Control towers are transforming the supply chain, using new technology such as IoT to enable decision-making based on real-time insights. The significant benefits of the control tower can be teased out to KPIs with operational and strategic returns, including sustainability and financial payback. And to help measure these KPIs, the pandemic has perhaps given us the most comprehensive case study to date.
Figure 1. Pharma supply chain control tower
The accelerated pace of vaccine development will long be acknowledged as a remarkable moment in medical history, but vaccines don’t work at all if they don’t reach recipients. Before the COVID-19 pandemic, an estimated* 25-50% of vaccines were wasted globally each year due to a broken cold chain.
Looking at COVID-19 vaccines monitored using the real-time control tower approach, waste fell to less than 0.1% in the space of 12 months. As supply chain leaders across the biopharma industry embrace this approach, the improvement is expected to amount to tens of billions of dollars saved each year, not to mention the impact on patients. With more pharmaceutical products reaching patients at the speed and quality required to be effective, the health impact is substantial; lives are improved and saved.
The supply chain is a complex ecosystem of partners; a succession of links that does not form a neat line from A to B to C, because each link, each interaction, is itself an intersection in other complex networks of raw material suppliers, manufacturers, LSPs, carriers and so forth.
The multidirectional nature of the supply chain is why any damaged link creates risks – to quality, resilience, and sometimes even life. In designing a control tower, once a company identifies its current pain points, or pinpoints where its competitive advantage predominantly lies, this is where the greatest potential value lies.
Control towers, by definition, provide insights. Without downplaying the significance of such insights, the advent of real-time control towers enables a much greater level of actionability. As Controlant CEO Gisli Herjolfsson explains, it was the evolution of certain technologies that made this possible:
“The advent of IoT made real-time monitoring possible, and the integration of IoT technology is an ongoing task of developing and refining software and hardware solutions to connect every step in the control tower process.”
In the pharma industry, there are thousands of steps from the moment a drug is created to the moment a person receives medicine. Most of these steps can be grouped under five key phases: planning, sourcing, manufacturing, warehousing, and distribution. Depending on the company’s strategy and pain points, any phase falls within the scope of the control tower. “Each one involves manifold data paths: internal data, such as ERP and WMS; external data, from supplier data to weather reports; and status information coming from IoT loggers or carrier feeds, and so forth,” says Elmira Seitakhmetova, Senior Manager at PwC Management Consulting.
In isolation, this huge amount of data is a tangled mass of threads leading to static pieces of information. Woven together the right way, it is a valuable set of actionable insights with the power to boost efficiency and prevent loss in real time, as well as pave the way for future improvement.
It is also what enables optimization via autonomous decision-making, whereby events automatically trigger actions; from invoice generation to geofence alerts.
It may seem obvious, but to construct and implement an effective control tower, the data needs to be accurate and current. “To react quickly or take preventative measures, you need data in real time,” says Ada Palmadottir, VP Business Development at Controlant. “If the data is not current, then it shouldn’t be in the equation. Compromised or old data corrupts the resulting insights too, leading to misguided actions and decisions.” This is also a consideration when deciding what to do with data from external sources.
As well as the data being right, it needs to be the right data. In shaping the control tower, your company’s strategy and goals will determine what data and insights are relevant. Individual KPIs and key milestones will help decide the types of dashboards, metrics and analyses required. Palmadottir:
“A supply chain data repository, no matter how comprehensive, isn’t valuable until it is presented in a practical framework of actionable insights.”
This is no small feat, as it involves grasping complex relationships between people, processes, and products, and then highlighting excursions, shortages, critical orders, bottlenecks, excess inventory, etc.
To extract value from the data, you need the control tower’s built-in intelligence to turn your visibility into insights, and for those insights to be actionable, the actions, roles, and responsibilities must be clearly defined. “This requires a robust operating model and a clear governance structure,” says Luc Van Ostaeyen, Senior Director at PwC Management Consulting:
“To benefit from a control tower implementation, companies must put in place the right structure which enables agile ways of working and communication.”
The control tower makes it easier to detect patterns in the data that indicate weaknesses and opportunities in the supply chain so that managers can take strategic decisions to increase supply chain efficiency; a return in time, money, and resources.
The return on investment (ROI) is both short-term and long-term, provided a proper review process is in place. “The control tower connects real-time dashboards, aggregating relevant pieces of internal and external data,” says Palmadottir. “The resulting actions – such as intervening to avoid temperature excursions, redirecting a shipment along a better route, preventing the distribution of damaged product, or comparing the performance of suppliers or distributors to inform business decisions – are points at which the ROI becomes apparent.”
The journey of a product to the recipient is only the final step in the supply chain. The benefits of the control tower are both upstream and downstream, enabling greater visibility and control at any stage, from planning to sourcing, manufacturing, warehousing, or distribution.
To help safeguard the sustainable production and distribution of essential medicines, the control tower gives us much greater control of maintaining product quality and safety, as well as reducing global supply chain waste. It can be customized to focus on improving the way we meet customers’ expectations, the way we fulfill quality and compliance obligations, or the way we reduce our carbon footprint. Companies that commit to the United Nations Sustainable Development Goals will want to show their progress, for instance, and the control tower is a powerful tool that helps measure and demonstrate achievements, as well as inform planning.
The all-encompassing nature of the control tower is one of the reasons it adds so much value, but this can make it a daunting prospect for organizations in the early stages of building one. “One size doesn’t fit all, and different companies will develop different control tower structures to best meet their needs,” says Elmira Seitakhmetova.
The control tower setup adds value when applied to one or several market segments or products. It is highly customizable with a few core components: accurate data, well equipped personnel, established cross-organizational processes, and a robust operating model with clear governance.
The control tower is quickly becoming the gold standard of supply chain management. At the strategic level, it provides insights from aggregated data that inform decision-making and identify opportunities for strengthening the supply chain. At the operational level, the real-time control tower enables intervention to prevent delays or quality issues. Organizations adopting the control tower are seeing immediate benefits plus indications that their agility gains will bolster their long-term resilience to face unknown disruptions in the future too.
*Estimates of vaccine waste vary from source to source. For example:
20-40% is estimated by Logmore
Over 50% is estimated by The Last Mile as detailed in a case study submitted to the UN Climate Technology Centre & Network
The clinical trial market is in a state of flux; innovative therapies, working practices and startups are creating a landscape of constant churn. To navigate it, supply chain optimisation will be essential.
New technology is sometimes sluggish to penetrate the pharmaceutical industry. With an era of digital transformation promising to optimize pharmaceutical supply chains, how are companies learning to embrace the change?