[ID] => 10193
[post_author] => 288
[post_date] => 2018-10-08 07:37:33
[post_date_gmt] => 2018-10-08 06:37:33
[post_content] => Chemical distributors, particularly those with a full-line portfolio, operate in a very complex environment. This year’s Annual Congress of the European Association of Chemical Distributors (Fecc), which took place in Nice in June, considered some of the ways in which that complexity affects distributors and their principals and what digitisation might be able to offer to help them manage their supply chains.
Following on from Dorothée Arns' presentation on trends and challenges affecting European chemical raw materials, as detailed in the first part of this report, (HCB October 2018, page 92), Andrea Matviw, Merck's head of supplier quality, turned attendees' attention to future trends within the sphere of pharmaceutical distribution partnerships. Pharma firms, she said, require "the right material, the right quality and at the right time and the right costs". By using chemical distributors, they are able to enjoy better inventory management and lead times while ensuring high levels of customer service concurrent with streamlined communication and market knowledge. Meanwhile, they also stand to benefit from better shipping services; a consolidation of services; a standardised cold chain; improved volume handling; and better pricing.
Matviw explained that there are essentially three types of distribution partnerships at play today. The first she termed "distribution transaction only", whereby the distributor neither undertakes any Good Manufacturing Practice (GMP) activity, such as repackaging, testing or re-labelling, nor any physical material storage. The second sees the distributor undertaking storage in addition to straight-forward distribution and the third both storage and GMP activity as well.
Distributors, she continued, are expected to fully adhere to all necessary "chemical specifications", such as maintaining correct temperature, light and humidity levels; complying with all other transport and storage mandates; and meeting all applicable shelf life/expiry requirements. As well as implementing "systems to ensure these conditions are maintained", distributors must also have all the right documentation in place, including all appropriate certificates, such as MSDSs and certificates of origin. In addition to following correct process protocols, they must also operate a system for complaint handling and provide a point of contact for requests to the manufacturer as well as "support for qualification or authority registration activities".
Noting that distributors also need to sign all appropriate quality, technical and service agreements with the principal in question, Matviw concluded her presentation by stating that Good Distribution Practice (GDP) needs to be followed by all concerned parties as per regulation. "Specific requirements have to be applied to chemical distribution depending on the intended use and the level of handling from the distributor," she said, adding that "distributors can provide certain advantages to pharmaceutical companies when approached as a partnership".
The are many challenges associated with the pharma business of which distributors should be aware, warned Sabari Roy, Novartis's global head of compliance and audit. Traceability in the supply chain is "a must", she stated, noting that the sector is characterised by "often complex” supply chains. In addition to the large amount of documentation that is needed, the business also has a "high impact in failure mode". Moreover, while the pharmaceutical business is highly regulated, regulatory requirements are "not always standardised".
Breaking this down, Roy told delegates that the regulations governing the pharma business can be seen as resting upon four pillars: societal laws concerning, for example, "discrimination, child labour, slavery and human rights abuse"; finance, such as the Sarbanes-Oxley Act in the US; the environment; and the patient. This latter category of regulations can themselves be seen as covering quality, such as regards GMP and GDP; safety, as exemplified by the EU Falsified Medicine Directive; and efficacy, such as those concerning clinical trials. What's more, after describing the reality facing todays pharma players as "complexity", she expressed her belief that the current regulatory burden will only increase over time.
Companies such as Novartis therefore need their suppliers and distribution partners to be able to control where the materials used for the manufacturing of pharmaceutical products are sourced from as well as the quality of such materials. They must also be able to provide full traceability while having processes in place to fight falsification, such as utilising methods of serialisation, track and trace and tamper-proofing. Similarly, they must be able to act urgently when or if needed, being able to implement a rapid recall process while also being able to quickly provide alternative suppliers and source information. The pharma business is complex, she concluded, to protect patients; avoid drug shortages; prevent falsified medicines entering onto the market; and to bring life-saving drugs to those that need them. "We expect our partners to establish processes to support the overall regulatory requirements," Roy said.
