Challenges and Opportunities in the Consumer and Pharmaceutical Industry Packaging Process

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1 Customer Spotlight Challenges and Opportunities in the Consumer and Pharmaceutical Industry Packaging Process Sponsored by: Tech Mahindra and Esko Lorenzo Veronesi May 2017 Maggie Slowik IN THIS CUSTOMER SPOTLIGHT Many consumer and pharmaceutical companies are struggling to maintain packaging quality and consistency across product lines. Even minor label translation errors and poor printing quality can result in costly product recalls that have a huge impact on the business. Consumer and pharma companies need to equip their workforce with an enhanced IT platform that creates visibility while offering real-time insights into product information along the entire life cycle. By doing so, they will be able to: Capture and validate packaging decisions upfront to carry out a more complete impact assessment and make decisions sooner with a greater level of confidence Accelerate business processes and approval cycles to reduce costs and time to market Improve total life-cycle quality, reduce costs, and increase customer satisfaction, which in turn enhances brand image and market position Increase the speed and accuracy of decision making, especially in processes that are created under time pressure This IDC Customer Spotlight explores how artwork in packaging can be an inefficient process for many consumer and pharmaceutical organizations. If tackled the right way, however, it can save costs and provide a process that can be leveraged across other areas of the business. SITUATION OVERVIEW What Are the Key Challenges in Packaging Today? Many brand-oriented industries such as food, beverages, personal/home care, and pharmaceuticals have seen their business environment change dramatically. Manufacturers now need to design, make, and launch new, personalized products quicker than ever before. In response to increasingly demanding and diverse customer segments, and to fend off growing competition, companies are speeding up design and new product releases. To meet these demands, they also have to target new geographies and capitalize on resource ecosystems in multiple regions. Leveraging the packaging process to increase speed to market is a major challenge in many respects. The process of designing a new package while maintaining an existing design can be a minefield of complications. This complex process involves a host of contributors, including internal writers, external designers, and the people who provide frameworks, images, and logos, as well as the product teams focused on content, recipes, and ingredients. On top of that, companies need to May 2017, IDC Manufacturing Insights #EMEA

2 make sure that once the packaging has been defined and approved, the print process fulfils the necessary requirements. Problems can come from a number of areas non-standardized bills of material, translation mistakes, typos and poor proofreading, missed annotations, unclear briefs, artwork problems, expired digital assets, third-party artwork suppliers and printing shops. Consumer and pharma companies must also deal with a very strict regulatory environment. In the U.S., for example, the Food and Drug Administration's (FDA) Physicians Labeling Rule (PLR) provides dozens of labeling, content, and presentation guidelines on how to communicate every class of information, for every type of drug, for every kind of patient. And each time there is a problem, the manufacturer risks having to issue a (potentially major) recall. Recalls caused by issues with artwork and packaging are an ongoing problem for many companies. According to the FDA, 20% of packaging and labeling-related recalls are due to defective containers and at least 65% are related to artwork and content management errors. According to evidence collected in the Dow Jones Sustainability Index, the cost of artwork-related recalls for an average multinational pharma company can amount to several million dollars a year (and up to $10 million in some cases). In the CPG sector, there is anecdotal evidence that this could amount to 1% of companies' total revenue. Poor artwork management can negatively impact companies in other ways too. Having to share artwork/packaging-related information with partners, including printing and material suppliers, creates an ongoing challenge in maintaining and sharing the right versions. The time wasted here can lead to longer time to market and time to value, and can have a negative impact on the company as a whole. Managing the packaging process is therefore key to achieving profitability. With an efficient packaging process in place, companies can benefit in a number of ways and these in turn enhance their brand image and market position: Fewer packaging-related product recalls Optimized warehousing and supply chain costs due to less waste Lighter environmental footprint Adherence to regulatory standards Improved process productivity by reducing rejections and rework costs and promoting standardization Accelerated business processes and approval cycles leading to shorter time to market and lower costs Efficiently reusing digital assets such as artwork and avoiding duplicates is essential to streamline the process, improve the quality, and right-size the number of people involved. The Need for an End-to-End Solution To achieve these goals many consumer and pharma companies have streamlined the tools and processes used for product labeling and packaging design. Many still need to figure out how to deliver information effectively across their organization, especially as business applications (ERP, PLM, etc.) tend to manage silos of information focused on dedicated processes. In other words, business applications are very good at doing what they were originally conceived and implemented to do, but are not so good at seamlessly handing over data and information to other business processes and applications. As a result, to effectively cover the end-to-end packaging design, management, and production process, companies often need to rely on expensive and cumbersome custom applications or error-prone manual processes IDC Manufacturing Insights #EMEA

