In many ways, Johnson & Johnson was at the heart of the COVID-19 crisis.
Not only was the company racing against the virus to deploy a vaccine, but it was also supplying medical facilities with critical gear and working to keep the supply of consumer goods, like cough syrup and fever reducers, flowing. All of that tested J&J’s supply chain, while also forcing it to evolve to be more digitally driven, like many other channels during the pandemic.
The company’s focus on improving its supply chain netted it the No. 3 spot on Gartner’s Supply Chain Top 25 Index for 2020, which was an improvement of five spots from its 2019 ranking.
The company’s robust supply chain solutions no doubt played a role in its strong first quarter earnings that were released in April. Its ability to ship products helped J&J increase its worldwide sales by almost 8 percent, distributed across its consumer health, pharmaceutical and medical device divisions.
In speaking to PYMNTS CEO Karen Webster, Johnson & Johnson’s Sarfraz Nawaz, who helps drive the digital transformation of the company’s supply chain, said two things factored into the company’s successful transition to more of a digital supply chain operator.
“First, it’s necessary to create a foundation that’s really robust and resilient, where from a technology standpoint, we are fruitful,” he said. “We were able to support building applications that have long-lasting impact rather than working in silos.”
One of those applications includes leveraging complex algorithms to identify unusual ordering patterns from large clients like governments and medical centers. It also used digital risk-simulation modeling to predict how its supply chain would manage with the staffing shortages brought about by the pandemic. The company was able to model such things as whether a factory could run at 30 percent to 40 percent reduced capacity, or what would happen if products couldn’t be shipped on their normal schedules. Such modeling helped J&J also keep operating costs low by not over-ordering or under-ordering raw materials.
Another digital supply chain pivot that the company made in the past year was to allow workers at manufacturing plants to connect with engineers who weren’t able to be on site due to travel restrictions. Using smart glass technology like Google Glass, combined with opening higher security clearance levels and employing robust cybersecurity measures, allowed scientists to fine-tune equipment by looking through the eyes of someone in the factory.
Track-and-trace sensors also played into J&J’s digitally resilient supply chain during the pandemic. Sensors equipped with GPS, temperature-monitoring ability and impact monitors were included with shipments, allowing supply chain managers to not only know where their shipments were at any given time, but also if packages had been dropped or if delays caused temperature fluctuations that could have impacted quality. The company is now pairing this track-and-trace technology with intelligent automation that could automatically trigger alerts if, for example, a plane leaves without an important package on board.
Beyond J&J’s efforts, supply chain visibility has become a hot topic across the healthcare manufacturing industry at large. Just last month, FourKites, a startup that supplies freight-tracking software, announced that it had secured $100 million in a Series D fundraising round, which effectively doubled its capital raised to date. The company now handles a significant portion of the supply chain tracking for Cardinal Health, which says it supplies nearly 90 percent of all U.S. hospitals and more than 29,000 U.S. pharmacies.
So, the technological components of J&J’s digital supply chain resiliency are clear — but what about the second aspect of the company’s digital transformation? Nawaz said it’s simple: people.
“Having deep expertise and a focus on execution from a technology standpoint is important, but then comes the culture side — being able to nurture talent internally while attracting new points of views,” he said. “So, we are really focused on these foundational aspects that helped us progress faster through the last year in this journey while trying to keep the longer-term vision intact.”
Room For Improvement
Looking forward, Nawaz said there are even more enhancements and improvements to J&J’s digital supply chain to be deployed.
“I think we’re in a good place and marching forward in the right direction in terms of being able to tap into technologies around machine learning or analytics or intelligent automation,” he concluded. “But there’s also the institutional environment that we work with, the various geographical conditions where you have to operate, and the availability of technology capabilities in these regions and how we enable it. So, I think that’s another area that probably requires a lot more work.
“And then we talk about innovation and change. How do we have a strong innovation process for bringing in tools, capabilities and talent, especially for legacy organizations? That’s a big area to focus on in terms of processes.”