Last week I had the opportunity to be the master of ceremonies for the 2011 OpsInsight Leadership Forum, which was produced by Halcyon Business Advisors.  The conference provided a great line-up of speakers including AT&T, Aberdeen Group, Accenture, Cardinal Logistics, CCI, IBM, The Shingo Prize, McDonalds’s Corporation, Vecco International and Wal-Mart.  The executive level attendees represented a diverse group of industries with many different challenges.

In my conference opening, I observed that the continual challenges facing productions and operations management, namely more demanding customers, complex, globally stretched supply chains, rising labor costs and dramatic increases in disruption and risk events can each significantly impact the ability of any organization to compete.  My challenge to the attendees was to reflect on the fact that now more than ever before, capabilities for flexibility, agility and transformation are no longer optional for operations management, yet each brings its own unique challenges.

Many of the conference speakers reflected on these challenges and what was really interesting was that many speakers reinforced that technology and tools are not the real challenge but rather changing business and organizational culture tend to be most difficult for many operational focused teams.  The reasons are many.  Operations teams sometimes do not get the visibility or sensitivity that other business functions may garner.  Leadership and business structure also plays an important factor.

Some takeaways I noted from our speakers were:

• Operational excellence must be baked into the fabric of corporate culture and that begins with the leadership of top management.
• Supply chain and operational leaders need to be able to balance many different aspects of business process capability that include being adept at operational results linked to business strategy, standardization, consistency and tools.
• Little things can make a big difference.
• Leaders must see and acknowledge reality.

I attended one think tank session that brought home many if not all of these concepts.  The session was facilitated by Thomas M. Feeney, the President and CEO of SafeliteGroup with headquarters in Columbus Ohio.  For readers unfamiliar, Safelite Auto Glass is one of the leading providers of automobile glass repair and replacement in the U.S. with over 4 million customers.

It is not often that this author encounters what I would describe as a dynamic and inspirational CEO, and Mr. Feeney certainly filled those requirements in his beliefs, communication and articulation of leadership principles. How many CEO’s are you aware of who can sit down with a total group of strangers, without a script, and completely articulate the fabric and culture of the company, and field all questions related to that culture?

First and foremost, Feeney reinforced that changing culture starts at the top, and that any organization needs to motivate change from the basis of how people are hired and rewarded in their day-to-day jobs.  Safelite’s philosophy is to hire for social skills first, by seeking out people who are empathetic and helpful by nature.  Safelite’s people are measured on how they go the extra mile to resolve customer needs and Mr. Feeney personally contacts and praises employees when they go to extraordinary means to satisfy customers.  Safelite further believes that customers want to speak to real people, and thus all customer center calls are automated but rather answered by a live person in an average response time of 11 seconds. How refreshing is that! An Executive Services group, an elite team of 40 employees was also formed to proactively resolve more challenging service issues.

Safelite teams also embrace business social media techniques as a means for further reach out with customers, including the leveraged use of Facebook and Twitter, with proactive two-way communication with potential dis-satisfied customers. Feeney noted that he himself has contacted disgruntled or praising customers by use of his own social media accounts, and has fostered a culture that embraces these tools while including appropriate safeguards. He characterized social media as another means of customer reach and opportunity to effect a more positive customer engagement, even with a potential non-conforming service experience.

The results for Safelite have been extraordinary with customer loyalty metrics that outpace many well-known brands.  The company constantly measures its Net Promoter Score (NPS) and how that score impacts increased revenue and customer referrals.  Employees are constantly made aware of the NPS score and how their individual contributions affect the score.  As a result, in the last two years, Safelite’s revenues have increased 27 percent along with corresponding profits.

Safelite provided a great story and a superior demonstration of how corporate culture can impact operations excellence and how a CEO can be proud to speak and celebrate this excellence.

Today’s business world moves at a much higher cadence of change, with higher stakes.  It is often operations management that provides the means to delight customers, respond to ever changing product demand or overcome extraordinary events.  Now more than ever, operations has a broader role to play, beyond any four walls of a production or service facility.  Operations is the business, and must have the capabilities of agility, flexibility and transformation.

