Investing in digital supply chain capabilities has the potential to unlock significant value for a business and the entire healthcare ecosystem
The life sciences supply chain has evolved into a critical, strategic element, making it possible for many companies to reach their growth and competitiveness targets. However, digital disruption is creating a necessary pivot point to transition from the traditional supply chain to digital supply networks.
Many factors are influencing the move to digital supply networks. For instance, several significant disruptions are occurring across the life sciences landscape – disruptions involving socioeconomic, scientific, and digital advances, and necessary changes to business models.
The result is a total change in how the industry and its value chain operate.
- Socioeconomic factors are impacting the way that therapies and related services are delivered to patients and caretakers;
- Groundbreaking scientific advancements and specialised medicines are expanding the range of therapies available;
- Generics are seeing a global expansion, while specialised products are being released carefully in highly developed markets only;
- Digital capabilities have yielded richer patient insights, created new business models, and completely disrupted the traditional paradigm for delivering health outcomes.
Moreover, there are specific triggers intensifying the urgency of digital supply networks.
- The complexity and specificity of products and therapies are increasing, driving up costs and lead times;
- The bar is rising on patient service expectations, necessitating increasingly sophisticated delivery models, increasing the cost of capital, and elevating levels of excess and obsolete product.
A digital supply network involves organisational structures, processes, and technologies which create a seamless, frictionless planning and execution function that can manage the complete supply chain. Digitisation makes it possible to converge traditional supply chain elements into true supply networks. The resulting digital supply networks are a seamless integration of talent, physical, information, and financial supply chains.
The transition to digital means establishing new business models that incorporate service and are closer to the customer. There must be several supply chain models, not just one. Although the shift to a digital supply network may represent a comprehensive change, it is still founded on the same supply chain fundamentals of service, inventory, and cost.
Unfortunately, most life sciences companies are still structured based on function. That perspective tends to separate several planning and execution areas – design, sell, plan, make, source, deliver, return – resulting in competing priorities across the time horizon of the value chain.
Leveraging disruptive technologies and building a digital supply network means breaking down these traditional functional barriers and focusing on integrated services that drive value across the enterprise.
Most companies are moving rapidly toward personalised therapies and novel patient services, such as home patient care and immunotherapies, which are disrupting the traditional supply chain. Recent Accenture research found that 95 percent of life sciences survey respondents said they would invest more in patient engagement technologies. The resulting pressures on the supply chain are intensifying and require dramatic improvements in performance.
More than just a tweak
But the extent of needed change is extensive – more than just a simple upgrade. A new mindset is required to deal with the complexity of this new supply chain environment and to capitalise on the market potential that it unlocks. Companies able to adapt and enhance their supply chain capabilities to create a digital supply network have tremendous opportunities to capture market share, increase overall profitability, and manage risk more effectively.
For instance, Accenture research shows that for a $10.6 billion company, a partial digitisation strategy leveraging the end-toend capabilities of a digital supply network enables upwards of $387 million in cost reductions, representing a significant lift to overall EBITDA.
The digital response
Several supply chain issues persist or are being amplified by industry trends. Digital supply networks can turn these issues into advantages, and drive value.
For instance, some companies are experiencing more volatility in planning and execution. Long-term planning faces new challenges, while short-term execution issues take more resource time. And, it is difficult to create seamless coordination between functions and share information on a realtime basis among commercial, supply, and distribution processes.
To address these issues, digital would leverage real-time information and unstructured data to proactively respond to accelerating volatility in planning and execution processes. Using advanced analytics to increase the precision of mid- and long-range planning enables more proactive, short-term operations and service specificity to customers. Single-source platforms would make possible seamless coordination between functions and the sharing of information in real-time.
Each supply chain function has its own priorities and performance metrics. But these must align with other functions, overall supply chain objectives, and business outcomes. Within a digital supply network, end-to-end visibility and connectivity facilitate performance measurement in line with broader business outcomes, placing priority on business value and customer or patient service.
In another instance, most companies’ fulfillment models are too static. Leaders are struggling to manage cost and complexity issues. Traditional distribution and transportation models support high volumes and fewer SKUs. But these models can also be inflexible and inefficient when extended to individual customised orders, wider product assortment, and multiple last-mile delivery options.
Automated, touchless delivery services can provide the right level of service to support highly sensitive pharma, biologic, and medical products. These digital fulfillment models will expand with the heightened demand for personalised services and the need to scale to meet market change.
Digital supply networks leverage cloudbased platforms and control tower set-ups. They connect scale, and ultimately integrate data from several sources, such as consumer devices, multiple points of sale, and internal and external data warehouses. Although the concept of control towers has been around for years, Accenture views the new approaches to control towers as core to a digital supply network.
By monitoring and managing operations, control towers provide overarching supply chain visibility and analytics while helping with end-to-end supply chain transformation. By introducing digital capabilities, such as artificial intelligence, analytics, and mobility, a company may be able to break down the walls of traditional supply chain functions.
Demand and supply planning can be combined to focus on true network planning. Customer service and order management can be managed as one function. Deployment and transportation also can be managed as one function.
Beyond a piecemeal approach
To realise digital’s growth potential, companies should go beyond piecemeal additions of such technologies as analytics, social media, mobility, cloud, cognitive computing, and 3D printing. They must leverage technologies in an integrated way to re-imagine the supply chain as a digital supply network that drives differentiation and top line growth.
By making their supply chains more responsive, proactive, predictive, real-time and scalable, companies can move quickly to take advantage of growth opportunities.
Digital supply networks have the ability to add (or shed) suppliers or customers and invest in (or divest) businesses, as required, for maximum efficiency. This organisational flexibility is critical in markets whose growing complexity and fragmentation is a top issue.
Digital supply networks excel at creating data-driven, actionable insights. They leverage digital technologies, and analytics in particular, to raise the supply chain’s IQ, enabling automated execution and accelerated innovation. These networks also leverage cloud technologies and analytics to provide end-to-end supply chain visibility in real time. They also keep a company connected, internally and externally, through seamless collaboration.
A recent Accenture study shows that digital supply network trendsetters follow a common pattern to pinpoint what capabilities they need, take action to implement them in a meaningful way, and capture the benefits.
- Reinvent the supply chain business case, preserving basic efficiencies, but examining how to leverage digital to change the value proposition and enable growth at speed for the enterprise;
- Rethink operating models, examining the supply chain for digital enablement and letting digital show how to reimagine a supply chain so that it can reap benefits;
- Expand the ecosystem externally beyond the four walls and leverage digital to access and share data, while managing cybersecurity risk.
A digital supply network represents a new paradigm for the supply chain, revolutionising the way that companies serve patients and customers, and also a necessity of doing business today. Life sciences companies should focus on more sophisticated technologies but not bolt new technology to an old model, which would realise only a fraction of potential value. Leadership must examine their high-impact technologies and determine the bold moves needed for strategy, processes, and organisation to push beyond today’s reality.