Purdue Pharma Upgrades Its Supply Chain Visibility

Purdue Pharma, a mid-sized company with a big emphasis on product security, recently added to its supply chain architecture by implementing a channel-commerce management solution by Edge Dynamics (Redwood City, Calif.). Purdue, maker of Oxycontin, a favorite target of drug counterfeiters, has been forced to improve its supply chain security and management out of sheer necessity to protect its livelihood.

Having gone down this road, Purdue is not looking back. It is one of few manufacturers shipping product with RFID tags affixed at the item level (as opposed to the case or pallet level; see "Purdue Pharma Blazes a Trail for Drug Security" for details). And it is incrementally expanding its IT infrastructure to give it the visibility and peace of mind it needs in getting product to retailers and consumers.

The channel commerce software allows a company such as Purdue — and Bristol-Myers Squibb and King Pharmaceuticals, both of which have also installed such systems — to more easily and transparently manage the complex and evolving fee-for-service (FFS) agreements it has with major distributors, giving it the capability to adjust agreements based on inventory, service levels and data quality. We talked with Steve Seid, head of national accounts and trade relations at Purdue, about the addition of the channel-commerce software, and how it furthers the company’s supply chain mission.

(Want to know more about the evolution of FFS agreements? Join the Institute for International Research’s March conference in Princeton, N.J.; see http://www.iirusa.com/feeforservice/ for registration information.)

P.M.: What made you pursue channel commerce management software in the first place?S.S.: At first, I didn’t really see the need for it, but thought it was an interesting idea. Then came the clouds on the horizon regarding fee-for-service agreements. The software has given us a nice opportunity to explore what would be good fee-for-service agreements, and to get a better handle on the data.

It was evident we were going to have a wealth of very valuable information. The question was, how are we going to get real value out of this data? The two key elements are [EDI documents] 852s and 867s. Certainly there’s an application with the 844 data. But the real key is that we weren’t getting 852s and 867s.

P.M.: What will the main benefits be for Purdue’s supply chain?S.S.: The main thing is that it will create transparency. We will know at any time what is in the supply chain and what is sold out, and so we’ll be able to better manage inventory.

It’ll help us in terms of security, too. Our product is a controlled substance requiring a [DEA] 222 form to be shipped. For security reasons, we have to ship at controlled times. That makes for a tight window for when the product can be shipped and received. Things that happen in the supply chain quickly affect how the product is delivered and needed.

And it will give us a wealth of information, relating to, for example, geographical issues, account (or retailer) issues, that will help us manage the supply chain better.

Finally, it will help us control our contracting and chargeback system.

P.M.: How will it benefit you from a manufacturing perspective?S.S.: I’m a sales guy, for 30 years with Purdue, so I always want to see as much product made as possible. But from the manufacturing side, it’s more important to have accurate production forecasting. We try as much as possible to be a seamless organization, and this well help that. Manufacturing will have more complex information so there aren’t months with huge overstock or understock. We’ll have a much tighter tolerance as to the validity of forecasting information, which will have potential benefits in the allocation of resources, labor, shipping and other things.P.M.: What other systems will the channel commerce software be integrated with?S.S.: We run SAP, so it will be integrated with SAP in our ordering system. It will also be integrated with the contracting and chargeback system, and of course integrated with customer service.P.M.: How about with your e-pedigree software [from SupplyScape]?S.S.: I’m not sure. We see the potential for that, but it requires more study at this time.

We have to get fully operational at this point. I need to see the basic function. Once that happens, we’ll have a better idea of how we can use our systems more effectively.