What is your view?

Are operational teams valued for the contribution they provide?

Are metrics and performance criteria designed to reinforce the traits described?

Bob Ferrari

We have on frequent occasions penned Supply Chain Matters commentary related to the increasing occurrence of counterfeit or bogus goods across multiple industry and governmental supply chain networks. This growing issue has impacted product-related as well as refurbished product supply chains and has contributed to a more important consideration in supply chain risk identification and mitigation. In December, we noted how this problem has spread across the most sensitive of supply chains that being the defense-oriented supply chains of U.S. military agencies.  In both industry and defense sectors, unsavory operators have developed sophisticated techniques to counterfeit brand trademarks on components, taking advantage of unsuspecting buyers in their quest to find lowest-cost supply, or tap secondary distribution channels.

Another wake-up reminder to this growing problem will now catch the attention of certain BlackBerry© smartphone owners.  This week, the U.S. Consumer Product Safety Commission announced that about 470,000 BlackBerry batteries distributed by Asurion are being voluntarily recalled due to an overheating and safety problem.  According to the recall notice, the batteries in question are counterfeit, and “these batteries were used across virtually all modes of refurbished BlackBerry devices distributed by Asurion prior to November 1, 2009.” Readers should note that Asurion is a well-known provider of consumer electronics add-on protection services for many mobile phone providers.  Their marketing tag line reads: Your Technology Protection Company.

The sobering aspect to this recall is that the batteries of suspicion carry a BlackBerry brand, which implies that an  uncertain number counterfeit batteries penetrated the supply chain without apparent detection.  The Recall Alert in-fact  provides a rather revealing phrase concerning the origins of these suspect batteries: Manufactured In: Unkown The fact that the dates of shipping span as far back as March 2004 is another concerning sign.  The Notice indicates that Asurion has received two reports of these suspect batteries causing minor burns. The CPSC notes that it is still interested in in receiving incident or injury reports that may be directly related to this incident.

I strongly suspect this incident will provide interesting challenges for consumers  with refurbished BlackBerry’s, since identification of genuine vs. bogus batteries will be key to mitigating this recall in a timely and cost effective fashion.  A web site has been referenced to provide consumers with information on how to identify the counterfeit version. Yes ladies and gentlemen, you have to identify if your battery is counterfeit based on various images of batteries.  The bottom of this Battery Exchange web site also notes that consumers should not contact Asurion directly, that this exchange program is being administered by a separate administrative entity.  That is even more interesting, adding a separate entity to the exchange and mitigation process.  Does anyone recall that past incident with Dell’s defective laptop batteries?  Dell clearly communicated the location of a web site where consumers could input a serial number and get real-time feedback if that battery was subject to recall.  I visited Asurion’s web site and as of this writing, there is no mention whatsoever of this recall program, or a reference to the separate battery exchange web site.  Interesting indeed.

The ever increasing popularity in smartphones and sophisticated consumer electronics brings with it high expectations for product reliability and customer service. Consumers pay premiums for these products because of the expectation that these are premium and durable products. Buying an add-on assurance program just adds more to these expectations. Being informed that the prime power source of your device may be counterfeit, trying to locate clear information, and having to determine this on your own based on visual inspection is not what consumers want to hear.

A supply chain risk mitigation plan must include means to quickly trace and identify suspect parts, and also be able to quickly respond when a potentially harmful quality problem arises. Clear and open communication is critical.  Think of Toyota’s latest incident.  Having just heard from the U.S. government that sticky accelerator pedals may have indeed been the root-cause of the recent rash of UIA incidents will not take away the damage that was done to brand reputation.

Quality or conformity of components applies not only to individual brand owners, but their add-on service and reverse logistics providers as well.  All involved are extensions of the brand, and consumers can often be unforgiving.

Bob Ferrari

The following guest posting is a contrbution from Atul Chandra Pandey, Industry Head- Enterprise Applications Integration and Service with Infosys Technologies.

