subscribe: Posts | Comments | Email

Announced Demonstration of Printed NFC-Enabled Smart Label

Comments Off

Supply Chain Matters has been following recent developments in the area of smart labeling, specifically a series of announcements from Norwegian based printed electronics technology provider Thin Film Electronics ASA. This technology provider’s latest announcement is the most significant to-date, with profound long-term potential benefits for certain industry supply chains. 

In an October of 2013 Supply Chain Matters posting, we called reader attention to the announcement that Thinfilm had successfully demonstrated a fully functional, stand-alone, integrated printed electronic temperature tracking Smart Sensor Label. The label was described as being built from printed and organic electronics with low power requirements with potential application to track and monitor temperature and environment for pharmaceutical products or to monitor the shelf-life and food safety of perishable products. In early April of this year, we updated readers on two other strategic partnership announcements involving Thinfilm’s smart label product development plans. One included a partnership with Temptime, for potential cold-chain tracking applications for pharmaceutical products, and another with PakSense Inc., in the development of intelligent sensing specifically designed to monitor perishable goods.

This week, yet another rather noteworthy announcement has been made, namely that Thinfilm has successfully demonstrated an integrated system product that combines printed electronics technology, real-time sensing and near-field communication (NFC) functionality. The significance of  Thinfilm NFC Enabled Smart Labelthis  announcement concerns technology that enables high‐performance transistors to support the high frequency RF circuitry required for NFC communications in Thin film’s labels with the potential to support a potentially wider range of sensing needs. A video depicting the proof-of-concept is included in the announcement on Thinfilm’s web site.

Last week, this author had the opportunity to speak with Thinfilm’s Executive Vice President and head of North America practice, Jennifer Ernst. in anticipation of this week’s announcement.  Jennifer explained that the addition of NFC opened opportunities for the sensing label to be paired with a mobile device such as a smartphone, where GPS focused or other mobile and RF related functionality can be incorporated into item-level sensing.  As an example, the receipt of a truckload shipment of perishable products can be monitored and tracked along its journey. The notion of item-level tracking from farm to fork becomes closer with such capabilities.  The fact that an infrastructure of mobile broadband and cellular networks already exists in many geographic regions, potentially removes the infrastructure cost burden that hampered previous efforts of RFID enabled item-level tracking. The smart labels will further support protocols to communicate with hand-held readers. We specifically asked the very obvious question: What about the individual cost of a label? The response we received was that Thinfilm’s goal is to target a cost that is significantly below that of current RF-based temperature monitors. Of course, the industry will have to await the real result, but we did get a sense that Thinfilm is driving toward a compelling cost-benefit proposition.

According to this latest announcement, Thinfilm anticipates delivering commercial samples of smart labels to key partners in 2015.

We continue to bring reader attention to specific smart label enabled developments because they represent, from our view, the dawning of a new era of item-level tracking, one that can harness the potential of the “Internet of Things”, namely a sensing label, with predictive analytics capabilities. Consider the possibilities that near real-time information concerning the environmental or shelf-life condition of the physical product can be integrated with supply planning, inventory management and customer fulfillment needs. Consider the possibilities in anti-counterfeiting, drug and food safety as well as avoidance of waste, spoilage and obsolescence.

This is exciting stuff. It provides evidence as to how convergence of technologies are now leading to the achievement of the goal for integrating physical and digital supply chain information and more predictive decision-making capabilities.

Bob Ferrari

© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.


Bayer Announces its Intention to Become the Number Two OTC Medicines Provider

1 comment

Last week, we featured a Supply Chain Matters commentary, Major Supply Chain Disruption On-Tap for Pharmaceutical and Drug Focused Supply Chains. The commentary outlined our concern that the current new wave of large-scale merger and acquisition activity involving billions of dollars that is currently surrounding the pharmaceutical and drug sector provides added risks to derail and add incredible distraction and disruption to ongoing supply chain improvement efforts.

Today, there is yet another development that adds to the potential for disruption.  German based Bayer AG has announced its intention to acquire the consumer care business of U.S. pharmaceutical firm Merck & Co. for an approximate purchase price of $14.2 billion. This transaction is subject to approval from various antitrust agencies with a closing expected in the second-half of 2014.

The acquisition is characterized by Bayer as the path for providing global leadership in over-the-counter (OTC) and non-prescription medicines. The announcement comes after Merck conducted an auction-like process seeking a high bidder for its OTC business.