3 In this context, companies need a solution that addresses the painpoints through process standardization, data harmonization, and tool automation. This solution could be a single application or a set of applications working together while individually performing a defined set of activities. Capturing and validating packaging decisions upfront enables companies to carry out a more complete impact assessment and make decisions sooner with greater confidence. This involves deploying an IT platform that is based on the following principles: A flexible workflow framework to accommodate the needs of disparate business units A standardized and extensible data model to connect disparate systems A scalable configuration to enable additional processes Greater automation of the business processes, such as proofreading and online annotation Auditability of the system to support traceability and regulatory compliance A combination of product life-cycle management (PLM) and artwork management system (AMS) applications addresses most of the challenges in the packaging world, as well as providing a platform to manage end-to-end packaging and artwork design activities. PLM enables change management, packaging bill of materials (BOM) management, and supplier enablement processes and project management. AMS enables management of artwork briefing and proofreading, drawing, print processes, program management, and digital asset management. Integrating and exchanging information between PLM and AMS applications to provide a platform for end-to-end packaging and artwork management is a key issue in the pharmaceutical industry. Failing to deliver the required operational results will increase the risk of quality failures and product recalls, adding pressure on profit margins. Compromising on patient safety is the main issue here, but even when a recall does not pose a direct threat to the consumer, there can still be a high price particularly when it comes to non-compliance fines issued by regulatory agencies such as the FDA. This could not only lead to skyrocketing logistics costs throughout the supply chain but also to brand damage. Case Study: Improving Artwork Management in a Pharma Giant A pharma giant devised a strategy to reduce recalls and improve packaging-related quality, with the overall focus on patient safety and communicating the correct information. First, however, the company had to tackle a series of obstacles, mostly related to the fragmented IT tools and processes used to manage packaging and artwork materials in different business units within the organization. This had been exacerbated by mergers and acquisitions that had resulted in each site using different processes and systems. In one of its business divisions, the company had a number of diverse processes and applications in place to manage artwork. This resulted in the lack of a single source of truth, as well as poor resource optimization, including both duplicate processes and material/artwork reusability. Even print suppliers were scattered, making it more difficult to keep printing costs down. This led to a series of issues that hindered the company's ability to achieve "right first time" metrics and increased the number of avoidable recalls. In other divisions, PLM and ERP were the main systems in place. Even though they were sufficient to manage data in a standardized way, they did not cover the artwork. Artwork, in fact, was being managed separately through a series of bespoke integrations with other content management systems. Force-fitting the artwork solution in PLM did not perform well in terms of stability and usability, resulting in multiple artwork-related recalls IDC Manufacturing Insights #EMEA

4 This non-scalable, fragmented IT solution stack resulted in an inaccurate packaging structure, a duplication of specifications, transcription errors, loss of annotations, and incorrect part number management which all led to product recalls and longer time to market. The company decided to embark on a transformation journey to enable a single platform to manage artwork across several business units and geographies. After a careful selection process, the company chose Esko WebCenter as its main AMS, mostly due to features that aligned with the company's strategy, as well as ease of use. Next, it embarked on a first of its kind program for solution standardization by implementing and integrating both Oracle PLM and Esko WebCenter. The company selected Tech Mahindra (TechM) as its strategic system integration partner for end-to-end implementation of the design, build, validate, and deploy stages of the solution, while partnering with product vendors Oracle and Esko. At the time TechM got involved, the only existing system integration steps were a high-level business process and semi-ready business requirements analysis. This required a standard, customizable solution to transform the artwork and packaging data model end to end. TechM and Esko s approach entailed creating a single platform catering to multiple geographies and business units via a standardized and simplified process and data model. This approach was designed to enable new features that were previously not attainable with a siloed approach to the IT systems, specifically: Organizing packaging data to take full advantage of PLM capability Enabling content owners to input text directly into artwork Creating a central repository and consistent format for technical specifications and enabling access to third-party vendors The journey started in January TechM and Esko proceeded with a combination of methodologies that included an agile-based model for design and build that was complemented by a more traditional waterfall approach for documentation, system testing, and user acceptance, a risk-based testing approach for validation, and a wave approach for deployment and data migration, plus TechM's proprietary data migration framework to migrate data from legacy systems. The company is already benefiting from: Lower-cost recalls. With the new system in place, the company has a better understanding of the root cause of quality issues, ensuring the same problem does not occur again. Improved regulatory compliance. The company now has access to a pre-validated source of data that ensures package information and artworks are always in line with regulatory requirements. Improved processes. The company plans to achieve its "right first time" KPI. A reduction in new product development and trial management time. Artwork turnaround time has been significantly reduced, enabling the company to launch products faster. Artwork is no longer a stumbling block. Greater control of artwork management. The company created a connected system that has improved approval and revision tracking processes. The company expanded its level of control for all activities related to artwork and packaging. Lower costs for artwork changes. The company can now change as much artwork as required within a single process step. Economies of scale. The company has benefited from supplier rationalization and consolidation due to process standardization IDC Manufacturing Insights #EMEA

