Pfizer’s Prescription For A Digital Supply Chain
This post explores the steps Pfizer is taking to digitize its supply chain in order to better respond to evolving pharmaceutical industry dynamics, customer needs, and regulatory requirements.
With over $50 billion in revenues, Pfizer is one of the largest pharmaceutical companies in the world . Its products include widely used drugs such as Lipitor (indication for cholesterol) and Advil (ibuprofen) . To serve customers in over 125 countries, Pfizer manages a highly complex and regulated infrastructure which includes over 60 manufacturing sites, approximately 100,000 employees , and more than 200 supply partners .
Evolving Need for A Digital Supply Chain
As Pfizer’s products evolve in complexity, the company’s supply chain will become increasingly taxed, rendering the ability to track inputs and products along the supply chain more important than ever.
Pfizer’s products are highly complex. As an example, a single dose of its Prevnar-13 vaccine to prevent pneumococcal bacterial infection requires the input of 1,700 employees working with 400 raw materials across 580 steps over 2.5 years. Not only does Pfizer master this process, but it does so at a massive scale – the company recently produced its billionth dose of Prevnar-13 .
A growing number of new drugs contain biological ingredients such as proteins which must be produced, stored, and transported at precise temperatures to ensure efficacy. In addition, these products require highly stringent documentation to meet regulatory requirements with government bodies such as the FDA.
Pfizer’s Highly Orchestrated Supply Network Initiative (HOSuN)
Acknowledging these evolving business needs, Pfizer began in 2015 a formal initiative called Highly Orchestrated Supply Network (HOSuN) to digitize its supply chain by (i) collecting data along its supply chain; (ii) use this data to track its products throughout its network and to enable real-time visibility into products’ location and status; and (iii) leverage its data assets to extract necessary documentation for regulatory compliance .
To do this, Pfizer has begun leveraging cloud technology, not only by collecting data internally from within the Pfizer ecosystem but by going externally as well. To that end, Pfizer has begun tapping into the IT systems of its more than 200 supply chain partners .
This initiative essentially creates a real-time virtual map of its supply chain and transportation system, allowing Pfizer to track each supply input and product across its complex network and quickly respond to evolving customer needs or shocks to its systems.
Pfizer facilities and suppliers transmit information about shipments based on customer requirements. Pfizer’s IT system then allows supply chain participants to track when cargo is ready for pickup, where cargo is at any point in time, and to be notified if there are any supply interruptions.
This also offers efficiencies for acquisitions. As a highly acquisitive business who has purchased 9 companies over the past three years, Pfizer must ensure its supply chain is flexible enough to ‘plug & play’ acquired supply chains into its existing infrastructure .
In the medium term, Pfizer is looking to build on its data assets to better anticipate and predict customer demand patterns relative to its supply capabilities . For example, Pfizer could identify a customer need and in real time push the product from the optimal production facility, through its supply chain, and into the customer in record time.
In addition, the use of analytics will allow Pfizer to generate significant cost savings as it better understands its supply chain and finds opportunities to streamline its infrastructure, for example by consolidating multiple batches of products into fewer shipments.
What’s Next for Pfizer’s Digital Supply Chain?
A number of evolving digital technologies could prove highly valuable to Pfizer as it seeks to build on its foundational technologies and data assets.
In particular, it is critical that Pfizer adopt breakthrough Internet of Things (IoT) technology to further streamline its supply chain and ensure patient safety and regulatory compliance. IoT consists of internet-connected devices that are able to collect data using embedded sensors  which, in the pharmaceutical industry, would deliver significant advantages across manufacturing, warehousing, and distribution, as summarized in Exhibit 1 . As an example, a particularly compelling use case would be the transportation of drugs that require refrigeration or ‘cold chain’ supply chains, where sensors would monitor the conditions of the shipments at all points in time, as summarized in Exhibit 2 .
How Will Smaller Pharma Companies Adapt To This Evolving Market?
While Pfizer is leading the industry in terms of its digital supply chain initiatives, many smaller pharma companies lack the scale, resources, and leverage over their supply chain partners to be able to introduce similar efforts. What actions should smaller competitors undertake to evolve and be able to compete with the likes of Pfizer who are building massive competitive advantages relative to their supply chains?
