The Friday Report: September 13th, 2018

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Hospital Health Care Consortium Launches Its Own Drug Company

Sick of shortages of critical medications and increased costs on longstanding drug products, a group of American hospitals has launched a not-for-profit pharmaceutical company, Civica RX to gain some control over the supply of prescription drugs.  Three philanthropic organizations paired up with seven large health systems to back the new venture.  Civica Rx will initially focus on pricing transparency as well as stabilizing supplies for 14 medications used in hospitals.  Because it is a not-for-profit entity, Civica Rx will not face pressure from investors or stockholders to issue dividends or push up stock prices.

Founding members of the consortium include the Mayo Clinic and HCA Healthcare which, together represent nearly 500 hospitals. Over $100 million has been committed to the effort by the initial governing members.  Long-term contracts to buy a fixed portion of drug products agreed to by member health care organizations will be the basis for the business model.

The criteria to select the 14 prescription medications for the initial focus was based on rising costs. Drug products which experienced increases exceeding 50 percent between 2014 and 2015 as well as essential medications that were on national shortage lists were the first to be considered for inclusion in the new program.

 Artificial Intelligence Smartens up Warehouse Operations, Reducing Cost

 Today’s supply chain moves at an incredible pace, faster than the speed at which humans can operate without the use of technology.  Using artificial intelligence in supply chain operations can enable companies to automate processes, streamlining operations for greater efficiency.  One way of using artificial intelligence involves helping with equipment maintenance.

Automating data collection using sensors on equipment linked to maintenance records can be invaluable to prolonging the life of assets and equipment without additional effort and reliance on manual record keeping.  Using a system that analyzes data from your equipment, can enable the prediction of the optimal time for equipment repairs.  By handling predictive maintenance in this manner, productivity can be boosted up to 20 percent and result in decreased maintenance costs of up to 10 percent.

Artificial intelligence (AI) can also enable warehouse operators to control multiple pieces of equipment from a single location, reducing the time spent by multiple lower skilled workers.  

Using warehouse data with AI can enable warehouse operators to predict how much inventory is needed.  AI is also useful in tracking suppliers, reducing shipping costs and can produce many other benefits.


Reverse High Costs of Returns Using Blockchain

Blockchain strikes again-this time the interest is for use in reverse logistics.  The transportation and logistics industry is in the midst of a digital transformation.  Across the entire logistics supply chain, there has been a growing need for real time data which could be used with innovative technologies such as predictive analytics, machine learning and artificial intelligence to improve freight efficiency and produce other benefits.  The coordination of logistics today is highly complex, especially considering the gaps in communications, different transportation logistics entities which do not use sophisticated technologies and need for speed.

In addition to the need to speed online shopping orders to consumers, there is the problem with returns, or in industry parlance, reverse logistics.  Estimated to be approximately $750 billion annually, the costs of reverse logistics have accelerated annually largely due to e-commerce.  Up to 30% of all goods ordered online are later returned, placing enormous stress on the supply chain.

Employing blockchain in reverse logistics can aid in alleviating costs, increasing efficiencies and providing validation of responsibility during the process.

Blockchain’s immutable digital ledger system locks in shipment data and enables near instantaneous traceability of goods.

Blockchain can also be instrumental in facilitating traceability for product recalls, validating authenticity to prevent distribution of counterfeit and gray market goods, and monitoring supply quantity.

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