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I interviewed Conrad Ross who discussed  'why the pharma supply chain needs to be improved'.









Hey, Dustin, this Conrad Ross with Establish. I’m calling in response to the question why the pharma supply chain needs to be improved. Particularly, what are the improvement opportunities in the pharma supply chain? I haven’t talked to you in a while, and I do wish you a Happy New Year.


What I’ve noticed is that in the pharmaceutical and related health care industries, it’s not uncommon for us to identify annual cost-reduction opportunities at 10 percent or more.


These opportunities are typically found in the configuration of a finished-goods network and transportation and warehousing.


Configuration of Finished-Goods Network


Now, to get specific about mergers and acquisitions. Pharmaceuticals can grow organically by acquisition or by some combination of the two. By “acquisition,” I mean by acquiring other companies and also by acquiring products. Those that are grown by acquisition sometimes, for a variety of reasons, do not always fully integrate the acquisitioned companies’ supply chain purchasing functions into their own. If they were to do so, it would enable them to increase the leverage of their consolidated supply chain spends when negotiating pricing terms and/or service levels with vendors; “vendors” meaning carriers, 3PLs and 4PLs, suppliers, and so forth.


Companies that have grown rapidly by acquisition typically contain significant opportunities to increase their spend leverage and, consequently, reduce their supply chain costs. Leveraging of spends and vendor negotiations, however, is not limited to companies that have grown by acquisition. Companies that have grown organically can also obtain similar cost-reduction opportunities, as can companies that are downsizing.


There are many ways to increase the spend levels and, as a result, include vendor negotiations. For example, companies seldom separate the transportation cost contained in the landed cost in their raw materials. Therefore, they miss the opportunity to leverage this spend with the finished-goods spend when negotiating carrier-agreement rates. In addition, we sometimes find that there are missed opportunities for incorporating transportation costs associated with the transfer of WIP inventories of finished goods into the combined transportation spend. Companies need to look carefully at their entire transportation spend from end to end so that they can capture their best opportunities for leveraging their spend.


Beyond levering spend, changes in manufacturing locations, product mixues, customer bases, and related service requirements in transportation warehousing costs always occurring. The finished-goods logistics networks continually need to be evaluated to be certain that they remain efficient and relevant. The configuration of most networks require at least some modifications every 5 years.


Transportation Costs


Transportation costs in a pharma company typically average 2 to 6 percent of revenues, depending on the modes and classes of service used.


Since product values and therefore revenues are extremely high in the industry, cost reductions can be in the millions of dollars and sometimes even in the tens of millions of dollars. I think this identifies, Dustin, the potentials for improvement to savings.


Warehousing Costs


Warehousing costs typically average 1 to 2 percent of revenues. While it’s difficult to change third-party warehousing providers, it’s important to know that their costs are in line with the industry. If a new agreement is being negotiated, it’s equally important to know that their proposed costs will also be in line with the industry. Benchmarking warehousing costs and practices is an effective way to make this determination. Another way is to obtain cost through a formal request for proposal, the RFP process. Either method—benchmarking or the RFP process—can be effective. We’ve found that the RFP process is consistently the most effective for a number of reasons.





About Conrad Ross



Conrad Ross

I interviewed Chandramouli N.V who discussed 'Talent Management in Supply Chains'.






It’s good to speak with you today, Chandra, and I look forward to hearing your views on the topic of talent management in supply chains. Can you start by providing a brief background of yourself?


Brief background of myself is that I have a postgraduate in commerce, as well as a Master’s in Business Administration from the University of Mumbai. I currently work with Thermo Fisher Scientific as general manager, supply chain. I have actually had a career which has a span from front line sales to head of supply chain, so I think I’ve had stints in marketing, I’ve had stints in business development, and now in supply chain. I think I have a fairly broad- based experience across various functions in an organization and also across various industries. I started with the imaging industry, then I’ve done stints in the pharmaceutical industry, and I’ve also done a major stint in the medical-devices industry. This is, in brief, my career background.


