What will it take to dramatically reduce risk in the retail supply chains?

Discussion
Photo: Getty Images
Jan 23, 2019
Dave Wendland

Whether it’s romaine lettuce, breakfast cereals or prescription drugs, never before has there been such significant attention given to overcoming supply chain hiccups and providing oversight and transparency.

Supply chain risk management aims at identifying areas of potential trouble and implementing appropriate actions to contain it. It’s defined as identification of risks across the supply chain through a coordinated approach among supply chain members to reduce vulnerability as a whole.

While risk has always been present in the process of reconciling supply with demand, there are a number of factors that have emerged in the last decade, which might be considered to have increased the risk level. These include:

  • The globalization of supply chains
  • The trend of outsourcing
  • A focus on efficiency rather than effectiveness
  • Reduction of the supplier base
  • Volatility of demand
  • Lack of visibility and control procedures

A number of these factors were identified across the pharmaceutical supply chain, which led the Healthcare Distribution Alliance (HDA), National Association of Chain Drug Stores (NACDS), and National Community Pharmacist Association (NCPA), among other leading trade organizations, to form a unified front to bring issues of adulteration, product tampering, counterfeiting and risks associated with global sourcing to the forefront within the Food and Drug Administration and the U.S. Congress. Signed into law November 2013, the Drug Supply Chain Security Act (DSCSA) remains a global mandate, requiring any company wishing to sell a pharmaceutical product in the U.S. to facilitate product “traceability” by 2023.

In theory, this means a consumer should be able to pick up a bottle at a pharmacy and see all the hands that touched it prior to the point of sale. In practice, however, the law demands that manufacturers, licensers, distributors and dispensers track, collect and share product data at each step of the supply chain. A daunting task to say the least.

Track and trace systems, in my estimation, offer a more streamlined method to quickly address risks as they present themselves, including responding appropriately to unexpected disruptions and minimizing financial and operational impacts to businesses across the supply chain.

DISCUSSION QUESTIONS: What do you see as best approaches — technological, operational, etc. — available in the marketplace to significantly reduce risks inherent in the various retail supply chains? Do you believe that elimination of risks associated with U.S. supply chains is an achievable goal?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Do I think it’s achievable? Only if there’s a corporate will to make it so. "
"Total elimination of risk is not a reality but single ledger tracking of things like pharmaceuticals (e.g. blockchain) can certainly go a long way to reducing risks..."
"Elimination of supply chain risk is unachievable, but reduction through technology and other means is not only likely but will happen over time."

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16 Comments on "What will it take to dramatically reduce risk in the retail supply chains?"


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Charles Dimov
BrainTrust

Regardless of product, trace-ability is going to become increasingly important in retail and in the supply chain at large. Hence the popularity of the blockchain craze. For today, retailers need to start asking about trace-ability and understanding the decision flows of their supply chain tech. For example, when an order management system routes from a particular location, not only should you be able to follow the route, but the system show the clear logic of why a particular route or source was chosen based on business rules and priorities.

We won’t be able to eliminate risk altogether. However, these are positive steps in the right direction of reducing risks.

Nikki Baird
BrainTrust

Data sharing and transparency is definitely key to reducing supply chain risks. But after spending a long time on the execution side of supply chain management, I would say I’m biased towards the idea that it is impossible to eliminate “risk” specifically. You can hedge against it, but unless you can predict the future, there is no way to eliminate risk.

Also, we need to keep in mind the context of this discussion. We spent the last 50 years building “efficient” supply chains with almost no recognition of the risks that just this idea of efficiency creates, let alone “standard” supply chain risks like weather or contamination, etc. People may be trying too hard to push the pendulum completely to the other side – “eliminate all risks, and who cares about efficiency” – but I think the reality is, it has to come down to somewhere in between the two extremes – a balance of risk, efficiency, and flexibility. That takes more than just data transparency.

Paula Rosenblum
BrainTrust

A lot of people are singing the glories of blockchain for this, but there are already technologies in place. Do I think it’s achievable? Only if there’s a corporate will to make it so.

For example, while I would much prefer that my medication and contents within not be sourced from China, corners are clearly being cut. But we have no national corporate will to do that with generics.

So, this real issue is “none of the above” and squarely in the realm of “intestinal fortitude”

Scott Norris
Guest

Hear, hear. My mother-in-law just had a bad reaction to a generic just this week. (different supplier, different factory) Profits are predictable for “pharma bros” but the risk is pushed to the patients…

Bob Amster
BrainTrust

Elimination is too final a word. Significant reduction of risk in the supply chain can be achieved through two technologies: RFID tagging and blockchain. There you have it.

Dave Wendland
BrainTrust

I agree, Bob, “elimination” may be too strong a word. However, measures such as the pharma industry have taken are going a long way to improve the safety and reliability across the supply chain. Protecting the integrity across all product types through reliable, transparent, and collaborative measures must be the mission. We should not settle for less.

Bob Amster
BrainTrust

True enough. The pharmaceutical industry has had chain-of-custody standards for longer than any other industry. In their case, many restrictions and measures were thrust upon them.

