Bayer Italy’s Supply Chain Transformation IN ASSOCIATION WITH
BAYER
DIGITAL REPORT 2020
Bayer Italy’s Supply Chain Transformation 02
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Michele Palumbo, Head of Supply Chain Management at Bayer Italy, discusses the challenges of COVID-19 and the way technology is shaping the future of the supply chain
T
he arrival of the COVID-19 pandemic sent shockwaves through global supply chains this year, with plant closures and
supply shortages leading to major disruptions. This 04
led many organisations to rethink the way they operate, choosing digital solutions to enable more visible, and easier to manage supply chains. In the case of Bayer Italy, their Head of Supply Chain Management Michele Palumbo explains that COVID-19 led to a digital acceleration that normally would have taken them 10 years, but they instead achieved in little under 10 months. “It sounds crazy to say this is ‘thanks’ to COVID, but I believe there is always something positive to come out of even the most negative of things,” he says. Bayer Italy’s digital transformation actually began in 2010 as they strived to move from software to a collaborative ecosystem. “You can have the best algorithm that you could imagine, but no algorithm is able to predict what will happen in the future, so we were dealing with
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“ It sounds crazy to say this is ‘thanks’ to COVID, but I believe there is always something positive to come out of even the most negative of things” — Michele Palumbo, Head of Supply Chain Management Italy, Bayer
some business disruption risks related to invoicing software,” says Palumbo. “We took this as an opportunity to think about how we could connect with our partners while integrating them into the legacy system that we had.” To do this, he says they needed to move beyond the concept of an interface. “It was too expensive and too difficult for small companies that were our partners,” he says. “We had to find a solution that could talk every kind of IT language, and at the same
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time get information from every kind of data source.”
E X E C U T I V E P R O FILE :
Michele Palumbo Title: Head of Supply Chain Management Italy Location: Milano, Lombardy, Italy Since 2017 Michele Palumbo has been Head of Supply Chain Management Italy at Bayer S.p.A. He started working for Bayer in 2010 to source logistics and distributive services for the group in Italy and he implemented important strategic and more operational projects in the remit of the life science industry. Summa graduate from Bocconi with a research empirical thesis on circular economy and majored at Polytechnics of Milan in industrial management, he joined the SDA Bocconi faculty where he designed and coordinated managerial logistics training for the technology and production department. After collaborating with some management consulting companies, he took on the role of innovation and logistics manager in the business services department of the pharma-chemical group, Hoechst, in Italy. Then he was responsible for central logistics services in one of the leading pharma wholesalers in Italy, Comifar-Phoenix Group. He is Adjunct Professor in Operations and Supply Chain Management at the Catholic University of Milan and faculty member of Il Sole 24 Ore Business School. “A serial innovator�, as a manager and academic, he offers a multifaceted perspective able to create value in different contexts thanks to technologically advanced, sustainable and efficient solutions. Empathic and altruistic, intellectually curious and a visionary, he has a large family and ever since he has been involved in charitable initiatives. He is a board member of the Italian Food Aid Foundation. www.b a y er . it
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TESISQUARE.COM
BAYER’S DIGITAL TRANSFORMATION JOURNEY In 2010 Bayer Italy undertook the challenge for a transparent supply chain. The need to change the software for pre-invoicing transport costs offered the opportunity to challenge the scope: to embrace partners and customers in a collaborative ecosystem. The first step was to grant a fully automated Transport Management System (human intervention only for exception) able to calculate costs for 200,000 deliveries per year to about 20,000 customers in a widespread network of 300 wholesalers, over 11,000 pharmacies and parapharmacies, 3,500 hospitals, laboratories and nursing homes, 3,000 retail outlets. Once the first goal was attained, Bayer moved to an extended solution, beyond the concept of interface: a collaborative cloud platform able to dialogue natively with external actors, whatever IT language would have been used. At that time, this was a breakthrough in “track & trace” systems: Bayer moved from paper documents to digital Delivery Documents and Proofs of Deliveries tackling every kind of issue in the between. Cybersecurity was not affected by the adoption of a cloud solution, since the legacy system let in only defined information following a stringent exchange protocol granted by an information security 3rd party.
THE FOUR BENEFIT AREAS We can say Bayer has identified four benefit areas: the first benefit is referred to a full automated transportation costs calculation; with this system 1 person can handle about 20.000 customers and 200.000 deliveries per year, without it about 7 employees would be needed and we’d have however a lower level of accuracy. The second benefit is that, together with the track & trace of deliveries, this system also allows to detect exceptions and to send an automatic alert to the right person. Third benefit: this system is multichannel and multicompany -– Bayer Group has different companies operating in different fields and a wide range of suppliers – and enables collaborative practices through the supply chain. Finally, the fourth benefit is a business intelligence dashboard to check performances together with the possibility to simulate different distribution scenarios, e.g. moving a warehouse or increasing/reducing the number of warehouses, considering the impact in terms of costs and service level.