I met with Bob Ferrari at Sterling Customer Connect event in Dallas in late April of this year and we were exchanging thoughts on emerging themes and trends in the supply chain space especially in the context of the recent economic downturn.  It was quite an interesting and engaging interaction where we discussed a host of topics ranging from logistics to order management / fulfillment, supply chain planning and customer service. One of the key thoughts which we synchronized on was how customer service is becoming central to organizational thinking and how supply chain execution – especially reverse logistics- can play a central role in creating differentiation. In this blog I have outlined how reverse logistics can help create this differentiation.

As mentioned in my blog on key value chain trends earlier this year, customer side equations are taking prominence over rest of the value chain. Based on my interactions with my clients so far this year, I have found this trend to be further strengthening. This is especially prominent for customers in the high tech / consumer electronics sector where new products are introduced now almost every quarter and with reducing differentiation between brands (product quality and reliability is a given now), retaining customers is becoming ever more challenging.

Based on my observations (types of IT projects getting funded, new initiative lists from the business stakeholders), these clients are increasing focus on strengthening all dimensions of customer touch points including both pre-customer acquisition processes (lead management, opportunity management, qualification / conversion) and post-customer acquisition processes (customer service, warranty management and technical support).

One of the key areas of focus in this renewed thrust on customer service is to leverage reverse logistics which traditionally has been a cost function and often not seriously attended to. The recent economic downturn drove organizations to rethink the entire value chain and look at every opportunity to squeeze costs and retain customers. Reverse logistics provides critical link in connecting sales & marketing and customer service chains and provides significant opportunities for reducing customer pain and increasing satisfaction, controlling costs, and gaining deeper visibility into customer choice and preferences.

Based on my interactions and analysis of my clients, leveraging innovative reverse logistics practices can help create differentiated customer experience at multiple levels. These can be divided into 3 lifecycle stages of customer experience 1) minimize occurrence of disruptive event 2) minimize pain in the event of disruption and 3) enhance product design to offer enhanced future experience

Performing remote diagnostics and remote correction on high value hardware / software assets (high tech equipment – such as networking gear, storage devices and servers) is great example of minimizing occurrence of disruptive event. Combined with electronic delivery of required software patches / fixes, the lead time to correct disruption is also significantly reduced.

Apple’s genius bar in Apple’s retail stores is an excellent example of the second category – minimize pain in event of disruption. All you need to know is the location of the nearest store – which again could be found from an app on your iPhone!  The entire product return / exchange process is managed seamlessly by these outlets. Minimizing wait time for replacement / fixing the issue and absolving customers from the headache of returning product helps minimize the disruption in customer experience.  .

Getting first hand visibility into customer issue and feeding it back into R&D, engineering and manufacturing can greatly help in enhancing future product releases and improve user experience. Usually Engineering, R&D and manufacturing orgs are not seamlessly connected with customer service. Further customer service itself may not be the first direct link to the actual customers. A great example of this scenario is mobile equipment. If there is a problem with a cell phone handset, (say Samsung), customers will not go first to Samsung, they will first go to the carrier (Verizon, Sprint). Carriers will do the initial diagnostics and then pass it on to manufacturers. In many of these cases the manufacturer may not even know the situation in which the customer experienced the disruption. (I actually had this problem just a couple of weeks back when I ordered first cell phone for my daughter – which went blank the next day. We went to the Verizon service center and got a replacement handset, however I am not sure when / whether Samsung will get the complete details of my problem). A great deal of customer choice and product usage data is also not available to manufacturers directly in these cases.

In all the above cases information technology has great role to play to support and take reverse logistics to the next level. Leveraging information visibility to anticipate disruption (smart sensors / diagnostics / asset management), manage disruption (guide customer to minimize disruption / take to point where disruption can be managed) and leverage disruption data and linking it to the back end functions in the value chain can help create much better future experience than simply focusing on the physical side of managing returns.

I anticipate the face of reverse logistics to significantly include and leverage value chain information than only be limited to physical asset recovery and disposition functions.

As always, would look forward to your thoughts and comments.