According to the announcement, the acquisition will place Bayer in the number two market position in OTC products. Merck’s OTC categories include cold, allergy, sinus, dermatology, foot health and gastrointestinal medicines. Principle Merck brands included are Claritin©, Coppertone©, Dr. Scholl’s© and MiraLAX© which each have a strong presence in North America markets. Merck’s consumer care business is reported as generating 70 percent of revenues in the U.S. market.

Bayer indicates in its announcement that it expects” “… the integration of the businesses to generate significant cost synergies, for example in marketing spend and cost of goods, in the region of USD 200 million by 2017. “  Paying upwards of a premium of 6.5 times 2013 revenues and 21 times earnings, Bayer has no choice but to drive cost synergies.

From our supply chain and B2B lens, implies the potential for disruption over the next few years since this types of estimates turn out to be overly aggressive. Bayer inherits more diverse North America distribution and retail channels where cost and healthcare delivery are under intense scrutiny. Both Bayer and Merck manage their businesses with an SAP focused enterprise information backbone.

A published report by Reuters points out that OTC drugs units carry far lower margins than prescription drugs businesses but some drug makers regard them as attractive due to the stable stream of cash that these products can generate. Further, they often require less spending on research and development and can be less exposed to the loss of patent protection where consumers remain loyal to a brand. The combined OTC revenues among the combination of Bayer and Merck are expected to exceed $7 billion in annual revenues.

Thus, the wheels of business change and the potential for multi-year distraction becomes prevalent for two different global corporations with different cultures and business process practices.

Who knows what other major industry announcements are in-store for the remainder of May, as well as 2014.

Bob Ferrari

Major Supply Chain Disruption On-Tap for Pharmaceutical and Drug Focused Supply Chains

1 comment

In the pharmaceutical and drug sector, business headlines continue to reverberate a slew of current or planned merger and acquisition activity as the major industry players are apparently jockeying for strategic advantage in product pipelines and cost structuring.

We previously noted on Supply Chain Matters the acquisition of India based generics drug producer Ranbaxy Laboratories by Sun Pharmaceuticals Industries in a $3.2 billion deal that attempts to address a very troubled generics drug maker. That pales with industry announcements made just in the past three weeks. Guest contributor and book author Rich Sherman addressed pending shifts and re-focus required across healthcare delivery supply chains.

Eli Lily announced a $5.4 billion deal to acquire the animal health business of Novartis with the goal of making its existing unit the second largest animal health company behind Zoetis. Lily had previously acquired similar business units from Johnson & Johnson and Pfizer. Novartis and GlaxoSmithKline announced a series of transactions valued at $20 billion that reportedly will re-shape each of these drug makers in key strategic areas. Novartis aims to concentrate on pharmaceuticals, eye care and generic drugs, Glaxo in vaccines and consumer healthcare. Valeant Pharmaceutical is attempting to broaden its eye and skin care drug lines by offering $46 billion to acquire its rival, Allergan. And then there are continuing reports that Pfizer is pursuing a massive $100 billion deal to acquire its rival AstraZeneca.

Obviously, the picture unfolding is one of massive consolidation and movement involving upwards in $200 billion in deal activity at this point.

As we and other analysts have often noted, pharmaceutical and drug supply chains are already struggling with many supply chain and B2B focused initiatives directed at improving dysfunctional efforts for consistent quality and market responsiveness while improving end-to-end supply chain visibility, planning and coordinated execution. There is also the ongoing effort for remediation of constant incidents of counterfeit or bogus drugs appearing in various global healthcare supply chains.

We have to conclude that this current wave of wide-ranging industry M&A activity provides added risks to derail and add incredible distraction and disruption to these ongoing improvement efforts. Regarding the potential for huge industry disruption, AstraZeneca’s CEO recently told the Wall Street Journal: “I think we’re better off focusing ourselves on what we do well and partnering where it makes sense.” It seems as though at least one industry executive understands what disruption can bring not only internally but to various specific supply chains as well. The industry should share ample supplies of Mylanta if all of these deals come to fruition.

Deals of this magnitude generally lead to disruptions and required changes in business processes and supporting information systems, especially when external manufacturing and services partners are involved.  Supply contracts need to be re-visited or re-negotiated as supplier contracts shift while information linkages among product development, the supply chain and directly to production processes are subject to changes and/or modifications.  Many of these deals imply the potential for added overhead and direct labor cutbacks which are not going to help as well.

