A healthy digital transformation strategy: how Haleon are solving supply chain challenges

Posted on 18 Sep 2023 by Joe Bush

With recognisable brands such as Sensodyne, Panadol, Advil and Voltaren, among others, global consumer health company, Haleon, services millions of consumers globally. The Manufacturer Editor Joe Bush caught up with Bart Derde, the company’s Chief Supply Chain Officer, to check in on the fledgling company’s progress and ask how it is solving current challenges.

Despite its recent formation, the history of Haleon dates back much further. GSK, Novartis and Pfizer all had previous consumer businesses, forming a much smaller part of the larger pharma company. Those three consumer elements were put together to create Haleon. Bart picks up the story.

BD: In 2015, Novartis and GSK’s joint venture expanded the consumer healthcare business within GSK, which was followed by a second joint venture with Pfizer. At that time the board of GSK decided that the timing was right to set up a separate consumer company.

Fundamentally, pharma companies serve patients, consumer companies serve consumers, and they’re very different. Consumers choose to buy products every day, while patients are served with products which are based on the development of new drug compounds.

From 2019 we embarked on a three year period to integrate Pfizer into the consumer business, and then created a separate business called Haleon. That was announced last year. We were the biggest listing on the FTSE for ten years and were also listed on the New York Stock Exchange.

We’re number one in therapeutically oral health, vitamin supplements and pain relief, with brands that make a huge difference to consumers every day. We’re currently in the middle of a transformation journey, in terms of our integrated business planning and end-to-end platform story, shifting from pharmaceutical to a more FMCG-based way of working.

How can supply chains be an enabler for growth?

Supply chain is certainly becoming more of a boardroom discussion in terms of how it can drive the company forward. We’re a growth story and that’s how we’ve come to market; delivering over nine percent growth in Q1 of this year. It’s also a volume and price mix of growth, which we’re extremely happy about.

Clearly the board are really interested in how we can deliver growth, with the support and fuel to enable margin expansion. The supply chain plays a significant role in all three so we’re having key conversations around how we unlock that potential.

If I look at some of the key drivers of growth, one is clearly availability; being there where the consumer needs the product, even when there’s peaks in demand that are beyond all recognition. A great example, and one we’re incredibly proud of, is the way China emerged from the COVID-crisis. No one predicted that China would come out of the pandemic in the way they did. The Chinese government made a decision to unlock the whole country after being on three years of complete lockdown.

At the time we were still GSK Consumer Healthcare and demand for our products, which really do matter to consumers, grew by 4,000% in three weeks; how do you plan and ready yourself for that eventuality? However, to meet that unexpected consumer need, we were able to deliver two and a half times the volume that was predicted over a six month period.

To achieve that, it was vital we had capacity available to support that rapid demand in the first instance, while also having scenario plans around what it might look like. We didn’t predict that, it was more about being in the right place to react. The team put in new lines and equipment in a fast and agile way, and in a short period of time.

Haleon experienced a huge surge in demand during and following the COVID-19 pandemic

So, within two months of the initial surge, we were up to 250% capacity. Going forward, we’re looking more and more at scenario planning around managing sales and operations (S&OP) and integrated business planning (IBP), anticipating what the unexpected might look like; ensuring we have the extra capacity for growth and balance the cost of that versus the opportunity.

Clearly, how we deliver growth to the organisation in a sustainable way continues to be key. The supply chain, and Scope 1, 2 and 3 emissions, play an incredibly important role in our growth story, ensuring that we look after the planet as well as making sure we serve consumers.

As a newly formed company in the pharmaceutical sector, how did you manage the changes brought about by COVID?

Like everyone we had our challenges through COVID. Of course, the first priority was making sure everyone was safe. At that time we took the decision to decomplexify the organisation and simplify our SKU portfolio, which helped us focus on the things that mattered most, particularly on the 500mg base paracetamol product to really make sure we could maximise output for delivering what consumers really needed.

We then saw the Omicron wave, which again caused an incredible surge in demand. Today, we are producing more than two times more Panadol, Theraflu and Otrivine than pre-COVID levels. And we’ve delivered capacity to support that.

Even so, that hasn’t always been enough, and we’ve seen some challenges in our ability to meet the demand that we want to deliver.