About the author – Atul Chandra Pandey , Industry Head – Enterprise Application Integration and Services with Infosys Technologies and has more than 14 years of IT experience. He is responsible for sales and engagement for Enterprise Application Integration (EAI) and services such as supply chain, customer care and Master Data Management (MDM) for manufacturing and the banking capital markets industry. Atul is also involved in program management, process consulting, IT outsourcing, implementation and sustenance services, project management and delivery, business analysis across leading package and technology services.
Atul shares his views on supply chain management at www.infosysblogs.com/supplychain

Further Disclosure: Infosys Technologies is one of other paid sponsors of the Supply Chain Matters blog.

Note: The following posting can be viewed and commented upon on the Kinaxis Supply Chain Expert Community web site.

A Wall Street Journal article last week, Home Depot Undergoes Renovation (paid subscription may be required to view) once again highlights how this remodeling and building materials retailer continues to try to overcome market share loses to rival Lowe’s. The article notes that Home Depot’s history of supply chain capabilities is hampering the company’s productivity and customer service, as compared to Lowe’s, its prime industry rival.  In the article, Home Depot executives concede that the company’s supply chain still won’t be state of the art even after a current investment phase is completed.

Home Depot just reported its first rise in same store sales since 2006, and its stock has lost half of its value over the past 10 years because of shareholder perceptions that the company is not competing efficiently with its industry rivals.  In the article, rival Lowe’s CEO is quoted as noting that he was confident that the Lowe’s supply chain capabilities would continue to provide a competitive edge [over Home Depot].

The notion of losing market share does not lie squarely on the shoulders of Home Depot’s supply chain teams. Rather it is on the awareness and actions of its former senior management.  They did not adequately address both the need for more responsive customer service and investing in industry leading supply chain operational effectiveness.  Instead of enhancing these capabilities, former management led by ex-CEO Robert Nardelli chose to focus on a strategy of centralization and massive IT, and the results are still a rather heavy anchor for this retailer. Much has been written in traditional supply chain media about the Home Depot transformation story, but in my mind, these stories fall short of addressing insight and learning that can be derived.  More importantly, there are some key takeaways around the specific notion of whether smaller, more-focused IT systems deployments trump large-scale and unwieldy deployments that promise multiple benefits for multiple business objectives.

Past history and learning from others are the greatest lessons in management.  There are constant reinforcements and learning that point to the fact that the success of any large-scale transformation lies in the right balancing of the three most important factors of right people, right process and right systems. Take a moment to scan an August 2004 article published in CIO magazine.  The article notes that the origins of Depot’s original success were a decentralized business model where stores were populated with highly knowledgeable sales persons with backgrounds in various building trades.  When customers had a home improvement project, they were confident that their Home Depot store could be just as knowledgeable as the local hardware store in recommending what to buy and how to install.  Regional and store-level managers, those closest to the customer, were empowered with decisions of merchandising and inventory mix.  An original business process design principle was that individual stores would serve as principle stocking centers, in essence a warehouse store model.  IT systems were for the most part homegrown, under the belief that the Home Depot business model was unique and beyond the capabilities of packaged software at the time.  Average store revenues in prime geographical markets were roughly $60-$80 million, which could justify high levels of de-centralization.

Home Depot’s troubles began when the chain decided to accelerate store growth.  A hodgepodge of different store layouts caused customers to be confused as to where to find articles. Multiple store expansion in primary and secondary geographies also caused average store revenues to decline, exposing inefficiency in inventory management.  The majority of supplier shipments flowed directly to the stores and resulted in the Home Depot being the single largest less-than-truckload shipper in the United States, since about 80 percent of supplier shipments were sent directly to individual stores on half-empty trucks. Individual stores were their own stocking centers and store associates had to spend more time in unloading trucks than serving customers.  Managing individual suppliers on delivery performance was an individual store task, causing suppliers to have the upper hand in hiding inefficiency.  Economies of scale for buying from individual suppliers were lost, and transportation systems were not up to the job of managing these higher volumes of activity. The homegrown IT systems also became unwieldy and expensive to modify as the overall scope of business increased.  The business model became compromised as to who had the most stores in the most locations vs. superior customer service.