5 Scalability. With the company planning to grow by M&A, it will be able to scale up the system to include the new entities in the process. Improved user satisfaction. High user adoption is a key positive for the company. While users were reluctant to change, the new system drives a new way of working together. This has had an immediate impact on the company and users are now using the same standardized work procedures. ESSENTIAL GUIDANCE Managing digital assets holistically is essential to ensure compliance with regulatory requirements and avoid costly product recalls. Dealing with end-to-end packaging specifications and encouraging collaboration among users in different disciplines (design, regulatory, production, etc.) is key to achieving this. This entails transformation driven by process standardization across multiple businesses. Central to this is the adoption of the right companywide platform solution that enables due diligence on data integrity and the full integration of the artwork and packaging solution with enterprise systems. IDC provides the following advice to consumer and pharmaceutical companies: During the packaging process, internal staff, agencies, and external experts produce different types of content, including text, images, frameworks, and logos. The key is to bring the right people together at the right time to ensure that no review processes are skipped, delayed, or stopped. Rather than creating new content from scratch every time you develop a new packaging solution, work with your vendor on a solution that will allow you to store assets internally and in a single data structure. You can then leverage other packaging processes and publication channels such as the web and social media. Lastly, invest the time to not only understand which vendors can meet your needs, but also consider other factors beyond IT knowledge such as track record and features, collaboration skills, and cultural fit. The better the chemistry with other vendors (such as ERP and PLM providers, system integrators, etc.), the quicker the results IDC Manufacturing Insights #EMEA

6 APPENDIX TABLE 1 Product Features Implemented Esko WebCenter Task management Orchestrating all teams and activities, internal and external, regardless of locality, region, division, market, and industry, and focused only on those tasks required of that particular user Graphical workflow Workflow canvas to manage global processes, segregated regional processes, or any hybrid of the two that delivers the specific business requirements Intelligent forms Capturing, coordinating, and standardizing information at every point in the process with rapid collation and versatile entry management, creating fully searchable information fed to every KPI and report Parent/child Enabling granular project management with associated relationships maintained from concept through design and even out into the market Asset browser User-friendly browser to search through every asset, stimulating innovation while avoiding duplication and eliminating rework Viewer with content compare Market leading viewer with the ability to instantly view and compare files User-based reporting Search and save reports within the artwork environment that enables user, role, and global specific reporting, which in turn feeds into the overarching business intelligence functionality Oracle Agile PLM Product information Change management Product definition capabilities to create, share, and maintain product records Enable collaboration capabilities for the product change process, enabling users to easily and systematically create and approve product change Project and task management Project and product management with a single integrated view to support throughput with automated task completion based on product deliverable life cycles Dashboards and reports Configurable dashboards and reports for tracking and reporting as per user needs Easy to customize and integrate Product can be customized and integrated with software development kits and can be integrated with a web service Source: IDC, 2017 METHODOLOGY The project and company information in this document was obtained from multiple sources, including Tech Mahindra and Esko, and from questions posed by IDC directly to the customer employees IDC Manufacturing Insights #EMEA

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