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1. CLICK TO ADD TITLE The 6th Global Health Supply Chain Summit November 18-20, 2013Addis Ababa, Ethiopia Reducing Risk and Achieving Better Control with Automatic Identification Technologies (AIT) – Supply Chain and Inventory Control Ike Anyaoku Deloitte and Touche LLP [SPEAKERS NAMES] [DATE]

2. Table of Contents • Introduction • Risk Management and Supply Chain • Emerging Industry Trends • Supply Chain Technologies via AIT • Case Study: Improving Patients Safety in Pakistan’s Hospitals • Thinking Ahead • Questions

3. Introduction Deloitte Supply Chain Services Ike Anyaoku • Manager, Deloitte and Touche LLP • Global Public Financial Mgmt. and Supply Chain Assessments • 10+ years of experience in risk assessments supply chain management • Focused primarily on public sector assisting NGOs and ministries improve performance • Risk and supply chain assessments • End-to-End Supply Chain Risk Diagnostics • Sourcing & Procurement Best Practices • Coordinate, manage, and participate in relevant workshops to identify effective program modalities utilized in peer countries • Distribution Network & Transportation Optimization • Warehouse Design and Implementation Worldwide Presence • Europe/Middle East Africa • 61,800 employees “Senior stakeholders within many companies would agree that managing reputational risk is of critical importance. The supply chain represents one of the greatest exposures for reputational risk – because if one of your suppliers stumble, it quickly can impact your brand,” Henry Ristuccia, Deloitte Global Leader. Source: Kennedy Consulting Research & Advisory. • Americas • 68,700 employees

4. Risk Management & Supply Chain

5. Risk Management Model & Supply Chain?How Does It Work? The risk management model helps the organization to better structure its process in order to reduce costs and losses in the supply chain that result from theft, assaults, and other illegal activities. The model is about the reduction of risk due to those activities What is it? • A systematic approach to organize and automate risk management process in the supply chain enabling: • Visualization and optimization of portfolio of routes • Standardization of business practices throughout the value chain • Supply chain managers are asked to think critically about each route: (a) what does it look like (who is involved, where, when, etc.)? (b) what happens on that route? (c) what risks are associated with each route? • The determination of risk must be done according to an agreed-upon methodology: managers must think about the types of risks, the impact of certain risks, and so on • The supply chain picture that emerges allows managers to think more creatively about investments and costs allocations across the supply chain: what requires attention and why? How the Model Works

6. Risk Management ModelMore About the Model The development of the Risk Management Model in Supply Chain could be based on these four steps Develop Risk Model Map Risk Rating of Routes Set Action Plan Integrate Model within Routine of the Area • Define standard actions in order to mitigate risks for each risk rating • Identify routes with excess or gap of security resources • Reallocate resources according to risk rating of each route2 • Estimate potential savings / costs due to resource reallocation • Detail implementation plan • Identify and collect data from routes • Calculate scores for routes • Determine risk ratings • Classify routes, consolidate data and establish portfolio of routes • Analyze risk rating of portfolio of routes • Test model against collected data • Treat divergences • Incorporate process to the routine of the area through: • Ongoing activities • Periodic activities • Define a scoring model based on: • Relevant criteria for measuring Supply Chain risk1 • Weights • Performance levels (KPI) Activities Notes: 1) Use of Multi-Criteria Decision Analysis (MCDA) 2) It is possible to customize actions to be taken based on the experience of people in the company for specific routes

7. Emerging Trends

8. Firm-specific practices that have increased supply chain risk exposure Supply chain practices of the last two decades, focused on efficiencies and cost, have had the side effect of increasing and shifting risk exposure These strategies have broadened the range of risks to which supply chains are exposed and often limit companies’ abilities to rapidly react when disruptions occur Globalization of supply chains Risk events across the globe can now have profound disruptive effects on a company’s operations Rise of just-in-time and lean practices Lower safety stocks and increased timing and logistics complexity have introduced new risks into operations Increased outsourcing of core activities Outsourcing business activities can hamper a company’s ability to manage disruptions within a multi-tiered supplier network Supplier consolidation strategies Consolidation reduces sourcing flexibility and can limit capacity to respond to demand fluctuation or crisis events Centralization for economies of scale Centralization can make companies increasingly susceptible to significant disruption by a single-site event