When previous CEO Nardilli took the reins in December 2000, he decided to make dramatic changes.  From his origins of senior management at General Electric, the primary goal became lowering the overall costs of operating the business and returning more to Wall Street and shareholders.   Reorganization included the centralization of merchandising, store planning and marketing, which rival Lowe’s was already successful at doing.  The goal was to make all stores look the same for shoppers, as well as to dramatically reduce operating costs at the store level.

The prescription further called for large IT that could deliver dramatic gains in productivity, efficiency and decision-support needs. In 2002, he hired a new CIO who came from Delta Airlines, and a $1 billion overhaul of IT infrastructure was prescribed.  This IT transformation included among its projects, replacement of point-of-sales systems, including installation of self-checkout systems, a huge data warehouse for sales and labor management information look-up needs, and assorted ERP investments in PeopleSoft and SAP.  The 2004 CIO article notes a background quote from retail consultant George Whalin, President of Retail Management Consultants.  He did not accept the assertion that all this technology could improve customer service, and further asserted that technology was rather being positioned as the answer to eliminate workers and improve margins.  I found this Whalin quote to be most profound: “their ability to distinguish the stores is going to be badly damaged the more they go to this model of more technology and little in the way of service.”  That was a consultant quote from six years ago.

For 10 straight quarters, from Q2 of fiscal 2001, through Q3 of fiscal 2003, same store sales and net earnings paled in comparison to Lowe’s.  Home Depot stock felt the impact, dropping from $67 in December 1999 to $20 in January 2003. During this same post 9/11 era, consumers were very active in their home self-improvement projects, meaning lost-sales for Home Depot. Meanwhile, Lowe’s had already been quite successful in practicing a conservative IT model, one more focused on highly specific business needs such as implementing retail planograms, and empowering existing store associates with automated inventory information. Whereas Home Depot was the first to implement automated checkout, Lowe’s continued to have existing store associates trained to cover registers during peak volumes.  Their assumption was that people were to be supplemented by process improvement as opposed to eliminated.

During SAP’s 2005 Sapphire customer conference, the then CIO Robert DeRodes hand picked by Nardilli, was on center stage touting a multi-year, $50 million rollout program. I attended that conference and distinctly recall hearing about the multiple customer support and supply chain process improvements that would be garnered as a result of this SAP deployment. 

In 2006, Mark Holifield was hired as senior vice president of supply chain and mandated to modernize the supply chain. Holifield has extensive retail industry supply chain and merchandising credentials, and had previously led the supply chain efforts at OfficeMax, for 12 years.  Holifield is a pragmatist, and he rightfully surmised that the supply chain deployment model had to be turned on its head, and fast.  Lowes had implemented a logistics hub and spoke store distribution model as far back as the early nineties. Holifield laid out an aggressive plan of transformation.  A primary goal was to flip inventory flows, moving the majority of inventory through regional flow-through distribution centers, while shifting inventory replenishment decisions to the RDC’s themselves. With the endorsement of current CEO Frank Blake, the company announced an additional $260 million investment in improved supply chain capability through 2010. The end-state goal is have more than 75% of COGS (cost of goods sold) flowing from the RDC’s.  The company also smartly invested in both a supply chain network design and inventory optimization analysis in order to understand the most efficient means to deploy its new RDC network to balance transportation and inventory investment needs.

Flash forward once again to January 2007, after the resignation of Nardilli. A blog entry published on ZD Net commented on the IT report card to date, and then speculated that a new CEO would most likely usher in a downshifting on the benefits of large IT. In 2008, Home Depot hired Matt Carey, formerly the CIO of EBay for two years. More importantly Carey spent more than 20 years with Wal-Mart, where he was senior vice president and chief technology officer. During his tenure at Wal-Mart, he managed the rollout of the wireless RF infrastructure and led the implementation and integration of Walmart.com, Samsclub.com and the grocery home delivery business in the U.K.  The sense was that Carey would bring a more pragmatic and complimentary approach to IT, but keep in mind that Walmart is not noted as having a high customer service model within stores. The emphasis has always been on lowest cost.

Meanwhile on the supply chain front, Home Depot’s project teams have been hampered by the need to not disrupt exiting retail store operations while the transformation to RDC’s occurs. These same teams must also balance this changed distribution and inventory management model with the existing SAP rollout.

