Right down the line26 October 2018
With regulations evolving fast, the discussion around track and trace revolves around meeting compliance deadlines. Dr Jyrki Syväri of Boehringer Ingelheim, Robert Jan van der Horst of DSM Sinochem Pharmaceuticals, and Tania Snioch of GS1 explain how traceability projects can intersect with a manufacturer’s business goals and deliver value across the entire supply chain.
More often than not, track and trace is discussed in terms of compliance. With regulations in place (or coming into force) across large parts of the world, the majority of the world’s medical devices and prescription medicines are now protected by traceability legislation. In the US, the applicable law is the Drug Supply Chain Security Act, which was introduced in 2013 and is being phased in up until 2023. The nation has already passed through the first phase of implementation: since 2015, manufacturers, wholesalers and repackagers have needed to provide lot-level serialisation. Currently, the US is in the second phase, in which serialisation must be provided at a unit level.
The original deadline for manufacturers was November 2017, but this was subsequently extended. In the third phase (which ends in 2023), every bottle or package will need to be traceable back to its manufacturer. In Europe, the Falsified Medicines Directive (passed in 2011) includes similar requirements. As of February 2019, all prescription medicines in the EU will need to be serialised on an individual product basis. In practice, this means featuring a globally standardised unique identifier, with batch number, expiration date and a random serial number issued by the manufacturer, in a two-dimensional barcode. The globally harmonised approach of using GS1 standards are used by suppliers trading their products in the EU member states for which the FMD will take effect in February.
All the difference in the world
Many other countries have traceability requirements that are beyond the scope of this article to cover in depth. Ultimately, all are working to the same end – to eliminate the problem of counterfeiting and ensure product integrity throughout the supply chain, ideally following a globally harmonised approach to identification and barcoding.
Some manufacturers may still require time to adopt track and trace solutions, and reap the full benefits, but a 2012 McKinsey report suggested that a manufacturer with $4 billion in annual revenues could realise significant cost advantages from adopting track and trace. These could include $90 million a year from inventory cuts, up to $12 million a year from reducing the costs of recalls and $25–35 million a year from reducing the financial impacts of counterfeiting.
While manufacturers, along with their supply chain partners, know they need to comply, the issue is often framed in terms of meeting deadlines and avoiding penalties. What is less frequently discussed is the business case for traceability. As Tania Snioch, the director of healthcare at GS1 Global Office, explains, the business benefits from implementing traceability can be wide-ranging.
“Many organisations are leveraging their traceability implementations to drive internal efficiencies and streamline processes with their trading partners. This is exciting to see,” she says. “Some examples of where traceability can deliver benefits beyond regulation are facilitated by the visibility provided by uniquely identifying the items moving through your business. Benefits include helping to reduce exposure to risk, manage and reduce costs, and increasing accuracy.”
For instance, traceability can help with product quality and safety management, to identify expired products and assist in inventory management. This will speedup recalls and withdrawals, making the process more targeted, accurate and efficient. Snioch adds that traceability can benefit all parts of the supply chain, from the manufacturer right the way through to the patient.
“Ultimately, traceability in healthcare is about making sure that the correct, and authentic, product is at the correct location for the patient when they need it,” she says. “Traceability is achieved by using unique identification of the items being tracked and traced, plus the location they are going to.”
For the most part, these identifiers are encoded in barcodes, to ensure information is captured accurately. This data capture activity is coupled with information sharing – product master data, transactional data and event data.
“Put together, the result is the opportunity to leverage visibility for every stakeholder about what is moving where within their business and between themselves and their trading partners,” she says. “The extent to which traceability delivers value to all supply chain actors depends on their vision for what this information could provide to their business.”
Dr Jyrki Syväri, the head of global process management operations, Boehringer Ingelheim, agrees that if value is to be delivered, everyone in the supply chain needs to share aims. “To deliver value across the entire supply chain, full track and trace needs to be established, and transparency of the transactions need to be guaranteed,” he says. “As long as some participants of the supply chain are not able or willing to share data, it will be hard to gain value from any traceability project.”
For the time being, he says, the lack of data sharing poses an impediment – at Boehringer Ingelheim, track and trace is mostly a matter of compliance and patient safety, and has little to do with meeting business goals.
“At the moment, we do not receive back any business-relevant data from markets such as Turkey, South Korea or Argentina, where full track and trace is in place,” he says. “In the EU, we have serialisation only, so we are not able to track our products in the markets, and we are not granted access to point of sales data. This means we do not see where our products are being sold.”
Ultimately, he feels that all partners in the supply chain need to be involved and willing to share information.
“As long as there is ‘serialisation only’ in place, traceability is nearly impossible to achieve,” he says. “We might, if available, embark in pilots to have a more in-depth look into this topic in the future.”
He adds that analytics tools can be helpful in this process, as there will be an enormous amount of data to be interpreted. If conclusions are drawn correctly, it will lead to having the products in the right place in the right quantities at all times. This will mean stock-outs and product destructions can be avoided, delivering the value anticipated.
Robert Jan van der Horst, the CIO of DSM Sinochem Pharmaceuticals, thinks that serialisation taken alone can benefit some companies more than others.
“If the processes of serialisation and supply chain management are fully integrated, serialisation data, as such, would not provide significant new insight in the company’s total data set,” he says. “For companies not integrated, they will be able to profit from a data set that was not earlier available.”
DSM Sinochem Pharmaceuticals is structured slightly unusually, insofar as the marketing and final packaging of its products are the responsibility of its partners. The company itself acts as a middleman, providing active pharmaceutical ingredients and finished dosage formations.
“It offers details exchanged from system to system that already possess rich data, and we fully incorporate the logistic data provided by serialisation with our own real-time logistic processes,” he says. “This enables a number of efficiencies that we would never be able to realise without serialisation.”
He adds that since serialisation is not yet fully live (legally, all EU companies have until February 2019), it is too early to say whether it can be used for future marketing purposes as well.
Broadly, he thinks that success in this domain comes down to how the project is approached – you need to think about integrating business processes, as well as promoting efficiency.
“This can only be realised if you begin well in advance, giving yourself sufficient time to view and position the project from an overarching strategic perspective,” he says. “Ultimately, the IT landscape of the company – either harmonised or scattered – will set the tone. Different types of IT tools need to be applied for different landscapes. The more your own house is in order, the better the strategic fit can be more quickly and easily realised with traceability projects.”
It is worth mentioning that companies such as DSM Sinochem Pharmaceuticals only have access to their own customer data, and cannot see what is happening across the rest of the supply chain. Overall data can only be purchased via a service provider, which delivers subsets of data for a fee.
Building the foundations
Snioch thinks there are a few options to ensure traceability projects are strategic. First, she thinks it’s important not to collaborate with partners and be aware of the direction regulation is taking.
“Second, base your implementation on a globally harmonised approach,” she says. “A foundation of traceability is being able to communicate clearly and concisely with your trading partners, and other necessary stakeholders, about the items being tracked and traced.”
Thirdly, she feels that stakeholders looking to implement GS1 standards should try to take advantage of the support on offer to them, not least from GS1 itself.
“Most of the challenges I’ve seen result from the implementers perhaps not having the full knowledge,” she says.“Having a vision of how traceability could benefit your organisation and incorporating this vision into your current planning is key.”
Snioch’s final piece of advice, is to think of future possibilities, not just what needs to be done today.