A digital supply chain transformation efforts depend upon getting good data, automating processes, making more holistic decisions, and eventually, perhaps, using predictive analytics to transform the enterprise.
But Tom Elliott, a Senior Director at Pfizer, gave a speech in which he convincingly demonstrated you can get to a high level of transformation even if you are not at the stage of using predictive analytics. Mr. Elliott gave his speech at the Council of Supply Chain Management Professionals annual show on October 1st. Pfizer, with over 53 billion dollars in revenues, is one of the world’s largest pharmaceutical companies.
Pfizer is present in 175 markets with 800 different highly regulated products. Some of their products are “medically necessary.” A medically necessary drug is one in which it is the only drug that treats a particular disease. Many of their cold-chain products need to be refrigerated and then kept within a narrow temperature band during transit. Clearly, this is a challenging supply chain.
It is also a supply chain that operates at great scale. They produce 74 billion doses, have over 20,000 stock keeping units (SKUs), and these SKUs flow across 2500 trade lanes. And each product, origin to destination pairing, and mode brings its own complications.
The Pfizer Supply Chain
Their intercompany supply chain begins with the production of active ingredients. These ingredients have long lead times. Once produced, they are sent to contract manufacturers who produce drug dosages and package them up. Finally, they are shipped to finished goods distribution centers, where market logistics will distribute them to drug chains, distributors, and hospitals.
This supply chain, from the shipping dock of the active ingredient plant to the loading dock of the distribution center, encompasses 20,000 air shipments, 2,000 ocean shipments, and 35,000 road shipments.
As an aside, the audience was surprised by the number of Ocean shipments. Ocean is associated with bulky, low cost, and long lead-time products. Mr. Elliott explained that in the cold chain, a refrigerated container can go air and then sit on a hot tarmac. Trucks going through customs have officials taking goods out of the truck while they engage in what might turn into a lengthy inspection. “But an ocean container is refrigerated the whole way.”
But gaining visibility to all these shipments was a highly inefficient process. “Prior to the solution, there was no near real-time (shipment) visibility” Mr. Elliott explained. There were way too many unnecessary phone calls and emails involving 200 core supply chain personnel. And all asking where their shipment was. A manufacturing manager in Puerto Rico reported getting 600 emails a week; and they came in 24 hours a day. This led to numerous escalations and too much ordering of just in case inventory.
Pfizer Embarks on a Digital Supply Chain Project
But when a new Vice President, Mike McDermott, assumed responsibility for this supply chain in 2016, he asked a very simple question. “If Amazon can provide end to end shipment status of my orders, why can’t Pfizer.” That was the impetus for the digital supply chain project. “We had to change our mindset,” Mr. Elliott said, “and embrace a global orchestrated supply network.”
Technology was part of the answer. Pfizer purchased a middleware transportation solution from GT Nexus for communicating with carriers. But much of this solution – which connected the company and their critical partners – was built internally. The solution can kick of proactive alerts and can provide a variety of analytics that can be used to improve the process.
Implementing the technology, as one would expect, was a big job, it involved envisioning what the “to be” process should look like, an obsession with data accuracy and quality, and partner onboarding. It also involved change management, training, and the ongoing monitoring of the timeliness and quality of carrier data.
One aspect of the change management was particularly interesting. The company had to come up with a standard definition of what a “critical” shipment was. And senior management had to buy in on this definition. The squeaky wheel could not continue to get the grease. Not all critical shipments would necessarily need to be expedited, but all expedited shipments should involve critical shipments. And a key part of what “critical” shipment was, flowed back from what customers needed, when they needed it, and the importance of the products in question.
By September of 2018, Pfizer’s Trackit application tracks 15,000 stock keeping units to their customers. Pfizer is adding new lanes and products all the time.
During the question and answer session, I asked Mr. Elliott what the ROI of this project was. He said there was no ROI analysis because it was “so obvious the process was inefficient.” That said, they are seeing savings in inventory carrying costs and from lower transportation charges. Further, across 1,000 employees, there may be savings of as much as 40 minutes per employee per day. “Even if it is only half that, the ROI is huge.”