Word Count: 781
 Pfizer, 2016 Form 10-K (February 23, 2017), https://www.sec.gov/Archives/edgar/data/78003/000007800317000014/pfe-12312016x10kshell.htm
 Pfizer, Product Listing, https://www.pfizer.com/products-list
 Pfizer, 2016 Annual Review, Transforming Delivery of High Quality Products case study, https://www.pfizer.com/files/investors/financial_reports/annual_reports/2016/transforming-delivery-of-high-quality-products/index.html
 Pfizer, Manufacturing and Supply Chain Report 2015, https://www.pfizer.com/files/investors/financial_reports/annual_reports/2015/manufacturing-and-supply-chain.htm
 Taylor, P., “Pfizer moves supply chain to cloud,” Financial Times (September 11, 2012), https://www.ft.com/content/1608e5d6-fc59-11e1-ac0f-00144feabdc0
 Capital IQ analysis, accessed November 2017
 Chui, M., Loffler, M., Roberts, R., The Internet of Things, McKinsey Quarterly (March 2010), https://www.mckinsey.com/industries/high-tech/our-insights/the-internet-of-things
 Saboo, M., Chourey, A., and Suranglikar, M., The Internet of Things: The New Rx for Pharmaceuticals Manufacturing & Supply Chains, Cognizant report (February 2017), accessed November 2017, https://www.cognizant.com/whitepapers/the-internet-of-things-the-new-rx-for-pharmaceuticals-manufacturing-and-supply-chains-codex2437.pdf
Student comments on Pfizer’s Prescription For A Digital Supply Chain
It will be interesting to see what Pfizer does in the future as they continue to implement the digitization of their supply chain. It seems Pfizer has every reason to be on the leading edge of this trend as they must bear the cost of spoilage from the large and increasing number of products that have strict temperature control requirements. I thoroughly agree that they must be proactive in tackling the challenges of integrating acquisitions into their own supply chain. From my experience with a manufacturer of large equipment that switched over it’s software for digitally managing inventory it can be an arduous process. They will need to have a highly skilled team prepared to integrate both the culture required for the higher level of monitoring in addition to the hardware and software.
To your question about how smaller pharma companies will react, I imagine in the short term they will use older, cheaper technologies until their supply chain partners fully adopt the IoT technologies. There are a wide variety of other technologies such as passive and active RFID that provide many of the same benefits and can help to efficiently digitize your supply chain in the near term. The main drawback is that it doesn’t provide the real-time feedback that the IoT solution does. Additionally, the passive tags do not give you the capability to track other measures such as temperature or pressure. (1)
1 Meola, Andrew, “How IoT logistics will revolutionize supply chain management,” Business Insider, December 21, 2016,
Great piece. I particularly enjoyed your point about Pfizer needing to adopt IoT technology in order to remain hyper competitive. I agree that this is necessary, and wonder what data at which points will be most useful when implementing technology. Getting it set up is not the hard part, but rather, deciding which metrics truly matter most.
As for the response from smaller pharma companies, even though they have less resources, because of their sizes, their advantage is that they are able to move and adapt much more quickly. At scale, communication typically breaks down more easily, and changes in a large chain will be difficult to implement. However, it is true that Pfizer has a massive advantage over these small players.
Foran, I thought your essay was well-researched and well-defended.
Having worked for Pfizer on several of their recent transactions, I was hoping to speak to the fact that the company is so hopelessly ineffective at research and development. Yet, I believe that this digital supply chain may have yield synergies that would help improve R&D yield and productivity (despite this not being the supply chain’s top priority).
Specifically, I see opportunities in allowing scientists to access data more quickly and securely. With an integrated ERP system, a scientist working on drug development in one area of the company could quickly access resources from colleagues in a different part of the world, cutting down on redundancies and communication time. This is one of the key areas that Mirko Senatore, director of the Network Solutions & Excellence Team EMEA (part of the Global Supply Chain organization) at Pfizer, discusses (below):
Additionally, I see this as an opportunity for Pfizer to improve the product quality, regulatory compliance and operational efficiency – all starting from supply chain optimization and digitization. The characteristics involved with a digital supply chain not only helps with manufacturing, but can also set the discipline and tone that would create a more successful R&D environment for the company. The article below specifies the manufacturing benefits, but R&D could stand to learn from these best practices as well:
I really enjoyed this article. I agree that Pfizer needed to digitize their supply chain. This point is particularly salient in regards to their high level of acquisition activity. A fully digital supply chain will greatly increase the ease of integration and allow fore Pfizer to realize the synergies provided by the acquisitions sooner. Additionally, it will allow them to add quick turnaround of new drugs or production of existing drugs as a customer promise.
In order for the smaller firms to compete, they will have to attempt to replicate Pfizer’s digitized supply chain. To do this without the capital resources, they well have to develop partnerships throughout their supply chains. They will have to convince the other actors in their supply chain of benefit of sharing their data and constructing a central data and information system. This will be made easier by the fact that they can simply point to Pfizer as an example.
I am stunned by the efforts Pfizer has taken to digitize its supply chain and the impact it has had on it’s ability to produce vaccines. Even though Pfizer is a very large pharmaceutical company, even it’s competitors are big and very complex companies. They all certainly have the ability to engage in supply digitization. I would argue that it may even be easier for them since their supply chain is likely significantly less complex that Pfizer’s. In order to achieve this, they should look to Pfizer for best practices and tailor those to their own internal processes.
Really interesting topic! Unfortunately I think the answer for smaller drug manufacturers is to partner with companies specialized in downstream distribution/supply chain optimization because they can’t compete with the behemoths in global drug distribution. In fact, I think that’s why you see so many small players partnering with larger pharmaceutical companies for commercialization!