Future-Proofing Supply Chains | Girish Juneja, Chief Digital Officer at DOVER Corporation

Doing well, Kanika. Thanks for having me on this.

Thanks, Kanika. Again, appreciate you having me.

Yeah, you know, supply chains used to be the sleepy part of the industry for a very long time when everything was steady, before COVID and in the last couple of decades prior to that. What we've seen in the last five years, the series of changes that have happened — the healthcare crisis, then the geopolitical crisis, and then the inflation crisis — is that supply chains are back in focus and really important for businesses to operate in an efficient manner, to fulfill the customer demand on time, and not to have shortages or price increases that are unaffordable at the consumer level. This is especially true in pharmaceuticals and healthcare products. The reason for that is these are life-saving products that need to be available when somebody needs it. And this supply chain over the last couple of decades has become more complex, has become also more regulated. There has been increased regulation in North America, in Europe, and in many other countries on ensuring that the drugs that are available to the consumer are original, not counterfeited, and that they can be traced back to the manufacturing factory where the drug was made in order to have a recall that is limited to the specific set of drugs, as opposed to the entire family of drugs made across the industry, if there is a counterfeit or a health issue detected. So what that has led to is fairly complex changes, both at the manufacturer but also at the contract manufacturer, primary distributor, secondary distributor, and dispensing. And those changes are just coming into effect because there's a November 2024 deadline in North America for enforcement of that law, that regulation. And many of the companies are scrambling to be ready for it as that comes about.

Yeah, I mean, the good news is this has been 20 years coming, so it isn't news to many of these companies. The Drug Security Supply Chain Act — DSCSA — came about in earlier, a couple of decades ago in multiple forms. The first version of that required drug serialization and aggregation within the four walls of the manufacturer. The more recent one that's going live in November intends to have that traceability all the way to the consumer — so through the contract manufacturer, through primary and secondary distribution to the consumer. And this has been a known deadline for the last several years. And the way companies are trying to go about that is they are providing digital identification of the physical product and making that information available at the manufacturer, and then enabling everyone else in the supply chain to validate that information as they get the physical hold of the product. There are multiple challenges in doing that — it looks simple but there are multiple challenges — but the good news is industry has been moving towards it, has been validating it, has been testing it. I suspect we will still go through a level of difficulty as the law actually fully comes into effect. The reason for that is, as is usual with the disconnect between physical and digital, you'll have exceptions, you'll have challenges, and very specific requirements in the regulation which require turnaround time in 72 hours and quarantining of drugs if everything cannot be matched. That would result in a burst of issues that might be pretty critical. But that's kind of what CIC as a business does as part of the Dover family to help this industry, smoothing out those challenges. And we've recently released an exception handling and rework product that is supposed to help smooth out the challenges they would get as they go live with this regulation.

Yeah, so look, there are various technical technology means by which you can do tracing of inputs in the supply chain and components of the products through the supply chain. Essentially, you're trying to keep a digital identity of the physical product. You can use a blockchain-based ledger technology. In the pharmaceutical space, the requirement has been a serial number. So you're supposed to give a serial number to a unit of product, then you're supposed to keep track of that serial number as it gets packed into aggregations of cases and pallets, and then similarly when it arrives at the distribution and it gets packaged into smaller units to be distributed to secondary distribution — that parent-child relationship is supposed to be kept through that distribution chain. And eventually as it gets to consumer or dispensing, there is again a requirement to revalidate that it was an original product and was an original serial number that came from a manufacturer. So in the pharmaceutical domain, the requirement has been more around serial number based, but obviously you can deploy other technologies in industries where that's not the regulated way of doing it. Blockchain has been used selectively in a few industries. It comes with its own complications, costs, and challenges. But there are multiple means of addressing this problem. The reason it starts in pharmaceuticals and pharmaceutical-type products — by that I mean baby foods, medical products, cosmetics — is these are the kinds of products which have tighter oversight and regulation coming from the government bodies across the world.

I'll talk about technologies, but let me relate it to the kinds of problems we're trying to address. In the pharmaceutical space, the reason it's more acute of an issue — in pharmaceutical space, you're dealing with patient safety, you're dealing with possibility of drug shortages, you're dealing with an extensive network of counterfeits around the globe because many of these drugs are very expensive even though they are life-saving. And there are multiple cases, if you just look around you will find, of unscrupulous elements having counterfeit drugs out in the market for especially these very expensive pharmaceutical products. So it creates this unique environment where having a proper authenticated product is really critical to ensure public safety. Now that issue is also true in things like baby foods, it's true in cosmetics where you have certain chemicals that can be harmful, it is true even in some physical products where that physical product is going into a critical part of infrastructure as an example. So in terms of technology and how you can address it, like I said, there have been various attempts based on industries. Pharmaceutical is the one where it's regulated, therefore everybody in the industry has had to find a way to engage with other partners in the value chain and to resolve this issue for them because, in a way, it became business-limiting — if you cannot handle traceability of pharma product, you cannot be in the business of providing those pharma products anywhere in the value chain. So it drives a level of attention and focus that in other products we are beginning to see early signs of, and I think it'll expand fairly quickly once this is well established as a means. Technologies like I said could be serial numbers. Historically, when you have multiple players in a network trying to coordinate information, there have been three or four patterns that have been followed. One has been: let's create a common environment — which is very hard to do when you have a global supply chain — and everybody puts their information in the common environment, pulls their information in the common environment, and connects the digital and physical information that way. Now in certain countries, EU is an example of that, China is an example of that — there is a nation or a political union's regulation to provide that capability to the participants. So EU has a central environment in which all the players in the value chain have to provide and pull information. Similarly, China has a similar setup. The US does not have that; it requires the players in the value chain to coordinate it amongst them. So one mechanism has been a central clearinghouse. Another mechanism has been coordination between different parties. Coordination can be done on serial number basis, it could be done based on blockchain, it could be done based on some of the other technologies that have been around a while — EDI is an example of that, that was created originally to exchange purchase orders and payments between different entities in a value chain. So those are the different ways we have seen it done.

