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Overhaul Your Understanding: Security Challenges in Healthcare Supply Chains

Welcome back to our expert interview series, Overhaul Your Understanding. You can listen to our interview with Bob Pocica, founder & CEO of BNCIL, or read the interview below.

Welcome back to Overhaul Your Understanding, an expert interview series. I’m Ania Adamczyk, Content Marketing Manager at Overhaul, and today I’m joined by Bob Pocica, founder and CEO of BNCIL, an enterprise risk advisory company.

As a way for our audience to get to know you a little bit more, we’re going to have three fun questions to get us started. If you could time travel, where and when would you go and why?

So that was a tough one. I live in the present, but I’d probably stay in the U.S. and go back to the 50s and 60s. It’s post-World War II, with a lot of economic growth and opportunity for really the whole population. And I love music and entertainment. So that’s the rock and roll coming of age period — it’s big band sound, it’s Frank Sinatra, Sammy Davis, Dean Martin, and Elvis coming along. I just thought that that was a great opportunity and it was a big change even culturally with the civil rights movement going into the 60s. I was very little, so I don’t remember that much from it and I would like to be an adult to enjoy that time period and just watch that opportunity blossom again.

What is one thing that is currently on your bucket list?

Well, luckily,  my bucket list is short because I’ve done a lot of my bucket list items. We had planned a trip to go down to Argentina in the spring, but that got canceled. So I definitely want to put that back on the list to hopefully maybe next year, if everything is normalized so that we can get down to Argentina, to just see the country, the people, or the food scene and wine. I’m a big lover of wine and I have a beautiful collection that I have in my cellar. So I’d love to get down there with my wife, down to Argentina.

What is the best piece of advice that you’ve ever received?

From a very wise person: listen more, talk less.

We’re going to just dive into your background and career. Could you provide us with a little bit of an overview of your background and let us know how that’s influencing what you’re doing today?

Great. I’ll do the short version because we could talk at length on this, but probably I’ll start with when I entered into the FBI as a special agent in 1980. The first case I ever worked was the theft full tractor load of goobers, which are peanuts. So I teamed up with the local cops, they had some informants and we were able to locate the load and get it returned back to the company and everything else. So it’s ironic all these years later, supply chain is very much rooted in what I did over the past. I was a special agent with the FBI for 23 years, a street agent for about half that time. And then an executive within FBI headquarters, working various programs, including the unit that handled theft of interstate shipments. So everything from art theft to anything intermodal that moves, from boats to planes, to clothing, so everything that was stolen and went interstate that unit handled.

So I got to meet a lot of people in the industry and it seems like all that was preparing me because when I retired from the FBI, I went to Pfizer in New York City and came in as a Senior Director and ended up being basically the number two person at Pfizer for the global responsibility of global security. And we operated in about 162 countries, as a large R&D pharmaceutical manufacturer with a lot of moving parts. I really learned my trade as a civilian security person in the private sector, based on the experience that I gathered in the FBI. And then in 2006, I was recruited to go to McKesson in San Francisco as Chief Security Officer. At the time they were probably a Fortune 20-something company, but $70 billion in revenue. And then when I retired last year (January 2019) they were a Fortune 5 with $225 billion in revenue, and we sourced globally.

Some things were brand products that we brought in ourselves and had manufactured and just the overall healthcare kind of product. So McKesson bought and sold as a wholesaler, everything in pharmaceuticals from tongue depressors, to gloves, to narcotics, to blood pressure medication, examining tables — just everything related to healthcare. I had a great team there, I was fortunate enough to work with Overhaul, both with the CEO Barry Conlon with his previous company, but also when he started up Overhaul. And we’ve been a customer with Overhaul since, I think it was 2018? And it’s just been an eye-opening experience on how things have changed and the risk and how global everything is. Let me stop there because that’s kind of a snapshot of the background.

Based on any of the differences that you’d seen being at Pfizer and then McKesson, do you feel that there are differences in supply chain and logistics challenges and security in wholesale compared to more the manufacturing distribution?

