Why Wait; The Business Case for Serializing Product Now.
While businesses have deployed large scale enterprise resource planning (ERP) systems to integrate much of the enterprise, the majority of shop floor devices and processes still are not connected in any meaningful way to the ERP system. Moreover, as manufacturers have added point solutions, undergone business acquisitions, and outsourced manufacturing and distribution to third parties, disparate silos of information have cropped up - exacerbating disconnects between the shop floor and the top floor.
This disconnect creates troublesome blind spots. If a manufacturer discovers a flaw that requires a product recall, it is often difficult to quickly understand which product from which exact batch needs to be recalled. There’s no way to pinpoint which locations or stores received tainted product. Thus, the company has little choice but to announce a massive recall of all items shipped during a particular timeframe — making the recall far wider in scope than is probably necessary. This hurts profit margins and brand reputation.
You only need to watch the local news to see examples of the issues this can cause regarding toys, food, pharmaceuticals and so on — but what you may not know is that in a six month span in 2011, the Food and Drug Administration issued more than 40 Class-1 recalls. A Class-1 recall, as defined by the FDA, is “a recall of dangerous or defective products that predictably could cause serious health problems or death. Examples of products that could fall into this category are a food found to contain botulinal toxin, a label mix-up on a lifesaving drug, or a defective artificial heart valve”. With the ever increasing global nature of the supply chain, having the ability to track product in an automated fashion through the entire supply chain is critical.
Likewise, many manufacturers face exorbitant costs because of product expirations. The Healthcare Distribution Management Association reports that the pharmaceutical industry incurs $2 billion a year in returns and product losses and incurs another $2 billion annually in the costs associated with processing returns, expirations, and recalls. Many of these expiration issues could be avoided if the organization had a better grasp on the shelf life of products still on site in order to determine ship dates appropriately.
As product moves through the production process there are many places where disconnects between the shop floor process and the ERP system can occur. After all, shop floor employees are focused on moving products - not entering data into ERP to report to management.
Typically, someone in receiving, manufacturing, packaging, and distribution will manually update systems, but the frequency of the updates and the granularity of the data are often limited. This does not allow management to have a real time picture of where product is and at what stage it is at. With this limited view, it is difficult to understand the impact that disruptions or changes in the process have on the entire supply chain.
In 2003 and 2004, many companies made a major push to deploy radio frequency identification (RFID) systems to comply with demands from major customers such as Wal-Mart or the Department of Defense. At the time, most companies were looking to use RFID only to meet the mandate - not as a way to provide the business with the granularity they needed to improve processes within the supply chain. However, these RFID systems were providing a way to efficiently serialize products.
Business Value Beyond ePedigree
In the current business environment there is a lot of discussion about serialization systems for use in track and trace applications. It is not so much the data carrier (RFID or Barcode) that is important, but the ability to use the business information that is associated with that serialized number that makes the serialization of product valuable. For example, if a company is faced with implementing serialization to fulfill a mandate, why not use the serialization system to report production, track the movement of finished goods, process shipments, and automatically update that inventory movement data directly into the ERP system? The further back organizations look in the supply chain for opportunities to track the movement of product the more value they are going to achieve from visibility to those products.
Instead of implementing serialization as yet another siloed function, manufacturing and supply chain executives would be well served to use this as a tool to track data and improve processes across the shop floor — from receiving to production, quality management, warehouse management, shipping and distribution, and third-party processing. This approach not only eliminates considerable manual labor, but gives management context into the product as it goes through the manufacturing and distribution cycles.
As inventory moves through the production run, the serial number is associated with key information about important metrics, such as lot and expiration date, key ingredients, notification regarding hazardous materials, etc. And by identifying which lot is associated with which carton, manufacturers can track these materials as they move downstream.
During the distribution process, additional data is added such as destination customer, carrier, expected transit time, and other key supply chain data. In addition, by adding intelligence to the product as it moves through the process, those handling the product can be alerted to any special handling instructions (for example, storage temperature). This ensures that specifications are met as the product goes through the supply chain.
Ultimately, using serialization and the context data associated with the serial number connects manufacturing and distribution processes throughout the entire product lifecycle. This includes automatic sharing of intelligence back from retail stores to the manufacturer.
For example, if a company ran a promotion, did the product make it to the right store at the right time and was it put out on the display area? Usually this type of information is very expensive and time consuming to track, but with the right serialization infrastructure in place, all of these granular details are tracked and reported automatically. This gives manufacturers and retailers a valuable insight into inventory levels, product demand, promotion effectiveness, and more.
A variety of key performance indicators (KPI) can be identified and tracked to monitor issues such as on-time delivery, product shelf life, and cycle times. Identification of customer consumption patterns is also extremely helpful for determining appropriate stock levels.
Conclusion
Businesses are already investing in serialization pilots and technologies due to industry and legislative pressures. However, those companies that do not take an enterprise approach to serialization are missing out on tremendous opportunity to optimize material flow, gain insight, and allow for process improvements throughout the supply chain.
Organizations today have the ability to manage the entire supply chain dynamically, simply by automatically collecting and analyzing serialized data throughout the product lifecycle. This rich wealth of information adds context to drive process automation and improved decision support across warehouse operations, distribution management, promotion management, and more.
To learn more about our pharmaceutical serialization solution, contact us at (856) 673-3000, or schedule a demo.
By John DiPalo, Chief Technical Officer at Acsis, Inc.
John DiPalo has more than 25 years of process and systems analysis and design experience. During that time John has implemented many manufacturing and warehousing systems across multiple ERP, midrange, and client server environments.