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P2 Consulting was started by a group of award winning consultants who recognised the opportunity to build a global consultancy firm that had clients’ needs at its heart. We understand the challenges clients face – the pace of globalisation, technology change and increasing regulation – and the pressure they are under to respond to these changes rapidly and efficiently.

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Supply Chain and Big Data – Why Cold Chain Matters

By Yoav Gordon, Managing Consultant and Life Sciences and Healthcare Lead at P2 Consulting

Cold chain has never been more important in global supply chains – the successful transportation of vaccines is going to help us win the fight in the pandemic war. Read more to find out how the pandemic has challenged supply chains and the role cold chain plays

10.11.20

Yoav Gordon, Life Science & Healthcare Lead

Cold chains can be defined as supply chains with cargo or products that undergo some form of temperature control through their transit. Some cold chains remain unbroken, with a sequence of storages maintaining a given temperature to transport or hold sensitive goods, which may include pharmaceutical products or foodstuffs. There are a range of challenges for complex and global supply chains in managing their cold chains to avoid wastage, meeting customer demand and ensure regulatory compliance. The effects of COVID-19 also adds another layer of complexity to its management.

Why cold chain matters

The growing demand for manufacturing and moving refrigerated products either within or between markets has grown exponentially in the last decade, as manufacturers have sought to drive cost arbitrage through overseas and offshore production. And growth into the mid-2020s will continue unabated, especially in the Asia-Pac region, particularly as the demands for COVID-19 related vaccines and treatments increase.

While cost remains a central driver, manufacturers are required to embed efficient cold chain solutions for the following reasons:

Regulatory compliance:

Global supply chains need to comply with a diverse range of compliance requirements that differ over product type and geography. Food products, chemicals and medicines are all subject to manufacturing and distribution practices overseen by national regulators. Pharmaceutical products that are often manufactured and distributed through a complex chain of partners and agencies with brokerage points in between, need to ensure that a strict audit process is in place to capture these relationships and hand off points.

Risk and cost management:

Most global supply chains walk the tightrope between efficiency and cost, seeking to reduce inventory where possible, limit wastage and loss (see below) and optimise ROI. Cold chain presents both an opportunity and a risk for supply chains – the increased demand for refrigerated projects is growing exponentially, but aligned to this is the risk of spoiled and lost products. The management of these risks will rely heavily on effective data management building on the digital advancements in the last five years and ensuring the effective investment in the right technology to mitigate them. Access to real time location and temperature data is one of the critical factors in managing this risk to the supply chain cost base.

Managing waste:

The World Health Organisation has estimated that nearly half of all vaccines globally are wasted, due to incorrect temperature management of products within their chain of supply and distribution, costing the biopharma sector in the region of $35bn. Even if pharmaceutical products are distributed through cold chain technology and reach their end destination in good condition, some patients don’t have adequate refrigeration technology meaning a significant amount are spoiled on receipt. This is a particular issue at the moment, as the COVID-19 pandemic means many patients are having their pharmaceuticals delivered directly to them.

Within the supply chain itself, the lack of real time data and controls can mean that products are shipped without the correct controls or may sit on a runway in the searing heat for hours, resulting in their deterioration. When the COVID-19 vaccine is developed and demand soars, there is a risk there will be a spoilage rate of 1bn doses if the process is not effectively handled.

Patient and end customer safety:

The end user – they might be a customer buying milk in London or a patient receiving malaria medication on the east coast of Africa – are measures of success for cold chain. Failure to meet the needs of customer or patient at the end of the chain will diminish the value of an effective cold chain, impact license to operate and critically diminish the bottom line. As Covid-19 has forced many patients into home isolation, the cold chain will be further challenged by shipping and distributing non-Covid related medicines to these patients, adding a whole new dimension of operational complexity.

Effective cold chain management through control towers

The challenges illustrated above have a theme running through them – the collection, interrogation, and analysis of complex data sets to support decision making in the supply chain. There is a known correlation between increased levels of wealth and demand for refrigerated products, so as new markets open up and demand continues unabated in developed countries, this poses a significant data challenge for supply chains, related to the continuous shipment of goods that require refrigeration.