On the broader scale, potentially caught in the middle of these massive changes are the drug distributors and healthcare service delivery entities that continue to undergo a fundamental transformation from delivering patient treatments to delivering patient outcomes which alone was another source of required attention. Healthcare delivery supply chains may now have to deal with pharmaceutical and drug providers that are literally changing chairs for the menu of preferred suppliers. It would seem that if any of the industry brand owners were to allocate just $1 billion, a cost to pay all of the lawyers, to just item-level tracking and counterfeit drug remediation it would add more to long-term revenue, profitability and overall industry supply chain responsiveness to patient needs than what’s on-tap currently.

We do not want to appear in any way as alarmists, but it seems from our vantage point that industry executives need to perhaps consider the effect of these massive changes on their current and proposed supply chain delivery capabilities and needed improvement initiatives. Rather than a primary focus on past performance metrics, the implications for managing through distraction and change are already occurring, and industry supply chain leaders will be hard pressed in change management vs. positive transformation change.

We certainly encourage readers residing in healthcare industry supply chains to weigh-in on the Comments section attached to this posting regarding what the heck is going on and how these wide-scale industry changes will impact industry supply chains.

Bob Ferrari

© 2014, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.

India Based Ranbaxy Laboratories Acquired- Quality Conformance Remains an Issue

Comments Off

Supply Chain Matters has featured multiple commentaries citing India based generic drug producer Ranbaxy Laboratories. Our latest commentaries were in a specific posting in late January and in an India based industry regulatory commentary published in February.

Thus, we were not at all surprised with this week’s announcement that Japan based Daiichi Sanko Co. the parent of Ranbaxy, has agreed to sell the generic drug manufacturer to India based Sun Pharmaceutical Industries Ltd. in a deal reported to be valued at $3.2 billion in a mostly stock-based deal. This transaction is expected to be completed by the end of the year.

The U.S. market accounts for a significant amount of Ranbaxy’s current revenues, while the U.S. Food and Drug Administration (FDA) currently bars imports from four out of five Ranbaxy production facilities in India due to inspectional findings. According to a report published by the Wall Street Journal, after a five year effort, Daiichi Sanko retreated from the expensive efforts to attempt to fix Ranbaxy’s drug-producing processes. Daiichi acquired Ranbaxy in 2008 for $4.6 billion. FDA warnings and citing’s continued throughout this entire period. The CEO of Daiichi indicated to the WSJ: “The deal will help accelerate a solution to the series of problems at Ranbaxy.”

A reflection on the broader picture, however, remains on the issue of production conditions across India based pharmaceutical facilities.  A report published by Reuters points out that India’s drug inspectors are hard pressed to oversee current drug production facilities. An India based drug official indicates to the Reuters reporters that there are 1500 inspectors responsible for more than 15,000 drug manufacturing facilities. Inspectors lack vehicles to travel to sites with reports that some inspectional practices are ignored. A study carried out two years ago concluded that one in every twenty-two locally made samples was of sub-standard quality. According to the Reuters report, about 40 percent of generic and over-the-counter medicines sold in the United States originate at over 500 India based production facilities. While facilities are barred by the FDA from shipping to the U.S., they typically ship to other global locations.

A follow-up report published by the Wall Street Journal (paid subscription) quotes workers and former employees of Ranbaxy as indicating “they received little training and were instructed to keep production going, even if that meant cutting corners.” One former maintenance technician at Ranbaxy’s Toansa plant indicated that he often signed blank documents which were filled in with information later to appear that equipment has been inspected. However, the WSJ cites former and current FDA officials as indicating that Mumbai based Sun Pharmaceutical has a better reputation for quality. However, in March, the FDA barred imports from a Sun API plant in Gujarat.

On her visit to India in February of this year, FDA Commissioner Margaret Hamburg was diplomatic, indicating that a few India based drug manufacturers have been overshadowed by recent lapses in quality at a handful of pharmaceutical firms. The Reuters report seems to dispute that statement. Dr. Hamburg further indicated that officials at India’s Ministry of Health and Family Welfare share this goal and both agencies plan to work together to improve lines of communication and diligently work to ensure drug products exported from India are safe and of high quality.

With the proposed combination of Sun Pharmaceutical and Ranbaxy, the two India based generic drug producers when combined providing even more global scale, it would seem that the urgency among broader industry and India government regulators should be raised to aggressively address systemic production process issues and support strict adherence to published global Good Manufacturing Practices. Both domestic India drug consumers as well as global drug consumers expect such practices, and the reputation and brand value of India’s drug makers is clearly at stake. The Indian government is not the sole answer, rather India’s collective drug producers as a whole need to step-up their priorities.