What are the most important issues with talent management in the supply chain today?


I think if you look at the major issues that are there in terms of talent management in supply chain—and I’m speaking primarily with reference to what I have seen in the Asia-Pacific context—the issues are, number one, in terms of having competencies and skills. If you look at, for instance, the Indian situation, the number of education institutions that are actually providing supply chain education is extremely limited, so if you want to get somebody who is actually schooled in the principles of supply chain and has a basic understanding of things like, for example, demand planning except it will be extremely difficult to find. You will find somebody at a very junior level, and if you want to know stuff at higher levels, that could be, I think, a difficult exercise. The second thing is, I think, the fraternity of supply chain itself is a very small fraternity, so the choices that are there for you in terms of picking up people is, I think, very limited. The third issue, which is, of course, the fact that most of the training that you have within the organizations are mainly directed at the sales-and-marketing guys or the finance guys or, if at all, they expand it to have training on, let’s say, quality for manufacturing people and operations people. Supply chain as a function, I think, is evolving, and I think we have, the major problem in terms of finding the right set of people with the right set of competencies and skills.


Can you talk about why these issues are important?


Basically, I think today, when you look at supply chain as it has evolved, a supply chain guy was actually looked at as somebody who used to manage warehouses and stocks. Today I think you can look supply chain, I think it’s moved from the conventional definition of somebody who looks after stocks and optimizing stocks. Today supply chain, I think, is one of the avenues for unlocking the revenue potential in an organization. How do I say that? When you look at supply chain today, most of the optimizations that you can speak of in terms of sales, marketing, in terms of manufacturing, etcetera, has been looked at, but supply chain is one area where I think there’s a lot of potential that is there in terms of, first of all, improving forecasting where it could help you plan better. In terms of inventory management, where, if you adopt some smart techniques, you can surely be able to bring about a lot of working capital improvement in the organization. In terms of freight management, where, if you do, again, I think an optimization of the inbound and outbound freight, there’s an opportunity to get for you improvements. Also, the fact is, I think, a lot of exciting technology in terms of—of course, it’s likely dated now, as I speak—things like your advanced planning optimizers which SAP has introduced. These are giving you a lot of opportunity for you to do these things in terms of making supply chain a very powerful, competitive weapon in the market.


Do you have any recommendations?


The recommendations that I have is, I think, first of all, supply chain education and training, I think, need to be really formalized, at least in many parts in Asia, so I think there needs to be a lot of work for getting the supply chain function established. Other than just speak about a bit of production planning and sometimes speak a little about demand planning, there need to be courses for people at all levels in the supply chain. There are different levels that need to be done. For example, if you're looking at somebody at a very basic level, these guys need to have basic concepts of supply chain. In case you're looking at a director of supply chain, I think you need to have people who need to have orientation in terms of strategic inputs that they need to give from the supply chain point of view when they sit on a leadership team. First of all, I think education needs to be, I think, one area where a lot of investment needs to be made. Second is in terms of the training that is offered internally within the organizations by giving people opportunities to work on different aspects of supply chain. What happens is, people are either procurement professionals or they’re supply chain professionals who are concentrating on particular areas of supply chain. I think they need to have a broad-based experience across various areas of supply chain, like they need to go do a bit of planning, they need to do a bit of procurement, they need to do a bit of customer service, they need to do a bit of order management so they have a broad- based understanding of the entire supply chain end to end so that when the time comes for them to get into the higher echelons of management, these guys are prepared. Also, the fact is, I think, the more that people broad-base their experience and become more strategic partners and business partners, they often look at supply chain as a shared service. I think that gives supply chain a lot more visibility within organizations and also give them access to higher positions in the organization.


Thank you for sharing your views on talent management in supply chains.



About Chandramouli N.V



Chandramouli N.V


Thermo Fisher Scientific

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I interviewed Chuck Intrieri who discussed Collaboration in Logistics.




