Digital transformation in supply chain management

Karsten Smet, CEO of ACI Group, looks at ways the pharmaceutical and agrochemical industries can adapt to changing times

The pharmaceutical and agrochemical industries are two sides of the same coin. Both are foundational pillars of human civilisation. Both invest heavily in R&D, with the percentage of revenue invested sitting at around 19% and 10% respectively.^1,2 And both face increasingly long product development cycles due to the tightening regulatory environment and the difficulty in finding product leads that offer more than incremental improvements.

As the two industries face some similar challenges, they can also share some common solutions. In many cases, these solutions take the form of supply chain efficiencies, which can help businesses optimise their innovation pipeline and boost profitability in an environment where time and budgets are both squeezed.

Importance of flexibility

Many of the challenges faced by pharmaceutical and agrochemical businesses are out of their direct control. They can lobby to try and influence or advise on new regulations, but can never decide on them. This means they often must often clear stringent regulatory hurdles before any innovations can be approved for market entry. As these regulations evolve, businesses must often flex their supply chains as they adapt to their new regulatory environment.

Other challenges become clear when sourcing critical resources. Even something as basic as water presents a degree of risk. Both industries can contribute to and be negatively affected by water pollution, creating a vicious cycle that can be hard to break. 

Wastewater contaminated with pharmaceutical ingredients, pesticide, and other agents can leak into the environment, which can cause havoc in regional ecosystems and the economies that depend on them. It also contributes to water scarcity, which poses a severe risk to chemical production processes and drives up prices.³

Again, industry can influence this through its own ESG policies, but cannot directly control it, as many regions of the world already face acute water stress. Managing water-related risks depends on significant operational risks, investments in technology and bioremediation, and – once again – flexible supply chains that can adapt quickly to incidents such as flooding or chemical leaks in regional water supplies.

Kick-starting the digital transformation

The major question that may well have appeared in your mind as you read through the above is ‘How can a digital supply chain help with something like water scarcity?’ Obviously, while the environmental impact of the pharmaceutical and agrochemical industries has an influence, there is a complex, interwoven web of other factors at play. 

Optimising a supply chain using digital technology will not prevent extreme weather events like drought and flooding. What a digital supply chain does offer is the ability to adapt and flex supply chains at a moment’s notice, thus helping businesses adapt to it.

Take the issue of inventory management. Supply chain volatility means that many businesses struggle to balance their stock levels without over- or under-stocking. With the pandemic still fresh in the mind, many readers will be acutely aware of how erratic demand can prove to be in the event of disease outbreaks – not to mention other events like wildfires, droughts and political trade embargoes.

Add in the extra wrinkles like temperature-sensitive products and counterfeit ingredients, and managing a secure global supply chain becomes staggeringly complex task. Just keeping supply chains moving becomes a challenge – and best practices like dual sourcing can be quickly forgotten about.

These operational challenges become much more manageable with proper end-to-end visibility of the whole supply chain. This is the optimal way to ensure quality and respond quickly to issues and where a digital transformation becomes invaluable to a business.

Unlocking new potential 

Of all the digital technologies on the market today, none have captured the industry’s imagination like AI. AI-powered software can enhance transparency throughout supply chains, ensuring maximum visibility and security from end to end. 

It can analyse data to provide supply chain professionals with the insights they need to make informed decisions, help forecast demand, optimise material routes to reduce transport costs and delivery times, and more to ensure sensitive products can be transported efficiently. In the future, AI can be used to enhance automation in warehouses, improving robotic sorting and picking, increasing accuracy and efficiency, reducing human error, and keeping operational costs as low as possible.

At present, AI is capable of analysing vast quantities of data and identifying patterns that humans could not. It means that, should one particular product supply become disrupted, finding an alternative route or product can be achieved in minutes rather than days. Even better, demand forecasting enables businesses to take pre-emptive action and sidestep disruptions entirely in many cases.

Perhaps most importantly, AI can kick-start the digital transformation of a business’s supply chain, future-proofing business operations as we move into the Industry 4.0 era. This technology will prove to be vital to ensure supply chains continue to move smoothly. 

The Internet of Things means almost every detail about a product can be tracked as it moves through the supply chain, from the temperatures it has been stored at to the time it has spent at customs. In many cases, this data can be supplied in real time, putting businesses in complete control over their supply chains.

ACI has embraced these opportunities by building its own AI portal, Supply Chain Manager. This provides our customers with previously unattainable insights into their own orders, and is continually being updated to ensure it can adapt to market conditions such as Forex volatility, environmental conditions and supply shortages. AI never stops learning, which means the level of control customers have over their supply chains never stops growing.

Enhanced security today & tomorrow

This element of control becomes all the more important when viewed through the lens of security. The global pharma and agrochemical supply chain is vast and complex. This means there are many opportunities for criminals looking to exploit any potential weaknesses in the chain, and as such both industries are frequent targets of cyberattacks.⁴

The solution here is to adapt and stay one step ahead of the criminals using sophisticated security systems. Blockchain is one such system that plays an increasingly important role in supply chain security. 

Blockchains are essentially decentralised ledgers that keep track of important details about products, such as their purchase history and their movement. Anyone can view this information, but due to its decentralised nature, editing it is nearly impossible, offering a reliable and valuable way to verify the authenticity of products at every step of their journey. In an era where chemicals and ingredients can circumnavigate the globe before arriving at their final destination, this level of security will prove to be invaluable.

Conclusion

While the pharmaceutical and agrochemical sectors are distinct in their purposes, they share many challenges. As regulatory landscapes become more stringent and environmental concerns more pressing, both sectors must look towards solutions that not only enhance productivity but also mitigate risks. 

While risk will always be some part of the equation, the digital transformation of supply chains stands out as the best way to minimise that risk, offering businesses the agility, visibility, and security needed to navigate an increasingly complex global market. Tools like Supply Chain Manager can enable them to stay ahead of disruptions and maintain a competitive edge.  

Contact:
ACI Group
[email protected]
www.acigroup.biz

References:
1. https://www.cbo.gov/publication/57126
2. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-future-of-agrochemicals.pdf
3. https://wwfint.awsassets.panda.org/downloads/case_study___diagnosing_water_risks_for_the_pharmaceutical_sector_1.pdf
4. https://www.mckinsey.com/industries/life-sciences/our-insights/four-ways-pharma-companies-can-make-their-supply-chains-more-resilient