Dick Seesel
BrainTrust

This is a complicated issue, but one place to start would be bringing some clarity to tariff and “trade war” policies. These have disrupted country-of-origin decisions, especially on the part of general merchandisers who have built a sourcing ecosystem in one country that they are forced to uproot in order to keep prices low.

This isn’t always easy or practical: I recently spoke to a merchant who sources private-label handbags that have long been developed in Chinese factories. Tariffs have forced him to move production to Cambodia — a duty-free country but perhaps lacking the same expertise, vendor relationships or freight infrastructure as China. There are stories like this throughout the retail industry, and the impact on consumers — either higher-priced goods or less predictable quality — is real.

David Weinand
BrainTrust

Total elimination of risk is not a reality but single ledger tracking of things like pharmaceuticals (e.g. blockchain) can certainly go a long way to reducing risks and creating one consistent version of the truth in the product. I’ve read that they are using blockchain to track diamonds so there is no reason this can’t apply to this to things like pharmaceuticals.

Carol Spieckerman
BrainTrust

Mitigating supply chain risk is a sensible goal. Eliminating, not so much. Transparency and traceability have been on the retail supply chain wish list for quite some time, however the often-described scenario of a consumer seeing every sourcing and manufacturing step hasn’t become an everyday reality. The crux of the article is about increased complexity and greater complexity calls for new collaborative models. Partnerships can either be part of the solution or part of the problem. “Owning” as many steps in the chain as possible can drive transparency and accountability. On the other hand, partnering with reliable experts for various functions, including oversight, can make more sense. Supply chain management and risk mitigation relies on trust and cooperation.

Andrew Blatherwick
BrainTrust
The supply chain has always been central to the success of any retail operation, however the importance has increased dramatically over the last 10 years as pressures on retailers from online and socio-economic factors have increased the need to make it as efficient as possible. The good news is that supply chain solutions are now significantly more sophisticated and capable of managing this pressure and providing the ability to understand what is actually happening, react to it quickly and maintain efficiency while improving customer availability and visibility. The ability to run “what-if” scenarios helps retailers understand the impact and how best to react to changes such as volatility, supplier issues, weather, promotional activity and international political changes. This is invaluable to ensuring the retailer stays on track. For drugs and short life products, special features are available to track and trace, forecast and manage within day deliveries down to individual ranges in each store. Retailers need to invest in the latest technology, especially now with a downturn possible. Most are still running old technology that… Read more »
Adrian Weidmann
BrainTrust

Mitigating risk is possible. In today’s global tsunami of data, I don’t believe you can “eliminate” any possibility. The speed of implementing track-and-trace technologies and processes are directly proportional to either the value of the products or the financial exposure to the resulting pain — financial or physical — caused by out-of-stocks, tampering or other nefarious activities. Shopper expectations continue to broaden — whether in-store, click and collect (BOPIS), online or delivery — and all these shopping paths require retailers and brands to have 100 percent visibility to their inventory and especially their shopper-facing, at-shelf product sets. These challenges compound the fact that retail is, at its core, a consignment business and as such brands, in particular, need to take control of their product journey.

Gene Detroyer
BrainTrust

Of course it is possible. Check out China’s Hema grocery chain. Every product has a barcode, including live fish, which shoppers can scan to trace the product’s origin, supply chain, and nutritional information.

Harley Feldman
BrainTrust

Technological changes will reduce risk in supply chains the most. Operational changes tend to be implemented incrementally as risk issues are detected. But risk can be reduced quickly through enhanced visibility to inventory in the supply chain. Elimination of supply chain risk is unachievable, but reduction through technology and other means is not only likely but will happen over time.

Ken Morris
BrainTrust
Supply chain tracing and transparency won’t be widely adopted unless supply chain vendors and retailers are forced to comply. While the technology exists and is getting more cost effective (e.g. RFID tags), it is a challenge to get all supply chain vendors to participate. The Drug Supply Chain Security Act’s (DSCSA) new global mandate, requiring any company wishing to sell a pharmaceutical product in the U.S. to facilitate product “traceability” by 2023 is a good start, but we need to see mandates that cover other product categories. Once more mandates are in place, it will become a standard process from almost all goods. Another opportunity for retailers across all retail categories is the adoption of “realtime retail.” This concept has the potential to eliminate safety stock within the retail supply chain because you eliminate the inherent latency of the current decentralized retail supply chain model with stores and distribution centers synchronizing inventory once per day at best. This eliminates the need to carry 10%-20% more inventory than a retailer can sell at full price and… Read more »
Oliver Guy
Guest

This is becoming a bigger issue and consumers want more reassurance. Look at the strawberry problem in Australia — incredibly worrying for consumers. Some smart technology could help. IoT along the supply chain perhaps to monitor opening/closing of shipping containers….

wpDiscuz
Braintrust
"Do I think it’s achievable? Only if there’s a corporate will to make it so. "
"Total elimination of risk is not a reality but single ledger tracking of things like pharmaceuticals (e.g. blockchain) can certainly go a long way to reducing risks..."
"Elimination of supply chain risk is unachievable, but reduction through technology and other means is not only likely but will happen over time."

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