Teva Pharmaceuticals - Logistics Transformation (CHAIN) by iThink Media

PROJECT PARTNERS

BUSINESS INTERVIEW

Val Petursson, Senior Director of Global Transportation at Teva Pharmaceuticals, discusses the importance of global standardisation, advanced IT solutions, and of forming strategic partnerships when undergoing a successful logistics transformation.

TEVA PHARMACEUTICALS IS THE LARGEST GENERIC PHARMACEUTICAL COMPANY IN THE WORLD, OPERATING IN ALL REGIONS, WITH LARGE PHARMA OPERATIONS IN EUROPE, THE US, ISRAEL AND INDIA, AND COMMERCIAL PRESENCE IN MOST COUNTRIES WORLDWIDE. 4

ts logistic network is very large and complex, and has been undergoing an End-to-End transformation for the last six years. Val Petursson, Senior Director of Global Transportation, explains, “Teva Pharmaceuticals brings medicines to 200 million people every single day, and is the world´s largest medicine cabinet. The company’s numerous acquisitions of the previous decades resulted in a number of

challenges for our Supply Chain and logistics, such as multiple IT systems in manufacturing sites and markets, different channels to market, hundreds of logistic partners, and no common global way of doing logistics. “A major weakness was the lack of logistic intelligence i.e. globally standardised data and information on our compliance, service and cost levels. The 5

defined scope of logistics was too narrow, and an End-to-End approach was not taken. We are still on a journey, and we have plenty to accomplish yet, but looking at where we were six years ago, Teva has made huge leaps in globalising processes and systems, and in building strategic partnerships with the world´s most experienced logistic partners, utilising their core capabilities and knowhow to build solutions that benefit both parties long term. In doing so, we needed to look at many elements with fresh eyes from the start, sometimes referred to as ‘starting from a brownfield’.”

Defining the scope of logistics and the task at hand Teva has dozens of its own sites and hundreds of CMO’s, and 200 million daily customers in 80 markets. Discovering the true complete cost and scope was no easy task, as it is often hidden. This brings further disadvantages when it comes to the visibility of incoming products and the suboptimised inbound warehouse operations. Val breaks logistics into three distinct legs. Leg A is the transportation of materials into the company’s manufacturing sites, while Leg B refers to the movement of the finished products from these sites into individual market DC’s. The third and final 6

“Teva has dozens of it’s own sites and hundreds of CMO’s, and 200 million daily customers in 80 markets” leg, Leg C, is the logistics from the market DC’s to the final customers e.g. wholesalers, hospitals etc. Val says, “Whilst optimising in all of those buckets individually, full optimisation is only reached by connecting all three. We have to look at these legs as one cost bracket in order to unify the processes, standardise the IT systems, and design and align in detail with other Supply Chain stakeholder sites and markets.”

Logistic majority: A journey from transactional and local logistics to a globally integrated set-up with strategic partnerships Pharma logistics is exceptionally exciting, yet much more regulated and complex than 7

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The ROI of real-time supply chain visibility Real-time visibility for the temperature-controlled supply chain is universally desired by enterprises, customers, shippers, and carriers, but its bottom-line dollar value is less often discussed. That means it often remains a nice-to-have rather than a must-have. You know that complete visibility over the entire supply chain is likely to have a good effect on business, but the tendency is to regard it as an ineffable benefit that either cannot adequately be measured or that is considered too expensive or complicated as an investment. This is an antiquated mode of thinking and it is largely

products at the optimum temperatures—temperature

inaccurate. Allowing a belief that it isn’t possible to put

monitoring is mission critical. This is made more

hard figures against the benefits of a real-time supply

challenging as products make their way through various

chain visibility program to prevent your business from

stages of the supply chain. At each step, a slight variation

implementing one is likely to put you at a significant

in temperature conditions can lead to unsafe conditions

disadvantage, both from a competitive standpoint and

that impact quality and integrity. The product may have

a business standpoint. Data can now demonstrate that

been left out of refrigeration, left to sit in the sun or

having complete visibility and control over the entire

in a holding area for too long, or placed within a truck

supply chain can lead to exponential cost savings and

without palettes to optimize the airflow inside. Each

ROI. Improved visibility reduces both product and

lane of travel—air, road, or sea—requires different types

operational waste. It illuminates the dark spots in the

of handoff points and each poses different risks. As the

supply chain, enabling businesses to focus only on what

global cold chain is increasingly more complex, there

matters, and helps drive continuous efficiency and

has been a growing need for a trusted, secure way to

improvement. Further, real-time visibility is tied directly

document temperature and product movement end-

to better customer service, one of the strongest

to-end in a traceable format that can satisfy the reporting

competitive differentiators available.

requirements and data shared with stakeholders.