9. In parallel, external customer, macroeconomic, and societal trends have increased pressure on supply chain operations Many of these trends have increased in intensity in the last decade External trends that have increased supply chain risk exposure Shortened product lifecycles • Rapid shifts in consumer demand across diverse geographies, in parallel with heightened competition, have increased supply chain complexity Worsened impact of natural disasters • Urbanization, population growth, and technological interconnectedness have resulted in natural disasters’ increasingly negative outcomes € $ £ need for environmental and social responsibility ¥ • Social and media scrutiny, as well as resource scarcity, impact how companies must manage supply chains Heightened regulatory enforcement • Regulatory compliance issues have resulted in high-profile, high-cost shutdowns and penalties Shifting economic landscape • Sales and operational planning risks have increased as a result of market and commodity-price volatility Social media & increasing transparency • Reputational risks have increased to the rapid spread of information and greater transparency from social media and digital platforms

10. Recent risk events triggering significant supply chain disruptions These executive concerns continue to arise and become more acute because of the number of recent and interrelated high-visibility/high-cost supply chain disruptions In parallel, the recent financial crisis has raised the awareness of “Black Swan” risk events US$ 125B of estimated financial damage2 Hurricane Katrina Illustrative future events US$ 100B of estimated financial damage2 Kobe earthquake Sovereign bankruptcy in Italy precipitates a Euro-zone financial meltdown 0.2% of China’s GDP growth3 SARS outbreak 80% increase in oil prices in 7 weeks1 Iraqi invasion of Kuwait US$ 600M in lost revenues4 Genzyme production shutdown Carbon tax passed in the U.S. 1990 2000 2010 2020 Year Nationalization of cement industry in Venezuela US$ 400M sales lost by Cemex8 Italy Lombardi storm US$ 625M of estimated financial damage2 Mattel lead paint crisis 19M toys recalled7 Electrical grid failure in Bangalore Boeing supply failure US$ 2.6B in resulting write-offs5 Acute shortage of rare earth metals hampers tech sector growth 9/11 attacks US$ 40B in insurance losses alone6 Japanese earthquake and reactor failure US$ 210B of estimated financial damage2 Successful cyber attack knocks out most cell service in NYC Legend High-impact, low-probability (“Black Swan”) events Sources: 1) “The Economic Risks,” The Economist; 2) “The Internal Disaster Database,” EM-DAT; 3) “The Effects of SARS on East Asian Economies,” FRB Dallas; 4) “Genzyme Held Bad News As Shares Dropped,” Forbes; 5) “Supply Chain Project Management,” Daniel Newman; 6) “Cost of 9/11 in Dollars,” CBS News; 7) “Mattel Recalls 19 Million Toys Sent From China,” The New York Times; 8) “Cement industry is Venezuela’s latest target for state takeover,” LA Times

11. Few industries have avoided negative business outcomes resulting from serious disruptions to supply chains Company Event Outcome Flash floods and mudslides forced Sony to shut production at 2 of its 3 units in Thailand Sony delayed the launch of two products indefinitely Due to disagreement around job security and pay, 26,000 commercial aircraft workers went on a strike for 8 weeks Boeing’s fourth-quarter revenues declined 27% as the strike reduced commercial airplane deliveries by 70 units Genzyme discovered a virus in a bioreactor, resulting in production shutdown for 3 drugs Genzyme estimated the revenue loss associated with the disruption to be around $600M Mattel recalled 19M toys with “impermissible levels of lead,” resulting in a single day share price decline of 2.4% and significant brand damage One of Mattel’s Tier 2 suppliers used paint from an unauthorized 3rd party Due to gaps in demand visibility, Cisco could not see slowing demand before the tech bubble burst in 2001 Cisco took a $2.25B inventory write-off, one of the largest in history Extreme flooding in Thailand resulted in shortages of critical hard drive components Intel forecasted a $1B loss in revenue in for Q4 2011 attributable largely to hard drive shortages Sources: Sony – “Sony postpones product launches due to Thailand floods,” BBC News; Boeing – “Boeing posts quarterly loss on strike impact and charges,” Boeing press release from 01/28/2008; Genzyme – “Genzyme Held Bad News As Shares Dropped,” Forbes; Mattel – “Mattel Recalls 19 Million Toys Sent From China,” The New York Times; Cisco – “Cisco’s $2.25 billion mea culpa,” CNET; Intel – “Intel's Fourth-Quarter Revenue to Be Below Expectations Due to Hard Disk Drive Supply Shortages,” Intel press release from 12/12/2011

12. Automatic Identification Technologies (AIT)

13. Emerging Industry TrendsHow technology powers supply chain Today, technology in supply chain is much more than just computers. It includes varied aspects, right from factory automation, enhanced communication devices, data recognition equipment to other types of automated hardware and services.

