I interviewed Evren Ozkaya who discussed Digital Factory and Digital Supply Chain.
Can you first provide a brief background of yourself?
Hello, Dustin. Thank you, and first of all, I appreciate the invitation for being here. A little bit about myself... My name is Evren Ozkaya. I'm the founder and CEO of Supply Chain Wizard. We are a management and technology consulting firm headquartered in New Jersey. We focus primarily in pharmaceutical industry and serving some of the largest manufacturers in pharmaceutical industry, the branded or generic manufacturers, around the world. And we focus on primarily in supply chain security and compliance projects as well as supply chain transformation and performance improvement projects.
Prior to Supply Chain Wizard, I was an executive in a pharmaceutical manufacturer in the supply chain practice. And prior to the pharma industry, I was with McKinsey & Company as a consultant in their supply chain management practice, serving clients involved in vital industries, including healthcare, medical devices, logistics, consumer packaged goods, and a little bit of private equity.
So in Supply Chain Wizard, what we do is we help clients understand their end-to-end supply chain operations, whether it is going deeper into their manufacturing and packaging operations or their warehousing operations or their operation between trading partners like suppliers and customers. It includes a holistic view of understanding the supply chain before we can help them with their supply chain management problems or opportunities.
We are headquartered in New Jersey in Princeton. We serve pretty much all the countries in the world, wherever our clients are. We operate mainly out of five countries — the United States, Germany, Netherlands, Turkey, and India.
In our services, we do it in two ways. One, of course, bringing domain expertise and supply chain management consulting expertise.And the other way we help our clients is bringing targeted software to specifically tackle their supply-chain-management challenges. Our typical clients include head of supply chain, head of operation or IT, or head of manufacturing and packaging in different parts of the world.
Can you talk about what is the Digital Factory and Digital Supply Chain? And why are they important?
Before I begin answering this question, I want to give you a little bit of context specific from the pharmaceutical industry. Pharma industry is going through a major, major transformation in the recent years driven by regulatory pressures and legislations introduced by different countries in the form of track and trace or supply chain traceability or, in other words, serialization.
So what this is is for the first time in pharma industry, the traceability of the supply chain, the products in the supply chain will be done, not at the batch level, but at the individual unit level, the saleable unit level, which means that from a vertical silo mode of operation, companies can transform themselves into a more horizontal flow where they have the ability to track any single product from the origin of the product — where are the manufacturer/manufacturers, which nodes in the supply chain it flows through, and where it ends up in the market.
So what is the big challenge here? The big challenge is the speed of change enforced by the regulations. So right now, there are more than 40 countries in the world with the serialization track and trace regulation, and the required timelines are all ranging from two to three years. So they the year 2020, more than 90% of the pharma supply chain in the world would be coming under the serialization and track and trace regulation. So the challenge is the speed of change. The challenge is the digitization of the supply chain and the amount of data that is being created and the lack of experience and expertise in handling this major change.
So, for the first time in pharma, we will be getting computers in some of the sides and factory shop floors. For the first time in pharma, the electronic connectivity between trading partners are becoming mandatory. So still, many of the pharmaceutical trading partners are all operating on emails and phone calls and, believe me or not, in faxes in terms of communication and exchanging order data and shipment data.
So now the companies are not ready for this change. A lot of investments are being made. And because of this major challenge, it is also opening up a major opportunity, which is a digital supply chain.
So the project we are helping the clients implement, primarily, is implementing track and trace infrastructure, which is consisting of equipment to help put unique serial numbers on every single unit and the software that is used to generate these serial numbers, maintain those serial number status, and then trace those serial numbers along the supply chain.
So when I say digital supply chain, it's the ability to look at the pharma supply chain, or any supply chain in any other industry, from a digital lens. The data is being the primary currency and how to use that data, how to transform manual operations into more digital operations with the help of the data. Because there will be a lot of data being introduced into the supply chain in the many years to come.
So when it comes to digital factory, the story is a little bit deeper in the shop floor operation. I just said earlier that for the first time ever, some of the factories will be getting computer systems on their shop floors. So currently, many of the medium and small-sized companies operate on a manual or machinery that is not communicating with any other machinery or any other system. Right now we have the ability to introduce computer systems, digitization and the ability to introduce sensors to the lines and packaging and manufacturing lines and collect the data from the shop floor and connect it with the overall supply chain flow.
So with the concept of digital factory and digital supply chain, companies would be able to automate some of their processes. They would be able to harness new data that wasn't previously there, and use that data in creating a trend analysis or insight analysis or, in some cases, predictive analysis to understand some [inaudible 00:04:33] for the future of their operations and use this to their advantage in becoming a digitized supply, a digitized factory, a digitized operation.
So, why it is important...why these concepts are important. First of all, the current supply chains are highly complex. Their efficiency levels are low, so they're highly inefficient and mostly depend on manual processes. So the future of the supply chain is, on the other hand, would be based on digital principles and data. It would be simplified and streamlined with the help of data and algorithms that can manipulate and use the data. The future of the supply chain would be automated, a lot more automated than today, and it would be highly efficient.
So take a look at the Uber supply chain, for example. It's the system of bringing the supply, which is the drivers, to the demand, which is the passengers and connecting them electronically through the use of cloud applications and knowing exactly where each supply point and demand point is and matching them together and simplifying the process. So like this Uber transformation Uber brought into the transportation industry, the track and trace and serialization is bringing a major transformation into the pharma industry.