Flash forward one more time to January 2010, and in an effort to dramatically impact customer-facing capabilities, there is now the announcement of a $60 million investment in Motorola hand-hand terminals.  A direct quote from Carey notes the following.  “If you compare us to a world-class retailer, from a technology perspective, 1991 is kind of where we are pegged. This is the first big customer-service tool we’ve given our associates in a very long time.”  While I suspect that this quote was made in the context of customer-facing IT, it certainly does not endorse the merits of the previous multi-million IT investments.

While this has been an uncharacteristically longer than usual posting for this blog, I wanted readers to dwell on the important lessons that can be derived from the ongoing initiatives underway at Home Depot.  Industry competitive advantage is really about the practical ways that teams can balance the needs for people, process and technology to solve customer needs.  Too often, especially in today’s business environment, firms fall into the trap of focusing on the near-term needs for eliminating people to increase profits. Applying massive amounts of technology to solve large problems vs. tailored technology to enhance a business process or in the case of retail, providing answers to customer problems and buying needs seems to be a perspective lost by those who stand to gain by huge transformations.

In the specific case of Home Depot, closing the supply chain gap with Lowe’s remains a self-admitted open question. 

What your view on near-term vs. longer-tern transformation which occurs in phases?  What about large IT vs. focused IT applied to supply chain transformation needs?

 Bob Ferrari

In our last Supply Chain Matters commentary on the topic of H1N1 vaccine availability in the U.S. on October 28th, we touched upon the then current imbalance in providing adequate supplies of the H1N1 vaccine.  Since we are now approaching the Thanksgiving holiday weekend in the U.S. where lots of families gather together, I thought it would be an appropriate time to provide an update on what the U.S. government is indicating as availability of the vaccine.  From my perspective, the picture of availability looks far better, but certain logistical challenges remain.

The status update as of November 23, 2009, indicates that close to 59 million cumulative doses of vaccine were available at government distribution depots for shipment to individual states.  Of that number, slightly over 49.5 million doses have been shipped out to state distribution sites.  Compare that to the October 28 status of 16.8 million doses shipped, and we can conclude that the availability picture is getting much better in terms of the ability to administer vaccine to the high priority and broader population. A visual look at the CDC’s allocation vs. shipped availability graph indicates to me that the current challenge is more than likely the logistical challenges of getting these larger amounts of vaccine from government distribution depots into individual health centers for administering the vaccine to candidates. 

My suspicion is that the overall availability of H1N1 vaccine will get a lot better during the month of December as manufacturers continue to complete shipments from production sources and supplies make their way to final destinations.  The U.S. government has purchased a total of 250 million doses of flu vaccine. That may be little comfort to those who are traveling this coming week and weekend, but the message is be patient, the supply situation, from my perspective, looks to be improving.  Perhaps we might be able to look forward to having ample availability of the H1N1flu vaccine by mid to late December, hopefully prior to the December and January holiday periods when families once again travel and congregate.

As for the normal seasonal flu vaccine availability, we will all have to wait until manufacturers shift their attention to distribution of that vaccine to government agencies, which looks to be much later in the upcoming influenza season.

 Bob Ferrari

Much has been written and discussed concerning the current unavailability of adequate doses of the H1N1 vaccine to combat the current swine flu pandemic. As outbreaks of H1N1 influenza continue to peak in the U.S. and other countries, delivery of the vaccine has been falling short of expected levels.  In the U.S., government agencies anticipated that 40 million doses would be on-hand by the middle of October, but a mere 13 million doses have arrived, prompting growing fears that the vaccines will arrive too late to stem potential swine flu deaths.

Since this blog is dedicated to commentary related to supply chain business process and information technology, I thought it would be helpful for readers to view the current problem from a supply chain lens. Our loyal readers are welcome to pass along a link to this posting to those that would benefit from education to the magnitude of the effort.

Let’s look at the current problems from the perspective of value-chain scope and complexity. 