Heads of supply chain logistics and quality managers

Supply chain resilience is becoming increasingly

now have a far stronger argument than ever before

important because the frequency, magnitude, and

when it comes to convincing C-level executives to

costs of disruptions are increasing. Within the cold

green-light buying and installing a real-time visibility

chain, problems typically happen at multiple handoff

solution. Through data, they can now clearly

points. Today, temperature excursions account for nearly

demonstrate why the short-term operational disruption

80 percent of supply chain problems.

involved in making the most of today’s visibility technologies can be justified.

Climate change, increasing transportation costs, driver

For producers handling perishable and sensitive goods,

greater efficiency, not only to prevent spoilage but to

one of the most significant challenges is maintaining

maximize profitability.

shortages, and other supply chain disruptions are forcing

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other industries. These regulations are extremely strict, and as Teva’s market is enormous, with products and material moving intercontinentally and in different temperature ranges (all the way from -40°C to 15-25°C), the task to standardise its movements and processes was massive, and is still ongoing. According to Val, many global and, in particular, fast-growing companies find themselves at some point in a situation where they discover that their legacy set-up simply isn’t scalable. Cost becomes

an issue, the set-up doesn’t integrate with other IT parts of the Supply Chain, and logistics are seen as purely transactional as opposed to value-adding units. At the start of a transformation, companies will begin by being an enabler, before becoming a value-adding driver. So, how do you become faster and leaner, finding better solutions that give a competitive edge in the commercial space? Val continues, “We are now on this journey towards global standardisation and optimisation, focusing on value-adding, End to End logistics elements. We redefined our entire 11

operations and purpose, asking difficult questions, such as what we were good at and where we were behind. And in cases of where we were behind, we asked the question of whether we should continue doing it or ask someone else to do it for us (Insource/Outsource model). The core purpose of Teva Pharmaceuticals is to manufacture and sell pharmaceuticals. We are not a logistics company. Therefore, we strategically partner up with companies whose core function is logistics to help us on our journey.”

Strategic partnerships: Control towers (4PL concepts) Most large companies have moved a critical part of their logistics function to logistics control towers (or 4PLs). Teva took this step in 2017 to a global scale whilst continuing to optimise and improve. Val explains, “A logistics control tower is a concept of standardisation of logistics; one global IT setup, reports, execution, and process optimisation. Usually, companies outsource control towers, which becomes, in most cases, a fundamental 12

“The 4PL becomes an absolute core element of the logistics and valueadding for the entire Supply Chain of the company. This is a gamechanger for quality, service and cost”

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“At Teva Pharmaceuticals, there is great awareness of sustainable solutions. We have taken a very clear strategic approach – we are not just following the minimal guidelines, but we want to lead the way” Val Petursson, Senior Director of Global Transportation at Teva Pharmaceuticals

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strategic partnership. The 4PL becomes an absolute core element of the logistics and value-adding for the entire Supply Chain of the company. This is a gamechanger for quality, service and cost. For us, this opened up visibility and a fact-based approach towards everything we do, ensuring fact-based conversations with our internal stakeholders. “By going through a control tower and booking everything through one single conduit, it also allows us to see where we need to improve and where the true problems lie, so we can prioritise our projects and put the right resources on the right pain points. We went from local

logistics with low visibility on compliance, quality and cost, to one global control tower set-up, which provides all the visibility we need. It is a one-stop shop, comprising everything from logistic transactions, invoicing and reporting, to project management and value-added services.” By moving from local ownership to an external 4PL concept, Teva Pharmaceuticals changed its mindset towards forming strategic partnerships to assist its transformation; partners for transportation, warehousing, cargo protection, and not least, cargo monitoring. Val says, “We 17

