jump if the ERP systems and SaaS services were integrated.
From EDI innovation of 50 years ago, the current reliability and sophistication of integration of business systems is within our reach in a Cloud-based environment with extraordinary interoperability challenges. Healthcare will achieve the required resiliency, the ability to spring back after being stressed.
10. TECHNOLOGY-ENABLED SMART AND SECURE HEALTHCARE
Technology is certainly coming to the rescue by reinvigorating the supply chain with the utilization of Digital Technology, Cloud, Robotics, AI, Machine Learning, Image and Voice Processing, Blockchain, Driverless Vehicles and Supersonic Transportation. Imagine a Blockchain distributed ledger or an AI-supported drug development or robotics to scale up hazardous operations or machine learning to advance clinical trials!
Digital Streaming, Video-Conferencing and Digital Collaboration are providing the steroids for communication and nature of work in the entertainment industry and can be applied to healthcare as well. Finally, Telemedicine and other remote healthcare services, where a patient does not have to visit a doctor in the hospital, will enhance patientcare. The requirements of security and privacy will be paramount for the Brave New World after the pandemic crisis.