RESOURCES FOR COMPLIANCE
Building on these themes, Dr Frank Milek, head of quality assurance, quality control and GMP at Aug Hedinger, explained that things were a lot simpler back in the 1990s - the regulatory environment became a lot more complex in 2004 with the introduction of GMP. This itself became more demanding following further changes implemented in 2011 and 2015.
Consequently, the main challenges facing distributors today include the need to "provide full traceability information about every part of the supply chain". They also have to have "significant resources” to provide regulatory and technical information while also maintaining GMP-compliant premises and equipment for storage and repackaging and a GMP laboratory to provide analytical data to end customers. This therefore requires more human resources in the form of "educated and competent personnel".
The onus is also on distributors to foster stronger relationships with, and garner greater support from, original manufacturers. Distributors must also manage quality agreements with customers and suppliers and, while hosting audits at their own sites, also arrange audits at those of their suppliers. Milek told delegates that, when undertaking any pharmaceutical activities, they need to seriously question whether their "business volume [can] justify such resources and effort". What's more, as regards the outlook for the future, Milek echoed Roy's sentiments by stating that "requirements and the need for resources will only increase".
Turning to matters technological, Chainstep managing partner Frank Bolten spoke about blockchain: "a decentralised data structure that allows participants to transact directly with each other and stores the state and history of participant's' transactions". Adding value to the internet, interlocking communication, interaction and transaction, blockchains, he noted, are "peer-to-peer [P2P]; transparent; encrypted; private; uncensorable; [and] immutable".
Furthermore, the key benefits of blockchain technology, include "disintermediation", which results in "increased efficiency, decreased costs [and] faster processing". It also offers enhanced security as it is "cryptographically secured/validated" thus providing "accountability and provenance" as well as "ownership tracking". There is also "less systemic risk" due to the ability of blockchain to facilitate "increased transparency, improved risk diversification [and] automated regulatory oversight". Blockchain also promises more automation in terms of "internal record keeping, documentation processing, multiparty process compatibility, M2M and AI on the internet".
Richard Zbinden, co-founder and finance director of CoreLedger, noted that a public blockchain "enables the Web of Value" thanks to its ability to offer "a global proof of ownership without intermediary" and its "immutability of proof of ownership". The Web of Value, he explained, concerns "unique globally available immutable lifecycle-describing documentation" and is a "public available place where you can broadcast unfalsifiable offers". It is also a "multilateral settlement engine for any kind of asset" and can also be a "search engine for multilateral settlement" while also offering "cryptofinance wallets and custody". As for blockchains being a "driver of transformation", he identified three notable megatrends, viz "cryptocurrencies as value store"; "P2P transactions without intermediary"; and "wallet management", whereby the "life management platform is the future".
LEAN INTO SALES
On the subject of digitalisation, Specialchem CEO Christophe Cabarry, urged delegates to embrace "a new world" of lean sales and marketing. Prior to the turn of the century, chemical companies, he said, pursued a 'reach out' approach to sales and marketing, whereby around 95 per cent of contacts with customers were initiated by a supplier's sales force. Today, though, this has drastically changed, with more than 70 per cent of contacts now initiated by customers through the use of digital technology. Thus, while contacts were traditionally garnered through sales teams, trade shows and press coverage, they are now more likely to be initiated via websites and blogs, social networks, search engines, emailings, e-newsletters, webinars and industry platforms, such as his own company Specialchem.
"Customers' behaviour is digital," he asserted, adding that business-to-business (B2B) practices have digitalised rapidly. Citing IHS Globalspec data, he noted that when sourcing information for work-related purposes, 89 per cent of those surveyed used general search engines while 79 per cent also used suppliers' websites; 76 per cent online catalogues; and 54 per cent industry-specific search engines. Sticking with the stats, Cabarry also reported other findings that showed 90 per cent of B2B buyers now use online search engines in their research process, with 54 to 70 per cent of the buying process "already completed before the buyer contacts a potential supplier". Moreover, he continued, 66 per cent of B2B buyers "narrow their pre-selection down to two to three potential suppliers" while 38 per cent "make half or more of their work purchases online", something that is expected to reach 55 per cent by 2020.
Before the digital era, customers seeking to purchase speciality chemicals would make the "exploration and screening phases" with suppliers. As such, the first interaction with a supplier would be personal. Now, though, the exploration and screening phases are conducted online, with the first interaction with a supplier being digital in nature and typically conducted via the supplier's website. Personal contact, he said, is now "made only with a few suppliers at the time of sampling when 70 per cent of the selection work is done".