Vaccine producers are dealing with a production and distribution problem of enormous scope.  A medical history expert at the University of Michigan indicated in a press interview “that this is potentially the largest mass vaccination program in human history.”  The World Health Organization (WHO) estimates that as much as three billion doses of vaccine could be produced in a single year.  That represents an incredible level of production and distribution scope.

To adequately prepare for both a potential H1N1 pandemic, as well as the normal outbreak of seasonal influenza, many countries have pre-ordered two different vaccines, the H1N1 specific, as well as the recurring seasonal flu vaccine.  Timing is of course most critical, since the vaccine must be delivered in adequate time to buffer a seasonal outbreak.  There are a minimum of three large-scale drug producers working on volume production and global distribution; GlaxSmithKline, Novartis, and Sanofi-Aventis SA. Glaxo alone has invested more than $3 billion on research and incremental manufacturing in anticipation of supporting a flu pandemic.

Vaccine is produced in batch production techniques, with cycle time varying depending on the characteristics of the particular batch.  Supply chain planners in process-related industry who deal every day with planning batch production are very familiar with the complex challenges related to having to account for various aspects of variability in scheduling the output of a batch production process.  While new production methods are currently being investigated, the majority of the current vaccine demand is grown relying on a fifty year old, egg-based production technique.  One of the problems underlying the current delay is that H1NI virus is not growing as quickly as expected in this production process. Apparently, this problem was anticipated as early as this summer, when U.S. government officials were already predicting a shortage of the H1N1 vaccine by mid-October.  A good perspective on the current production difficulties can be found in a U.S. News and World Report article, Production Problems Plague Delivery of Swine Flu Vaccine.

Another form of controversy concerning vaccine production relates to the use of adjuvant as an additive. Adjuvants are a class of substances that apparently increase the overall potency of a particular batch of vaccine.  A recent and timely New York Times article, Benefit and Doubt in Vaccine Additive, contrasts adjuvant methods with lingering uncertainty regarding the safety or side effects of these substances.  According to the article, the WHO and some health experts have been calling for the use of adjuvants to allow more people to be immunized for H1NI with a given amount of vaccine, prompting some governments to order vaccines with adjuvant. Glaxo and Norvatis are selling pandemic flu vaccines containing newer adjuvant made from water emulsions of squalene, or vitamin E.  If vaccines with adjuvants were to be administered in the U.S., the Food and Drug Administration (FDA) would have to evoke a so-called emergency use authorization. U.S. officials are currently of the view that that increased potency is not large enough to offset the possible risks and extra complexity of using the adjuvants. 

Packaging of vaccines is another factor that manufacturers must address. Priorities and protocols have been outlined by governmental authorities as to which populations will receive the vaccine initially. They rightfully include pregnant women, healthcare workers, and children as the first priority, since these populations are the most vulnerable to the effects of the H1N1 virus.

In order to support high-volume distribution needs, preservatives are added to allow manufacturers to package vaccines in multi-dose vials, as opposed to single-use syringes or nasal sprayers.  The U.S. government requested that nasal spray and preservative-free vaccine be the first priority of initial distribution to insure that the populations of pregnant woman and children be serviced by vaccine.  As high-volume distribution continues in the coming weeks, manufacturers will have to shift vaccine production to multi-dose vials to service broader vaccine delivery needs, hence more preservatives will need to be incorporated.  Consumers remain highly sensitized to the potential effects of vaccine preservatives, which may defer some from actually securing the vaccine.

Vaccine producers are under the gun to dramatically increase production and distribution of all influenza-related vaccines.  These producers exist in healthcare-related supply chains that are not currently noted for overcoming complexity in production methods and global packaging and distribution needs.  There are certainly needs for more value-chain wide visibility to supply and demand alignment imbalances, along with more-timely information flows to make critical operational decisions. 

The current crisis is a symptom of a wider problem. If this crisis provides any benefit, it will be in the understanding that vaccine related supply chains will be our most critical area for future supply chain technology investment.  Consider the fact that both consumer goods products and high tech product related supply chains are currently looked upon with track records of world-class capabilities in process and information technology automation.  These supply chains morph in terms of the production and order fulfillment requirements that are manifesting in vaccine supply chains.  The time for attention and investment is overdue.

 Bob Ferrari