Yeah, so look, any digital product you offer in an industry comes with its own risk of cyber security. A higher level of risk in these kinds of products is the physical product security — by that I mean counterfeits. Just to give you a simple example, in the morning actually I was reading an article where, I think it was in India or some other place, they busted a racket of people producing counterfeit cancer drugs. So people who are depending on these drugs for life-saving are being offered these counterfeit drugs, and it was a multi-million dollar racket that was going on. So cyc products start at the factory floor; they connect with the manufacturing, with the packaging lines where the drug is being packaged. Using cameras and using software, we connect that, we interlock the physical and digital product. So there is a digital serial number and there is a physical product; they are interlocked in that line. Then our product, through cloud services, offers that capability for downstream supply chain vendors to validate that the product they got in their dock and that they unpack from pallet to case to unit, they could be reverifying. You can also sometimes have serial numbers counterfeited — you could have duplicate serial numbers. How do you detect that? For that, we have layered another technology on top, which is patented technology that uses the barcode and creates a unique e-fingerprint from that barcode — the 1D and 2D codes — and that unique fingerprint can be detected downstream in the value chain as not only having a valid serial number but also being original. So that combination, the layered security of the product — the first layer being there is a serial number, that serial number is validated with manufacturer; the second layer of security being the physical package which has a barcode, that barcode was authenticated that it was produced in the packaging line at the manufacturer. That double layer of protection then offers the customer the safety that they're looking for in a life-saving drug. Now cyber security is really important around this infrastructure that we offer, and our solutions at cyc have gone through cyber security validation. There is a certification called SOC 2 certification that our products have gone through in order to validate the cyber security of those offerings.

Yeah, I mean, you know, the pharmaceutical industry has done a phenomenal amount of innovation in the last 15, 20 years. I have met people who have said that their lives have been saved just in the last four to five years of innovation that if they had the same disease five years ago, they would not have survived. So with the enormity of the life-saving potential of these drugs comes the higher risk of people trying to counterfeit because they are expensive drugs. And what we are seeing, just like cyber security, we are seeing the counterfeiting industry grow leaps and bounds. It's a huge source of illegitimate wealth generation for the criminal environments. Therefore, we don't see the reasons for counterfeiting to vanish. That means the vigilance and the protection against that, just like in the cyber attack world, has to go up. We expect more innovations in the pharma industry, so more drugs, more critical life-saving drugs, therefore more potential for counterfeiting, and therefore more need for having layered protection. And we strongly believe here at CIC that it has to be a layered protection model — no single means of protection will safeguard against all possible ways of having illegal drugs in the market that should not be floating around. And that's kind of what we are innovating on — we are innovating on layering additional capabilities so that the customers — manufacturers, national distributors, but in some cases international distributors of vaccines and so on — have the ability to validate that the product they have is safe. And eventually we expect the consumer to demand a digital experience where they can be satisfied that the product that they have bought from the dispensing environment is original. And we are extending our technologies to that part as well.

Yeah, so you know, some of the technologies I talked about are things that CIC has announced in public domain. But there are obviously R&D continues to move the boundary in areas that we don't typically talk about till the products are ready. What I'd like to bring your audience's attention to is that I've talked a lot about pharmaceuticals, mainly because the deadlines are here and now. We are working with a lot of customers as of today and as of this week and next week to make their capabilities ready for the regulation. However, there are various products in the industry where the level of counterfeiting is through the roof. It can be all the way — you can look at apparel and fashion on one end, you can look at medical products and baby products on the other end, you can look at even challenges of sourcing materials from places that you may have regulation not to source material from — that you want to trace. All these problems now have a digital solution where you can deploy it and create that traceability end to end and have secured supply chains. The benefit of secured supply chains is not just that you're following the law, but also you are ensuring the quality of the product your customer is getting, and you are ensuring that you would not go through shortages or other problems that arise when something faulty is found that cannot be traced back to where it came from in the supply chain, and you tend to take more Draconian measures rather than limiting only the production from the place where something counterfeit or incorrect came from.

Thanks, Kanika. It's been a pleasure. Look forward to speaking to you again. Thanks again for inviting me.