Hi, Dustin, thank you for allowing me to speak about collaboration in logistics. It is certainly just on the horizon right now; more and more people in logistics are talking about collaborating with their logistics partners. In third-party logistics it’s easy to sit down and demand cost reduction immediately as a shipper and customer. That is the wrong approach, in my opinion. It creates adversarial relationships.

Asking for cost reduction is great, but it has to be done in collaboration with your third-party logistics provider or supplier, for that matter. Collaboration is important in that both parties have to have authentic—not just lip service, but authentic—nondefensive presence and make a personal commitment to mutual success in the relationship. You have to be truthful, tell the truth and listen to the truth, be open, honest, listen, take action together, and create self-accountability.

I believe in creating a service-level agreement with key performance indicators so that both parties have marching orders as they collaborate to meet the goals they set as a team. You have to be self-aware of others, know yourself and your partner deeply, and be willing to explore difficult issues together. There’s always going to be conflict and difficult issues. The answer is to collaborate and solve them as a unit together. Use problem-solving methods that promote cooperative atmosphere; avoid fostering subtle or unconscious competition; get to the point where you have the skills that are necessary for successful collaboration.

You first must want to collaborate and be honest with yourself and your partner regarding what you want and what you're willing to do. After that, you must follow through. Be credible; always say and do what you say you will do. Credibility is very important. Also, an honest appraisal of your performance with your partner. Ask your partner if your performance meets their expectations. They, in fact, should go beyond the customers’ expectations.

There are many things you can do to improve a relationship to collaborate. Some of them are: telling the truth; realizing that you choose to be collaborative; seeking deeper self-awareness of each other; give up blame and postpone judgment; seek not to consciously hurt your partner, but work together in the spirit of cooperation; take time to envision yourself as you want to be with your partner; consciously change your limiting beliefs; search yourself; be as sincere and as vulnerable as possible; be in touch with yourself and your partner.

What you should be aiming for in collaboration is to cocreate value. You both want to gain value from the collaborative effort. You want to avoid adversarial relationships and have a seamless integration for value-added logistics services. You should put this information into the service-level agreement as to the type of value that you want. First of all, I would suggest that customer service is the number one value to both parties, and you want to go beyond the customers’ expectations.

It’s important that you communicate very, very much, at least on a monthly basis, and choose partners, the project manager, from the shipper customer and a project manager at the third-party logistics provider, to get together once a month and discuss the various service-level agreements that you put into the key performance indicators. They should be reviewed on a monthly basis anI interviewed Chuck Intrieri who discussed Collaboration in Logistics. be changed based on the situation and the culture.

It’s difficult to collaborate because most people are used to demanding what they need instead of asking the logistics provider to use their expertise in helping you find your needs. It’s important that you, again, cocreate value, take steps to optimize 3PL partnerships to cut waste, and create targeted value. Work together in a lean environment; think about a lean way. And have vested outsourcing in that you invest in each other. You need to follow a method and look at what works and what doesn’t and keep what works in front of you.

It’s important to look at risk assessment, margin matching, and incentives. Today both parties have what’s called gain sharing. If there’s a gain sharing in the agreement and you both see the value that you want. You share in that value, not one party or the other gains; you both gain in the spirit of cooperation. You set your strategic objectives—customer service, IT systems, tools, change management, metrics, training. You are specific in your service-level agreement. It’s measurable, attainable, relevant, and time-based. That’s SMART—specific, measurable, attainable, relevant, and time-based. That should be the essence of your collaborative efforts.

And, yes, it can be on a global scale, where you’re looking at your total supply chain as a more valuable system for an entire supply chain, with a single vision around seamless value, working together in the spirit of cooperation.

Thank you for this opportunity, Dustin, I appreciate it. Happy New Year, happy 2014 to you and everybody. Thank you very much, Chuck Intrieri, Charles M. Intrieri Consulting,, (714) 788-0744, Pacific Standard Time. Thank you for this opportunity, Dustin. If you have any questions, please call or contact me. Thank you, bye.

About Chuck Intrieri




Chuck Intrieri


Consultant with helpful wisdom and hands-on experience

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