In the R&D world, there is movement of products, but it’s generally either API going into developing and producing the product and then shipping, maybe the tableted form to a different country for finished goods. And once it’s finished goods, then it would go back, return to market wherever it was prepared and labeled and marketed for. So operating in 162 countries, finished goods would be moved around at various times. But the main channel here in the U.S. is that we were responsible to deliver to a wholesaler. So freight-on-board shipping, which is they’re controlling the end of it, where once they sell it to McKesson and it’s picked up by McKesson, they booked a sale and it’s off their books. FOB destination is basically, they would need to move it to our central warehouse in the U.S. and once they transacted it and put it on our docks and delivered to it, then they would have it by a destination. It is no longer the responsibility.

So two different views, generally the manufacturer would control that contract discussion, for the most part of my career was pretty much FOB destination, which is they continued the risk and own the risk to ship it. But in the last handful of years, I started to see it was changing, some — not 100% — but incrementally, it was becoming more FOB shipped, which meant we would be responsible to pick it up from Pfizer or Merck or J&J. And then we would have to transport it back to our central national warehouse. Also, wholesalers have to be concerned however they receive the product from the manufacturer. Their job is to then take it, push it out to forward distribution centers and from forward distribution centers located around the country, down to their customers. And that push down is a daily basis. Sometimes if the volume is big enough, it could be twice a day, but wholesale has had to be concerned about the last mile.

That’s a big difference because you’re taking it from our forward distribution center and then providing it to a courier who’s going to basically distribute it down to CVS, Walmart, Rexall, whoever the customer may be. And that last mile is always the biggest challenge because you’re giving up your product and again, it gets into contract. They own the insurance, if it gets stolen and things, but we still have to be accountable if it’s controlled substances and other things to the DEA, to ensure that we have valid compliant vetted couriers that are going to basically distribute this product at the last mile. So we’re moving it from our national distribution center to forward distribution centers, down to a customer. So there’s more breadth on the risk, I believe to the supply chain from the wholesaler.

You’ve seen all sides of it still in your career at the FBI, but what do you feel like are the most significant improvements within supply chain security?

Oh, having experienced a loss at McKesson within four months of me starting there, I had to do a top to bottom review, which I was teeing up and as I was learning the company. But there’s an assumption that an informal process, the relationships would be enough to provide security for the loads. And as a security expert, that’s just not true. You have to have validated processes and procedures that everybody follows. And I think that the bad guys always knew that there would be opportunities either at staging locations, cross-dock locations, and various components when things are in transit, that it was kind of target-rich for the bad guys. And I’m moving back to 2006 and even the early 2000s, I think, and I don’t have the statistics in front of me, but I think they could actually show, even though the amount of loads and costs value have gone up, there has been an impact based on a lot of things like Overhaul offers. Which is advanced technologies and processes that can ensure that your product is going to get from A to B.

And you’re going to be able to have transparency and the visibility to ensure that everything is compliant. I think some of the government programs like CTPAT, Custom Trade Partnership Against Terrorism, has helped the global supply chain. And it’s helped the industry have standards and be able to pull out and self-audit and validate. Which also brought the business partners because logistics or just the people that are trying to make book sales, they only care about — book the sale, move the product, and they always defer to security as well, you’re supposed to be able to just ensure everything’s safe. That wasn’t holistic, that was not as complimentary, it was kind of different functions. So I think over time, it’s become more of a working group and the holistic environment of government programs that can help and assist. Internally, when you’re working with your other business functions, there’s a better alignment and communication.

And that at the end, industry-wide the sharing of information, communicating and cooperation, like organizations like the PCSC, the Pharmaceutical Cargo Security Coalition, have been instrumental in bringing together a lot of different industries and functions to better serve the supply chain end-users. They’re just fair coordination and cooperation on everybody because everybody is at risk of having a load stolen.

In terms of everything that’s been going on recently and your role as an advisor to so many companies in this industry, what challenges did the recent pandemic present for supply chains? And what do you think can be learned to improve crisis management planning for the future?