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10 Working with TesiSquare, the
the possible synergies in coordinat-
answer was to build a cloud-based
ing the goods - like a calendar with
platform where every actor in the
bookable slots - enabled the use of a
process is able to connect in real time
barcode or QR code to grant a free
and provide useful information, issuing
pass to the carriers coming from
alerts only to the owner of the relevant
whichever country.
part of the process, and not sending multiple emails to numerous people. This enabled an ecosystem where real-time connections among the actors activated forms of collabora-
“This prevents huge queues from forming, and you can also plan the resources that are required for receiving or dispatching goods,” he says. Moreover, the control tower doesn’t
tion previously unimaginable. As an
just offer business intelligence and
example, the collaboration was also
advanced analytics features, but also
extended to the competitors working
allows them to plan how many ware-
in the same LSP warehouses since
houses are needed, and where. Via
€43.5bn Full-year sales
€5.3bn
Investment in research & development
103,824 Number of employees
87
Countries
a simulation module, it’s possible to move, close and increase LSP sites, to see what would happen in terms of costs, as well as service levels on the basis of ‘what if?’ analysis based on real data referred to the timeframe. Palumbo believes the supply chain of the future will be PAL - personalised, automated, and local – a view shared by transformation change expert and author Sean Culey. “We want to be able to cope with the service level requirements of the customer of the future. They will have a minimum acceptable level, which is the Amazon one, and if we are delivering drugs the expectation is to have a
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“ We want to be able to cope with the service level requirements of the customer of the future” — Michele Palumbo, Head of Supply Chain Management Italy, Bayer
“This helps to identify what the pallets are carrying, and they’re also great in terms of the Falsified Medicines
higher service level than if you’re deliv-
Directive (FMD) that will be in place in
ering a pair of shoes (with due respect
Italy from 2025, helping to track goods
to shoes).”
along the supply chain and provide
Their next challenge was to make sure the supply chain was transpar-
visibility in real time to relevant authorities,” says Palumbo.
ent. Palumbo says they had blind 13
spots when it came to proof of delivery to the customers. “This is crucial for pharmaceutical providers, because we’re dealing with a very long list of things like changes in temperature, humidity, geolocation, lead times, regulatory and quality compliance, security and sustainability, among others.” Their solution, which they developed with Murata ID Solutions, was to apply disposable RFID (Radio-frequency identification) tags on the shipping cartons and embed permanent ones into the pallets – a technology that enables data to be transmitted cheaply and easily. www.b a y er . it
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On top of that, the pallets used
The idea was simple, he says.
are not the regular ones, and the
Bayer began working with Valsir
company found a way to reduce the
to take the most polluting plastics
number of pallets they were losing
which would normally find their way
along distribution lines. “We realised it
into landfill or the world’s oceans
was possible to create a closed circle
and instead create a granule that
reusing the same pallets for distribu-
can be used to make plastic pallets.
tion,� Palumbo says.
By doing this they are able to operate
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with 4,000 reusable pallets made
“The Green Pallets are practically
from recycled plastic, instead of
fireproof, washable, are not affected
75,000 single-use pallets each year
by mold or bacteria, are difficult to
made from wood. As well as saving
break, and easy to repair. If they
money, and reducing waste, they are
do become damaged, the plastic
generating an additional €250,000
can be reused as raw material for a
euros by selling the wooden pallets
new pallet. They’re light and easy to
they no longer need.
dismantle, are stronger than wooden www.b a y er . it
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pallets, and are stackable,” he says. This particular initiative has won numerous awards from Environment Authorities and Logistics councils. Palumbo says that the whole process has been dramatically simplified. “We send the order of dispatching goods to the logistics service provider. They print the labels, arrange transportation units, and ship the carton boxes on the Green Pallets. If something is missing during the shipping phase, then we can activate an inventory con16
trol that tells us where it is. This works not only because the box isn’t visible, but also because acoustically it emits a different noise with a different frequency and volume depending on how close you are to it.” The advantages of their new system have not just been financial. “There have been benefits in terms of service levels, because from a real time point of view, we are automating a lot of activities which before were manual, so we’re gaining time. Also, service quality – can you imagine the amount of products we were losing because they were missed, misdirected or damaged? Now we have real-time visibility, with greater security.”
“ T here have been benefits in terms of service levels, because from a real time point of view, we are automating a lot of activities which before were manual, so we’re gaining time” — Michele Palumbo, Head of Supply Chain Management Italy, Bayer
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Even though their journey to go digital began before COVID entered the picture, this new way of working
actors, then people start collaborating,” he says. “This is a powerful means by which
seems tailor-made for current proto-
you can optimise processes and
cols, as it’s entirely contactless and
leverage synergies that were com-
makes social distancing in the ware-
pletely unknown before because you
houses possible with only one person
didn’t have the broader view of oth-
required on the shop floor.
ers. Together, we can solve problems
Palumbo emphasises how impor-
this way.”
tant working with partners has been to make this possible. “We have a great collaborative approach. If you connect people, and you connect www.b a y er . it
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