We tried to predict the future and maximised capacity where we could. We moved to 24/7 production in most of our plants and invested in new lines, including four new blister lines which will soon be coming on stream for Panadol. We also invested in new contract manufacturers to support the demand for all the products that surged through the crisis.

So, the three key areas where we invested were significant new contract manufacturing operations, new equipment and simplification of the portfolio. In addition, having digital capabilities to support those investments for a more agile way of working is something we’re still in the process of rolling out. That is key to being ready for more uncertainty going forward.

How does Haleon’s digital transformation strategy tie in?

We’re involved in several activities around digital transformation but the main project is with o9 Solutions, a provider of supply chain planning, demand forecasting and digital IBP.

With them we are building an agile method of managing and delivering on customer demand through an IBP process. A scenario planning tool also helps us understand the variables that we see in demand and how we can be ready for different situations and changes to the market.

The digital tool will help us do that in a more sophisticated way than we were able to during COVID, when it was very much Excel spreadsheet driven. That’s difficult with the 170 markets that we serve, a portfolio of ~15,000 SKUs and significant unpredicted surges.

We’re investing significantly in that platform solution with o9 and we’ll be deploying our demand planning tool in the US, China and Italy during the remainder of 2023. Fundamentally, there is a desire among the leaders of the business and the operators who run the demand and supply planning every day, to want to be different and be an enabler for change.

And, if you can create change through incentivising and being clear that it’s an expectation – creating a really engaging reason for change – then that’s what’s truly going to make the difference to transformation. All the mechanical issues can be resolved as part of the process.

There also needs to be a clear set of domains, particularly around product data. As you can imagine we’ve come from three different companies, Novartis, GSK and Pfizer. Each had a different set of product hierarchies and integrating that into one solution for Haleon has been a huge job. We’re still in the process of creating a clear architecture and that is fundamental to making sure we have a planning system that’s effective.

Haleon has a vast product portfolio

How have you combined the ethos of a new company with legacy operations?

We’ve had to be very purposeful around our reason for being, and there was a huge engagement exercise early on. People had 30 years in Novartis and 30 years in GSK etc, and they had a lot of pride in being part of those very large organisations.

However, it’s been interesting to see how people now have a real pride in Haleon and that’s because our purpose is really compelling – making a difference to everyday health and what that means.

We made an early decision as an executive team to want to create the future here. We’re proud of our past and of the three organisations we’ve come from. But, when we talk about the culture of the organisation, it’s about the future.

Therefore, we created three fundamental cultural values that we want to work with. Do what matters most to consumers and customers – go beyond in a way that drives performance. Keep it human and be empathetic to consumers, customers and to each other.

And always do the right thing, which is an underpinning pillar of performance that really matters in an OTC business. We have a reason to be different from other pharma organisations and that means we need to be agile and more differentiated with consumers, because they choose to buy our products every day. Whereas in a pharma organisation, it’s more about developing a differentiated medicine to a healthcare system.

Being really clear about that purpose and how we can make a difference as Haleon has been the inspiration around that catalyst for change. It currently has the feel of a start-up as we’re trying to change everything at the same time, but it’s a mindset that creates agility and different ways of thinking around transformation.

How can manufacturers best measure business value of digital transformations?

With the o9 platform, we’ve been really rigorous at a country level, building a bottom up platform solution.

That is going to help with on-time in-full (OTIF), inventory, cash and agility. That value creation will then be tracked on a quarterly basis to see if we are delivering against those critical KPIs. Digital isn’t there for the sake of it; its purpose is to deliver outcomes and value for the business. And we’ve been far more rigorous about that in more recent projects.

Electronic batch records are another example of value creation. It sounds simple enough, but in OTC companies, when you make a batch, often there are some 100-200 signatures that are required around protocols and quality parameters. The process of documentation is often done manually, using hundreds of data points to prove that the quality of the product in the batch is as it should be. We’ve transformed that into an automated system that helps our operators make compliance easy, and that really matters in an agile consumer company.

We’ve put a lot of effort into managing resilience and building multiple scenario planning around what the future could look like, and what we would do in those different scenarios. How would we adapt? What would the network strategy look like? How do we make sure we’re dual sourcing critical, raw materials? How do we ensure that we’ve got the right manufacturing network to support it?

They’re the key parameters that we’re looking at, and again, this is where o9 Solutions come in as a fundamental platform technology that helps us do that.

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