Well, I listened in on Barry Conlon’s discussion about leveraging the supply chain during the crisis and visibility in a crisis. It was a very good presentation. And basically, I think it woke a lot of people on how disparate and global and complex the supply chain is. I mean, whether it’s pharmaceuticals or Boeing aerospace, they have components made all over the world and what people now do is there’s final assembly. And that final assembly is again putting the product together and again, whether that’s a pharmaceutical product, a car, a plane, they’re sourcing so many different components that are driven by costs, that are driven by tax, strategies that are driven by who’s going to give you the best value and the best product for your money. That real-time supply chain came to a halt when really the world came to a stop, especially in the March going into April. And I think that really woke up the politicians, I think it woke up the executives that are the executives in the companies that defer down to senior VPs or VPs that manage the stuff.

But it really became well, what do you mean we can’t finish our product because we can’t get something from Thailand or from China or from Bolivia or wherever that you’re sourcing? That all of a sudden, I think the discussion even at the board level is, why are we doing it to make this complexity? Because it is a decision for the complexity. And there’s a lot of drivers within a company, internal drivers within business functions of, is it a tax strategy? Is it an R&D strategy? Is it a sales component? Is it relationships because of a long-term decades-long relationship that somebody has been a supplier? And I think COVID-19 is going to be a big catalyst for new investments, new technologies, new processes. And it’s going to help people really step back to say, is this the best way to do it? Is this the most efficient and effective way that we should be doing it versus just the cheapest?

And I think the discussion around costs is going to be raised at all levels of a company that doesn’t matter that you’re saving a nickel here per unit, if you can’t get a finished good to sell.

You’ve covered this already a little bit, but what do you feel like the biggest threats to supply chain security are and how do you feel that those threats will change over the next 10 years?

That’s similar to the COVID-19 issues — the complexity, the global supply nature of the whole supply chain being global and the way people want to manage their inventory and processes. Nobody wants to sit on inventory. So everybody is just-in-time. Everybody is making enough to get out the door, to get it delivered, to be able to get it built, and then sell it. Because if you’re going to sit out components, that’s your cash flow. So your free cash flow is not going to be affected. And the cost drivers need to be evaluated from what I just said about, why you’re saving on one end, you may be losing tremendously on the output side. So I think there needs to be better alignment with the business function and role of the people making those business decisions. Whether it’s procurement, whether it’s the R&D side, whether it’s the manufacturing side, on how they’re going to manage the logistics and security aspect and get better visibility to that, get a better enhancement of, there’s a lot of data points that reside within a company and also through your suppliers.

What Overhaul does is bring a lot of those disparate aggregate data points into one common platform. And you can’t manage everything, so you really need to sit down, at a working group level to say, what’s most important to all the stakeholders? What is the visibility? Is it temperature? Is it timeliness of moving the product? Is it the security to make sure it’s not tampered and nobody’s going to contaminate your product and introduce some sippet and make it into something that it’s not? So you got to have those discussions. And even recently as these last several weeks with the protest and rioters, delays and disruptions, getting down through either Transcon, shipments, or last-mile shipments, what’s that impact? It could be weather, it could be a social unrest issue that’s going to delay your delivery. If it’s critical and you got to get your product from today at 4:00 PM to your customer by 8:00 AM, then you need to know what the weather’s doing and what social unrest in route might do.

And do you need to change the routing of the driver real-time and communicate saying, don’t stay on I-95, you’ve got to go off of that to go to I-10 and go up and around. Because all that, which has been enlightened more through COVID, that’s the new world and the things that can disrupt the supply chain are going to continue to grow. I don’t think, I don’t see the world getting simpler in that format, but I think people in the business need to come together with security logistics, the business functions, and really look at end to end, what’s critical, how do you manage it better? And then if you have a product like Overhaul that can give you that visibility and the data points that you need to critically manage, you’re going to have better outcomes. And you’re going to actually save money in the long run because you’re going to manage your flow better.

Thank you, Bob, for being a part of our Overhaul Your Understanding series!

Learn more about how Overhaul is transforming supply chain security by scheduling a demo today.

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