MERCK’S SEARCH FOR A SOLUTION
In a careful search for the right software to perform the collaboration function, Hydzik says Merck considered three possible approaches — a custom-built system, the purchase of an off-the-shelf software package, or something totally different, such as a cloud-based technology. “We decided to embrace the cloud and move fast, and if necessary, bail fast. We decided to go with Tracelink as an enabler to do that.”
Tracelink, which runs on Amazon Web Services’ public cloud, offers a supply chain collaboration platform enabling manufacturers to share information with business partners on supply, production and distribution. “This technology links brand owners and their CMOs, providing visibility into inventory information and compliance information, which mitigates the risk somewhat,” says Mooraj.
The ability to aggregate key performance metrics by supplier is an essential capability for pharmaceutical firms with extended supply chains, says Shabbir Dahod, president and CEO at Tracelink. “For instance, if there is a recurrence of quality issues among suppliers, it’s helpful to be able to log corrective actions against those suppliers to see which ones are impacting products on a recurring basis,” Dahod says. “This information, in turn, can be fed to a planning group, and they can work with procurement to get an alternate supplier in place.”
He cites the case of a major pharmaceutical firm that had a product in short supply due to a time-consuming quality review process. “They were not releasing batches fast enough to be able to deliver to market on time and in full,” Dahod recalls. “By having a technology platform to share that information, they can solve it much faster than if they had to collaborate via fax or email. With their planners aware of the problem, they were able to plan around the shortage and solve it by sending batches of product where they were most needed.”
In Merck’s case, the company wanted both greater visibility and agility when it comes to managing the various processes in the virtual supply network. “We want to enable our relationship managers to fine-tune the timing of each and every order in the supply chain,” Hydzik says. “The cloud provides that speed and agility. And it allows us to drive a better return on investment.”
One of the secrets to Merck’s success in moving to the cloud-based solution to manage its virtual supply network was the company’s recognition that the project was business-driven, as opposed to IT-driven. “The key fundamental principle was that this was not an IT project — it was all about business outcomes,” Hydzik adds.
Another essential ingredient was supplier buy-in. “We saw it as an opportunity for a win-win with our suppliers, because it was anchored in driving out inefficiency in business processes.” But prior to moving to the new platform, Merck had varying approaches for managing processes such as purchasing. “Each business manager had his own way of purchasing management with his suppliers,” Hydzik points out. “The ability to drive standardization, eliminate waste and make the information visible to Merck and the CMO was a win-win.”
The benefits to be obtained by suppliers quickly became apparent. “It allowed suppliers to trade up,” Hydzik says. “Instead of having a CMO focused on inventory position or ‘Where’s this purchase order,’ it was, ‘How can we improve the packaging line?’ It wasn’t a tough sell, and we are actually finding an amount of support from CMOs.”
IDENTIFYING STRATEGIC PARTNERS
The most advanced pharmaceutical manufacturers are working with CMOs to integrate their information platforms to facilitate collaboration, Mooraj says. “The new approaches to collaboration in the extended supply network have to do with how to develop shared processes,” he says. “A first step is to segment suppliers to identify those that are strategic, and then find ways to integrate platforms with them to exchange information and provide end-to end visibility.” The idea, he says, is to “develop a bi-directional feedback culture with your partners.”
Perhaps more important than the technological links are the organizational and cultural changes required to bring about this level of collaboration. “You have to have the focus to eradicate the barriers that exist, including the people, process and organizational challenges,” Mooraj says.
He recommends that pharmaceutical firms first adopt the necessary over-arching strategy. “They need to develop a holistic strategy for contract manufacturing that will take their relationship with their suppliers from ‘arm’s length,’ to a collaborative relationship,” Mooraj adds.
Instead of treating all CMOs and other suppliers alike, pharmaceutical companies should adopt a segmented approach, focusing on establishing a close collaboration with a handful of strategic suppliers. Mooraj recommends developing a set of bi-directional metrics so that results are measured and people are held accountable for those results.
SITE VISITS AND COMMUNICATION
Another best practice to ensure successful outsourcing of production from a quality and risk view is to conduct regular site visits and audits to verify that the contract firm is following good manufacturing principles and has employees who are trained to adhere to the client’s standard operating procedures.
“One of the big differences between a contract facility and a company facility in terms of quality is that the client’s product is rarely the only product being manufactured at that site, and often the client doesn’t know what the other products are,” says Reddy of Cognizant. “Aside from the biggest concern of cross-contamination, there are issues such as ensuring that equipment is not being swapped around, or if it is, that it is validated. The best practice is vigilance. Random batch inspections and verification of the CMO’s analysis by the client firm’s analysts should be part of any partnership.”
Not surprisingly, communication also looms large when trying to keep a tight and accurate pulse of the virtual supply chain’s health — not only for operational or logistical reasons, but also for managing quality and risk. As an example, quality incident reporting can suffer if communication is not totally candid. “For example, cultural issues at the CMO facility may prevent bad news from moving up the chain, so that the client is not aware of delays or failed batches until it’s too late to head off the problem,” Reddy adds.
When dealing with suppliers that have recurring production issues, it may be necessary to institute more careful and frequent product inspections. “The client can use a risk-based approach to inspect incoming products,” says Kacera of Pilgrim Software. “The inspections can be based on the level of risk for that supplier, or on the level of risk associated with the product,” she adds.
Ultimately, though, it’s better to catch manufacturing deviations early on via some electronic means of reporting from the CMO to the pharmaceutical company. As Kacera puts it, “You need real-time feedback from suppliers to see where their non-conformances are and see if there is a trend.”
Finally, driving many of these concerns is the industry’s need to comply with FDA requirements. “The regulatory environment for contract manufacturing is getting tougher,” observes Accenture’s Mooraj.
For example, in May the FDA issued a draft of new guidance governing drug manufacturers’ relationships with CMOs to ensure product quality. The FDA recommended that pharmaceutical companies and their contractors implement written Quality Agreements to delineate their responsibilities to ensure the quality, safety and effectiveness of the drugs they produce.
“The FDA says the pharmaceutical companies need to be auditing their suppliers, and that they are fully accountable for that product,” says Miles of SAP. “You can outsource the process, but not the accountability.”