Improve Supply Chain Management

??Dear Ark Friends,

We want to share with you a new Use Case for improving supply chain management.

Problem

The pharmaceutical supply chain consists of all partners involved in the drug manufacturing and distribution process, starting with raw materials and ending with patients. Here you will find a wide range of information on topics such as track and trace, serialization, and supplier audit/management. The fundamental goal of supply chain management (SCM) within the pharmaceutical industry is to make the right product, for the right customer, in the right amount, at the right time (1). And that process brings many challenges in the operational part in terms of collecting data in real time and developing sustainable methodologies to optimize the use of resources and avoid waste of materials and products.

Size of the Problem

• According to the IQVIA Institute for Human Data Science, the biopharma industry loses $35 billion USD annually due to temperature-control failures across supply chains (2).
• 90% pharma manufacturers reported that they didn’t have full visibility into their supply chains and didn’t trust the in-transit data they were receiving (3).
• The pharmaceutical industry spends about $1 billion per year on energy expenses and produces 55% more emissions than the automotive industry (4).

Why it matters?

In a global economy where cross-border trade contributes 50% of GDP, the Covid-19 pandemic has had an irreversible impact on supply chains. For months, it has put "essential" pharmaceutical and healthcare logistics teams through a stress test unlike any the modern world has experienced. In doing so, it has accelerated the need to reassess all the moving parts, from the factory to the pharmacy, sparking what is called the "end-to-end innovation" of pharmaceutical and healthcare logistics. Pharmaceutical supply chains in a post-Covid-19 world will consist of resilient systems and processes infused with reliability, transparency and intelligence, at every stage.?

SCM has a lot of drudgery and monotonous work involving money and time for the pharmaceutical and medical device industry. For example, manual document submission can cost companies 6,500 hours a year, a substantial loss of time that impacts productivity. AI can take over these administrative jobs, freeing up human employees to work on other projects at the same time (5). Not only that, this inefficiency causes the waste of resources and materials, where only in Latam there is a loss of 700 million USD in medicines that expired due to excess stocks in warehouses (6).

Solution

AI systems can use past trends and market signals to forecast demand. Warehouse managers can use them to see what they need to store more or less of. They could then avoid surplus and deficit, maintaining a consistently prepared operation. Thus, pharma manufacturers will have a full report of the dynamics of demand, storage and production of their products that will allow a better operation and decision-making process. Moreover, AI predictions about customer demands will help to fill orders faster, prioritize shipments, optimize route planning and inventory management (5,7).

It has been demonstrated that early adopters of AI in supply chain management saw a decrease in logistics costs of 15%, an increase in inventory levels of 35%, and a boost in service levels of 65% (7).

Data Sources

• Inventory Records: information about the products that come into the warehouse, leave the warehouse and remain within the warehouse.
• Demand records: historical data of the regional sales where the warehouse is located.
• Production data: self-reported data of the amount of product that comes from fabric.

Citations

1.Moosivand A, Rajabzadeh Ghatari A, Rasekh HR. Supply Chain Challenges in Pharmaceutical Manufacturing Companies: Using Qualitative System Dynamics Methodology. Iran J Pharm Res. 2019 Spring;18(2):1103-1116. doi: 10.22037/ijpr.2019.2389. PMID: 31531092; PMCID: PMC6706717.

2. IQVIA. (2023, January). Pharma’s Frozen Assets: Cold chain medicines. IQVIA, White Paper. Retrieved February 10, 2023, from https://www.iqvia.com/-/media/iqvia/pdfs/library/white-papers/iqvia-pharmas-frozen-assets_final.pdf

3.Tive, S. B. (2022, March 30). Five Critical Challenges Facing Pharma Supply Chains. 2022-03-30 | SupplyChainBrain. https://www.supplychainbrain.com/articles/34798-five-critical-challenges-facing-pharma-supply-chains

4.Pharma Companies Cutting Energy Consumption To Gain A Competitive Advantage. (n.d.). Centrica Business Solutions. https://www.centricabusinesssolutions.com/us/blogpost/pharma-companies-cutting-energy-consumption-gain-competitive-advantage

5.Nichols, M. R. (2021, December 15). 10 Ways AI Improves Distribution and the Supply Chain. Medium. https://towardsdatascience.com/10-ways-ai-improves-distribution-and-the-supply-chain-bbd2dc600965

6.División de Desarrollo Económico de la Comisión Económica para América Latina y el Caribe (CEPAL. (2018). Estudio Económico de América Latina y el Caribe. CEPAL.org. Retrieved February 10, 2023, from https://repositorio.cepal.org/bitstream/handle/11362/43964/141/S1800837_es.pdf

7.Fletcher, C. (2023, January 6). How AI can mitigate supply chain issues. VentureBeat. https://venturebeat.com/ai/how-ai-can-mitigate-supply-chain-issues/