14. Types of Automatic Identification Technology (AIT)Application

15. Automatic Identification Technologies (AIT)Types of Technologies Bar Coding Identify specific item as well as other pertinent information RFID Require manual intervention Full automatic data collection Static memory Memory can be updated Require line-of-sight reading Detect tag from a greater distance Read individually Multiple tags read simultaneously

16. Emerging standard AIT - Radio Frequency Identification (RFID)

17. Trends and Best PracticesVision Healthcare Retail In order to respond to the upcoming regulations and improve safety and security, all stakeholders throughout the chain need to invest in systems and collaborate towards the achievement of a common vision. • To flow seamlessly through the chain, data needs to have common standards • Various systems need to be implemented up to point of care to take advantage of the full benefits • Each transfer of ownership is critical throughout the chain to transfer information Supplier Drug Serial # Manufacturer ERP System Distributor ERP & WMS System Pharmacy Clinical System Inventory Management System RFID Patient Identification Wristband Pharmacy Management System Patient Records Hardware – RFID Tags or 2D Barcodes Software– e-Pedigree, Serialization, Track & Trace Communication Protocols – EDI, XML, and common data standards

18. AIT and Supply Chain Inventory ControlChallenges and Solutions

19. Example: RFID Reduces Supply Chain Risk in Emerging Markets Integrity • Reduce the risk of counterfeit products entering the supply chain. • Overseas manufacturing functions can be monitored for quality control by confirming that each step of the assembly line was completed. Authenticity Specificity Compliance • Immunizations and other medication are tracked to ensure shipment is stored in required government regulated environment to reduce spoilage and ensure delivery to patients. • Aid workers are provided with real time visibility at different points of the supply chain to manage shortages in immunizations, mosquito netting, water, food, ect. • International aid agencies gain reliance that donations and assistance is delivered to the intended beneficiary. • Inventory is tracked for accurate financial reporting and tax implications. Location

20. Supply Chain and RFIDHow RFID products and solutions could be deployed from manufacturing plant to healthcare workers in rural Africa • In country distribution centers • Manufacturers’ pallets arrive in country for distribution • Pallets are picked with vehicle mounted RFID readers • Antiviral inventory is automatically received and updated in system • Network of symbol readers ensure the antiviral movement is tracked • Manufacturing Plant • Manufacturer adds RFID tag to the antiviral drug • Antiviral drug is loaded into RFID cases and pallets • Symbol readers above shipping doors reads each pallet, case and item as it leaves the plant • Hospitals and field offices in remote locations • Delivery arrives to hospitals and FOs • Inventory is automatically received and updated • Network of symbol readers ensure that product movement is tracked • Healthcare workers distribute antiviral prescription

21. Applications in AITCase Study: Improving Patient Safety in Pakistan’s Hospitals Problem Poor hospital patient safety protocols Intensive Care Unit (ICU) patients in low and middle income countries (LMIC) are two times more likely to get catheter-associated urinary tract infections and four times more likely to develop ventilator-associated pneumonia than their counterparts in high income countries. Mortality in LMIC is between three to nine times higher due to elevated rates of central line-associated bloodstream infections. Solution Mobile health solutions Using radio frequency identification (RFID) tags on patient identification wristbands, health workers can access forms, procedure protocols, and important patient information by simply tapping the wristband with a cell phone. Patients’ information is updated in real time from central server, health workers can operate with the most up-to date understanding of patients’ condition and keep electronic records of patient safety events. - USAID Development Innovation Ventures report – July 2013

22. Industry mandates and direct guidelines outlining specific labeling requirements: Wal-Mart and other global retailers such as Target and BestBuy are mandating that suppliers apply RFID tags to all pallets and cases, phasing in the technologies The U.S. Department of Defense, which runs what is considered the world’s largest and longest supply chain with more than 60,000 suppliers, has mandated a phased-in approach for RFID labeling to its suppliers The U.S. FDA (Food and Drug Administration) is looking to RFID to control the nation’s drug supply to ensure quality and reduce counterfeiting