An effective supply chain management function makes use of a centralised hub that consists of all the technology, tools and processes required to capture data across the supply chain – these hubs are commonly known as ‘control towers’. Using the right data sets, control towers can apply predictive analytics tools to guide the supply chain network to optimise its activity and build in quality and efficiency. Control towers can add value in the following ways;

Data complexity and aggregation:

Unlike traditional distribution models managed from physical locations, the control tower doesn’t sit in a specific location within the network hierarchy. Instead, the control tower focuses on capturing vast arrays of data from all elements of the supply chain, from both the owner organisation and third party companies. It can aggregate large volumes of complex data from a range of sources, including inventory stock levels, distributor tracking data and weather patterns across different regions. Through the application of AI technology and data science principles, the control tower can provide a picture of activity previously unseen across a fractured or multi-agency supply chain.

Real time data:

The ‘internet of things’ (IOT) has allowed for the collection of large sets of real time data facilitated by a range of collection devices connectable to the internet. Control tower technology has benefitted from access to real time locations through GPS, as well as temperature data through portable monitors. This allows for the timely visualisation of the movement of a particular shipment or set of products through the supply chain, from forwarding sites, distribution hubs and ports. This real time data allows for the management of risk, by identifying points of temperature variation as they occur, save time and cost on investigating root causes of deviations and validation of the most efficient shipping lanes.

End to end supply chain risk:

As supply chains have become more complex so have the number of agents that operate within them. In the pharmaceutical sector there are multiple partner and stakeholder organisations that move  product through the chain from manufacturing through to patient/customer delivery. A single product chain may have up to ten points of brokerage between organisations responsible for its delivery, requiring complex sign off points and documentation. This brokerage risk can impact on the loss, damage or delay of products, which in turn impacts cost, regulatory compliance and the end user. Control towers – with their capacity to monitor real time data – can access a range of IOT products and partner networks, which can have a big impact on improving the efficiency in the end to end process.

The benefits of control towers

Control towers offer great value add to any complex supply chain and some of the leading products have been outlined below. It is important however to recognise that deploying control towers comes with a number of operational and cost associated risks. Primarily this is driven by non-standardised data processes between partner organisations without a common language and data management principles. As a result of these not being effectively deployed, predictive benefits through AI will be limited. Additionally, as they are cloud-based systems, data protection and security need to be optimal, especially when working in markets where data protection principles are in their infancy.

Control towers are a significant investment, but if deployed with the appropriate controls and methods of data management, they can prove a highly effective tool generating significant ROI on cold chain and other supply chain activity.

 

Readying the cold chain for Covid-19

No discussion of cold chain or analytics would be complete during 2020 without a reference to Covid-19. Aside from the bullwhip effects of panic buying on cold chains, 2021 is likely to see a surge in demand for cold chain deployment of any proven vaccine.

As noted above, with current wastage of vaccines globally, there is a risk that 1bn doses of any vaccine may be spoiled or damaged by ineffective application of cold chain methodologies. To address this and be ready for the COVID-19 challenge, the following factors must be considered:

  • Ensure that supply chain data infrastructure has the right level of investment and prioritization in the business
  • Identify cold chain market risks – do you know which markets or regions pose the greatest risk to loss or wastage?
  • Do you know where your cold chain congestion points are and can prioritise IOT resources to support them?
  • How well do your 3PL providers understand the cold chain and data challenges and how can you support them during Q4 of 2020 to prepare for distribution?

COVID-19 has taught us that supply chains remain vulnerable to external shocks and that these can be effectively mitigated through standardised, high quality and real time data sets. The Covid-19 pandemic may just become the ‘the control tower era.’

If you’d like to find out more about how we can help you with your transformation project in the life sciences sector, please call me on +44 (0) 7813 900 337 or email [email protected]


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