realised more and more that, as we are not logistics experts, we needed to sign up with core service providers. We went through a long process of testing their qualities and expertise, selecting a handful of them to work with us on a strategic level. We are able to talk through any issues and learn how other companies are dealing with these problems to create solutions together that benefit us in the long run. This has been the key to the success of our transformation.” The Covid pandemic in 2020 and 2021 was perhaps the biggest test for Teva Pharmaceuticals’ logistics function in the last six years. Val recalls, “There has been no event in the world that has influenced logistics quite as much as Covid. Almost overnight, most air capacity worldwide was down. Furthermore, the logistic pharma world experienced frequent and rapid ad hoc border closures from different countries in Europe, which caused extreme difficulties in the pharma road network in Europe.” Val continues, “There were no passenger planes during Covid, but 80 per cent of all pharmaceuticals in the world moved at that time on these planes. With most of Teva’s airshipped products moving with 18

“We delivered to our 200 million people every day, despite the extreme circumstances throughout a very difficult 2020 and 2021”

Challenge accepted.

“Our vision is to be the preferred choice for our customers in

selected markets globally, providing dependable integrated and

tailor-made air cargo solutions.”

“When it comes to protecting its products, Teva Pharmaceuticals has also partnered with world-leading partners”

strategic partners on cargo planes, we were only marginally impacted by this situation. Our strategic partner on road in Europe secured an uninterrupted flow of products through the very congested borders, keeping all countries healthy on critical medical supplies. Covid and, later on, Brexit caused a lot of concern within most healthcare sectors, as our pipeline is critical for them. We delivered to our 200 million people every day, despite the extreme circumstances throughout a very difficult 2020 and 2021. This

would not have been the case without the strategic partnerships, and the visibility and tools at hand today.”

Monitoring solutions and protective packaging in pharma With very strict regulations on temperature protection during transportation of pharma products, monitoring and protective solutions are vital to the industry. Both industries have advanced enormously in recent years. In 21

the monitoring space, Teva works with a world-leading innovative partner that provides an End-to-End realtime monitoring solution on its moving products across the world. Val says, “With this new technology, we have a 24/7 visual on all our moving products, and if they are stored at the wrong temperature or if they go missing, we receive an alert in real time, and can take appropriate mitigation action before the product is lost or damaged. This is a true gamechanger, and brings significant robustness in to our Supply Chain.”

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When it comes to protecting its products, Teva Pharmaceuticals has also partnered with world-leading partners. Val adds, “They provide equipment to keep the temperature of our products within the right range. In this way, they help us to uphold regulations by protecting the products we move. The quality and diversity of the protective products have advanced. They are more secure and definitely more protective, designed for different temperature ranges. Without those solutions, we would not be able to move pharmaceutical products in a compliant way today. They are absolute key for the industry.” 24

Sustainability – green footprint The next large change in logistics will be the new regulations on carbon footprint and CO2 emissions. It is clear that cities will disallow current transportation forms in the future, raising diesel fuels taxes, as is already happening. Some might see this as a threat, but it is as a real opportunity for first movers. Val says, “At Teva Pharmaceuticals, there is great awareness of sustainable solutions. We have taken a very clear strategic approach – we are not just following the minimal guidelines, but we want to lead the

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way. For several years, we have explored new technologies to move our products in a green way. We are evaluating a project on using drones to move products from market warehouses to the wholesalers, and we are actively working with companies which manufacture hydraulic vehicles and trucks with solar cells on their roofs. We believe that whatever we invest in this initiative, we will get back in image, goodwill, and, of course, in doing the right thing for our planet. Sustainability is carved in to the company’s core strategic mission.” For Val, the future means continuing to harvest on Teva Pharmaceuticals’ intelligence and experience, with help from its strategic partners, as well as looking further and wider in the logistics network to optimise and improve. He concludes, “The keyword is integrated logistics, with great emphasis on IT solutions and business intelligence to improve compliance, service and cost for our customers, as well as adding value through our green solutions.” For further information on Teva Pharmaceuticals, visit www.tevapharm.com