The digitalisation of the sales and marketing function, Cabarry revealed, offers companies at an advanced level the opportunity to achieve "gains in four directions". Firstly, it enables them to "adapt to a digital world" in which their customers have already gone digital and want to interact digitally with their suppliers. Similarly, these companies "know they need to be shortlisted by customers before they can even talk to them" and "know it is better to be found by a customer in movement than to try to put customers in motion". They also know, he said, "that customers now choose the way they want to interact" with their suppliers.
Furthermore, the digitalisation of sales and marketing can also reduce the cost to sell as it offers significant cost savings when compared to pursuing a "traditional sales reps-intensive, market-interaction structure". At the same time, it also enables companies to "make their sales force much more effective" by allowing them to concentrate on "interacting with the best potential customers and not run after prospects like before".
A third key benefit is the ability to gain market share. Companies at the advanced level, Cabarry asserted, want to keep their leadership image and "want to gain market share versus companies that do not digitalise fast enough". In so doing, they can "capture a larger fraction of customers in search mode" and also develop better products by better using market data. At the same time, a fourth factor is the "gain on pricing" offered by digitalisation. Superior market data, he argued, can lead to better segmentation and then enhanced pricing by segment and better prices as they capture more customers in search mode.
All this, Cabarry said, is what Amazon Business does when it enters a new market. Moreover, not only is Amazon Business "already a reality" but the possibility of it entering the chemicals sector "is a serious hypothesis" as it already sells small quantities of laboratory chemicals. With all this in mind, he told delegates that the distribution of speciality chemicals in a digital world would require the ideal company to centre its sales activities on the digital user. As such, it would need to adopt a multi-channel presence; pursue "effective interactions"; and employ "smart data collection and usage" methods. Furthermore, it would also need to maintain a "digital relationship" with its customers by, inter alia
, offering "specific digital services for regular customers", such as online lab access, for example.
In a similar vein, Deloitte Deutschland partner Dr Alexander Keller noted that B2B selling is becoming more like that associated with business-to-consumer (B2C) selling. Ever more expert in their purchasing habits, chemical customers, he said, are making greater use of "customised product and service choices and pay-per-use models". Digital technology is also enabling them to "select, consume and engage seamlessly across portals" while also allowing them to engage and interact with products or services and share preferences and feedback through new communication channels.
As a disruptor, digitalisation also means the chemical industry now risks seeing its traditional value proposition being diluted. Speciality chemical companies and distributors, he said, "developed their business model and offering from a chemicals-based one into providing solutions and services", allowing them to differentiate themselves from the competition while "charging the value-add". However, digitalisation has the potential to threaten this from two sides.
Firstly, the "broad-based availability of information and advanced data analytics" is "enabling customers to create solutions themselves" and source their own components. At the same time, "new market participants are providing the solution part and enriching it with other non-chemical-related services" and in so doing positioning themselves between the customer and the chemical industry.
Digitalisation, he said, comes "with opportunities and risks but [is] for sure changing the ways companies are operating". Chemistry 4.0, he continued, "is changing the markets, the competitive landscape and the parameters the chemical distribution industry is working in". However, change is not a new concept to the industry. "A number of topics have been addressed (some of them a long time ago)," Keller stated. Importantly, though, the upcoming changes "will be more deep and significant than before", he warned. "Chemistry 4.0 and digitalisation are hot topics and buzzwords at the same time, so to determine where being today and what are the most important areas requiring action is crucial."
The 2019 Fecc Congress will take place in Barcelona in June; more information will be provided on the dedicated website, www.fecc-congress.com.
[post_title] => Fecc: A whole new world
[post_status] => publish
[comment_status] => open
[ping_status] => open
[post_name] => fecc-a-whole-new-world
[post_modified] => 2018-10-08 07:41:34
[post_modified_gmt] => 2018-10-08 06:41:34
[post_parent] => 0
[guid] => https://www.hcblive.com/?p=10193
[menu_order] => 0
[post_type] => post
[comment_count] => 0
[filter] => raw