General Hospital Has Been Cancelled! – A Need for Renewed Emphasis on Healthcare Supply Chain Management

Comments Off

A Supply Chain Matters Guest Contribution from Rich Sherman

So you think that Obamacare is changing the healthcare industry in the United States? Think again.

It’s just the tip of the iceberg. The healthcare industry is undergoing a fundamental transformation from delivering patient treatments to delivering patient outcomes. And, it’s turning the industry upside down. The television series General Hospital may have celebrated its 50th anniversary last year; but, in real life General Hospital is about to be cancelled.

With the transformation to patient outcomes, healthcare providers simply can’t afford to treat anything generally. Specialty patient outcome centers (SPOC) are emerging throughout the healthcare industry. With nurse practitioners having expanded diagnostic and treatment licensing, general health clinics are appearing in every corner drugstore, 24/7. Emergency treatment and diagnostic centers are emerging in every strip mall. SPOCs, such as oncological, cardiac, ophthalmic, orthopedic, cosmetic, etc. for every ailment are emerging in every city. Quite simply, patient care centers are appearing and proliferating across the country increasing the cost and complexity of healthcare supply chain management as well as operations management in general.

Consider that it is not unusual for supply chain costs to consume 35% or more of the operating budget of a healthcare facility.

Supply chain management is a new term to most hospital and healthcare administrators. Haven’t they got enough on their plate with compliance, reimbursement, Electronic Medical and Healthcare Records (EMR/EHR)? Yet, with the transformation in the industry, administrators have to be more focused on revenue and cost. Effective supply chain management addresses both and healthcare providers have to consider bringing on a new breed of supply chain professionals to their leadership team even to the extent of hiring a Chief Supply Chain Officer. Most other industries are recognizing the significant contribution supply chain excellence makes to the financial health of the organization.

Transforming from materials and procurement management to supply chain management requires a more holistic view of the organization’s operations. Beginning with demand generation, acquiring patients to generate revenue, through demand fulfilment, delivering a successful patient outcome, supply chain management is the support system that enables cost effective, high quality delivery. And, it’s not optional. With the proliferation of patient delivery locations, competition for revenue is heating up. We’re finding more and more of our clients are seeking help in attracting patients just to maintain occupancy and revenue. But, that’s just treating the symptom.

The cure is to be found through providing a successful outcome for operations excellence. Operations excellence requires professional operations management. Medical professionals have to focus on patient outcomes not operational outcomes. This will create a transformation in the leadership structure of many healthcare providers from medical leadership to management leadership. The days of doctor controlled operations are waning. Healthcare providers that are restructuring their organizations for effective supply chain management will lead the way as the industry transformation continues.

General Hospital may be cancelled; but, the requirement for delivering successful patient outcomes will never end.

About the Author: Rich Sherman is an internationally recognized researcher and author on trends and issues across supply chain management. He currently serves as a Principal Essentialist at Trissential LLC in their supply chain consulting practice. His book Supply Chain Transformation: Practical Roadmap for Best Practice Results (Wiley, 2012) has received praise by practitioners, academics, and non-supply chain executives as a great read on business transformation. Rich has been a previous guest contributor to Supply Chain Matters.

India’s Drug Manufacturing Regulators Reach Out to the U.S. FDA

Comments Off

Supply Chain Matters provides an update to our previous commentary concerning the latest citations from the U.S. Food and Drug Administration (FDA) concerning India based generic pharmaceuticals producer Ranbaxy. In addition to Ranbaxy, India based producers Wockhardt and Strides have also been cited for failures in compliance to good manufacturing practices.

Last week on her first visit to India, FDA commissioner Margaret Hamburg declared on her blog that lapses by a few select drug makers within India have clouded good manufacturing practices followed by other producers in the country. The commissioner noted: “Ensuring that the products distributed in the United States meet our requirements for product safety and quality is among my top priorities as Commissioner. Unfortunately the many Indian companies that understand good manufacturing and quality processes have been overshadowed by recent lapses in quality at a handful of pharmaceutical firms.” Dr. Hamburg further indicated that officials at India’s Ministry of Health and Family Welfare share this goal and both agencies plan to collectively work together, including a first ever, statement of intent, to improve the lines of communication and work diligently to ensure that the products being exported from India are safe and of high quality.

Dr. Hamburg’s visit was well timed and garnered significant press coverage within India, including The Economic Times. India’s legislative and regulatory leaders have hopefully internalized the need for stepping-up standards in drug manufacturing among the chosen few who reflect negative perceptions on the remainder of drug producers across the country.

« Previous Entries Next Entries »