So the approach is from a platform we create called SCM 3D, Supply Chain Management 3D, and there are three pillars of the transformation. Firstly is the data. That's where we're collecting more electronically, more automated. The second pillar is the dashboard, basically understanding data, creating insights, creating trends and potentially predictive analytics out of the data to get more insight into the operations. And thirdly is the decisions, meaning using those insights, using those data points, and making smart decisions about your day-to-day operations.
So using these three pillars — data, dashboard, and decisions — companies can be able to make much better decisions. They could be able to have a lot more visibility. The opportunities would be more visible. The challenges would be more visible, and the best of all, they would have the ability to pinpoint specific opportunity of a specific issue and focus to solve it.
So because of these reasons, the digital factory and the digital supply chains are extremely important concepts for the specific to pharma industry because of the major transformation I just explained, but also in many other industries.
How are the Digital Supply Chain and Digital Factory concepts put into practice effectively? Have you seen good results which you can share?
Let me give you an example from the digital factory. In one of our clients in New York, a major pharmaceutical manufacturer, we have been implementing an equipment, a brand new equipment, to make this serialization a reality. But after the implementation of the serialization system and equipment, we observed during the testing a significant drop in the efficiency, and the line speed slowed down. So we wanted to understand what the implication is. Obviously, the client wasn't happy with the result, and we want to understand how we can make it better, how we can improve. So we ask a very simple question, "What is the current baseline efficiency?" And unfortunately, we couldn't have the data to calculate the current baseline efficiency, let alone predict what might be the future efficiency. What we were sure was that there is going to be a significant loss in the packaging line, the manufacturing line efficiency.
We created a joint initiative in this case with the client, and we said, "We need a system, a digital way of capturing the activity data at the line," which is basically the times where the operation is running, producing, the times when it is down due to either clean up or set up or some sort of a failure in a particular machine.And if it is a failure, then which machine is failing? Why am I stopping the packaging operation?
So all these reasons were basically captured to create a proof of concept solution, a software solution in the cloud, which we call OEE Tracker. So OEE stands for Overall Equipment Effectiveness. It's a measure of the efficiency of the line, and it considers the time aspect of the efficiency, the productivity aspect of efficiency and the quality aspect of the efficiency.
Once we created the solution and combined the solution with the set of sensors, the internet of things, IoT sensors, that can count and number of products produced on the line digitally, capture this data, post it on the cloud, bring it back to the application, and therefore combining the inputs we receive from the operators as to when they are running and when they are down, and the reason for the stoppages, together with the line speed data and the count data from the sensors, as well as the vibration sensor data that tells us whether a particular machine is working or not, we could create a consolidated database of activities that enabled us to track the line operations 7/24, live. Whenever there was a shift, we were capturing all the activities. Whenever it was down or idle, we were capturing it as well.
After about two to three months with this pilot project, we took a step back. We analyzed the data we gathered, and we presented to the upper management. Basically the site leadership was seeing the data for the first time. And they were totally amazed with their own data that they were previously not capturing or capturing bits and pieces of it on set of spreadsheets or paper. So for the first time, everything came together in a digital platform, and the client could be able to see their own operations 7/24, end to end. And with that, we uncovered a lot of new insights such as the average time of the stoppages, the certain variability of the cleanup of the operation, the performance of particular products versus the others, which machine was failing more frequently than the others.
This whole effort alone, just tracking the operations digitally, helped us put 10 to 15% more productivity on the line because of creating awareness. Some of the operators or the supervisors were more motivated because they know they're being tracked, to better perform. They also contributed improvement initiatives that they have taken themselves — nothing formal — and this alone improved the line efficiency by 10 to 15% within a number of months.
Now the next stage of the operation of our project, we went into deeper advanced analytics. So what can we do with the data? How can we better you that data and give you better insights, such as predictive analytics? The predictive analytics, one example is, when is the next down time? And, which machine is more likely to fail, so that you can position your maintenance crew next to it. Or the advanced analytics could be in the form of scheduling. So, how can I take the work orders that are required to be produced this month, and which line I should produce by when? What product is running more efficiently on which line? All this data which previously didn't exist is now in a single system, and the systems are getting smarter by learning from the data continuously, so there is a little bit of a machine-learning element to it, so we can make better and better decisions over time.
This concept where we started took us one quarter to bring it up and running as a proof of concept, another quarter, a couple of months, to basically prove it on multiple lines, and at the end of the second quarter, the client was convinced that we need to implement this entire line in the entire factory. So now, we are operating around nine or ten different production lines in this particular site, which we call digital factories, the foundation of our digital factory, and it's very interesting. The client is very happy. They have the visibility that they never had before. They can see live operations and which lines are idle, which lines are running. They can calculate their capacity instantaneously. They can run all sorts of reports out of the system. So this was their first step into the world of digital factory, and now we are taking them through a very long journey of improvements, insights, and better operations because of this concept. So we are both very happy that we are learning with our client, and the client is very happy because they're getting real value out of the digital factory initiative and the transformation that they are running.
Thank you, Dustin, and kudos to you for providing a platform to the supply chain experts of the world on critical topics of our field. Thank you.
About Evren Ozkaya
Founder and CEO at Supply Chain Wizard, LLC