23. Thinking Ahead

24. Deloitte has identified a variety of best practices for supply chain risk management Sense emerging trends Focus not just on traditional and known risks. Many companies are over prepared for operational and other common risks. Leading companies sense emerging drivers that transform into risks over time Be forward thinking History can be helpful, but past performance does not necessarily correlate with future success. Prepare by imbedding predictive thinking to become more forward looking Look beyond the four walls Risks emanate from a multitude of sources. Look beyond the company’s four walls – into the extended value chain, both upstream and downstream, and into the macro-environment Be proactive Be proactive: focus on addressing critical vulnerabilities that expose important nodes within the supply chain to risks as a means of managing risk Prioritize Prioritize and build resilience where it matters. Understand the critical, high-value nodes throughout the supply chain – even beyond Tier 1 suppliers AIT - Measure and monitor Measure resilience and continuously monitor and reassess. Establish feedback loops to ensure that observations inform resilience strategy planning and implementation AIT - Quantify through analytics Quantify the risk impacts using advanced analytics and simulation capabilities. Qualitative techniques, while valuable for certain applications, limit the insights into the magnitude of risks Test the worst case Test worst case scenarios as a means to understand performance, especially in the instance of low-probability, high-impact “black swan” risk events Think beyond BCP Integrated supply chain risk management goes beyond site and node level business continuity planning. While specific node-level operational plans are important, effective risk management is more holistic

26. Questions?

27. Appendix

28. Benefits Limitations Consequences Benefits of the Model Focus The model helps managers (a) document the modus operandi in the supply chain, (b) reduce variability of supply chain losses, (c) reduce cost of supply chain losses. It also has a number of additional benefits, which come with some caveats: • It helps to structure and document the know-how of the company • It is not an artificial intelligence system • It is a support tool for decision making • It allows to generate predictions from criteria applicable for most cases • It does not consider individual exceptions of the routes and mistakes on the execution of the procedures • It does not aim at anticipate the location of every event in supply chain • It helps to standardize potential actions to be taken in all routes • It is not a procedure handbook • It does not replace the specific local knowledge of the people • Facilitate and speed up security resource allocation decisions among different routes • It allows managers to have a global view of the portfolio of routes • It does not aim to be exhaustive about route knowledge • Make communication inside the department and with other areas at the company easier

29. Risk Management Model Scope The model can be used to measure risk levels of individual routes along the supply chain — from the plant all the way down to local warehouses and retail sights Local Sites Distribution Centers Plants Local Warehouses (Plants — Distribution Centers) (Distribution Centers to Local Sites) Route

30. Trends and Best Practices Vision (Con’t) E-Pedigree and RFID Increasing safety issues such as counterfeiting and theft has alerted regulatory organizations other and drug stakeholders to implement a safety system that enables tracking and tracing across the entire supply chain. Data Management and Systems Data management and systems are critical components in improving collaboration between stakeholders, as well as to achieve optimal internal efficiency. Strategic Collaboration and Vision The market will evolve towards strategic alliances rather than tactical operational relationships in the perspective of streamlining the supply chain, and increasing visibility and customer service. This factor will become increasingly important with the continued acquisition and consolidation of outsourcing services.

31. Trends and Best PracticesE-Pedigree & RFID How does E-Pedigree Work? Distributor Retail Store Manufacturer

32. Trends and Best PracticesE-Pedigree and RFID E-Pedigree • RFID tags enables tracking and tracing of drugs all the way through the supply chain • An answer to increasing counterfeit drugs and theft • FDA, EU, and other major regulatory agencies are stepping up the efforts to implement E-Pedigree • Prior to receiving, person accepting products in to available inventory, pedigree check, completeness and authenticity is validated • E-Pedigree can tell if a product is authentic • Collaboration software publishes event data at each step in the supply chain RFID RFID has the ability to increase security dramatically by: • Patient Identification • Medication Management • Tracking of Medication • Error reduction • Location of staff, drugs, and equipment • Managing controlled substances, pathogens, and other materials that pose a public health risk Even though the e-pedigree regulation has not been yet implemented, this key trend will greatly affect pharmaceutical distribution in the next 5 to 10 years. Your Supply Chain needs to be flexible and ready for the implementation of this upcoming standard.

33. Trends and Best Practices Data Management and Systems Component of the Sourcing and Procurement Cycle