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Life Sciences Industry:Temperature-supply chain metrics

Supplier: Global Cold Chain Solutions
09 September, 2008

The following report discusses some of the supply chain issues encountered by the Life Science industry, and recommends some key measures that can be implemented by management. These metrics have been recommended to assist in the decision-making and evaluation process in relation to the overall company goals and objectives.

The Life Sciences industry is experiencing changing circumstances, including increased R&D activities, shortened patent lives, increased product substitution, and highly regulated barriers to entry. There is a trend for companies to divest excess capacity and move towards a global, centralised supply chain management process.  In addition, there is a move away from viewing the supply chain as purely a mode of product delivery (at minimum cost), and instead recognition is being made of its ability to generate value for both shareholders and customers alike.

The author identifies the following elements as integral components of the pharmaceutical industry supply chain:
* Primary manufacturing (possibly including contractor sites)
* Secondary manufacturing (possibly including contractor sites)
* Market warehouses/distribution centres
* Wholesalers
* Retailers/hospitals

Supply chain metrics are a useful method to monitor the effectiveness of an organisation in managing the distribution and logistics processes.  The author recommends a combination of qualitative and quantitative metrics for life science companies, and a combination of metrics should be employed to provide a more specific, objective model upon which to base decision-making.  

Managing the supply chain is an intricate process; however add in the dimension of temperature-control supply chain requirements, and this process becomes even more complex for Life Science companies.   The following management objectives and critical metrics to measure have been formulated by the author (excerpt):

Management Objective                                   Recommended Metric            
1. Sustain Profit Objectives                           Profit Margin on Sales  (p $)  
2. Optimize Supply Chain Network             Supply Chain Effectiveness (se)
3. Achieve Customer/Shareholder Satisfaction  Customer  Satisfaction  (cs)
4. Meet Customer Order Demands             Distribution (d)               
5. Achieve Delivery Deadlines                  Delivery Time to Destination (dt) 
6. Reduce Product Defects                         Product Quality (pq)


Fig.1 Metric Matrix - Supply Chain Metrics for the Life Sciences Industry

All metrics, as with any objectives set, should be time-specific and thus reviewed on an ongoing basis.  Measures such as sales and distribution would be reviewed at least daily; the customer satisfaction measure should be reviewed at least bi-annually due to the method of data collection (i.e. a questionnaire).  Survey data, in particular, should be reviewed over time in order to identify important trends or changes Historical data collected can also provide managers with useful data to form the basis of trending and prediction modeling to assist with future decision-making.

Supply chain metrics systems can benefit global businesses substantially as processes can be aligned across multiple firms.  “You can’t manage what you can’t measure” – therefore effective use of supply chain metrics is imperative.  To be effective, the metrics must:
*­ Measure multiple dimensions
­* Sum inventory along the supply chain
*­ Take into account the complexity of the supply chain
­* Extend the “line of sight” of managers by providing feedback regarding objectives and performance of external companies and partners
* ­ Align with the overall company strategy

Laura Wills has a special research interest in the temperature-control requirements of the Life Science supply chain. She is a director of Global Cold Chain Solutions and holds a recently attained Post Graduate degree qualification in Business, and an undergraduate Bachelor degree of Business (Management/Media Communications), both acquired at Swinburne University of Technology.