[0:05] Intro: Welcome to Measuring Up, Thinking Out Loud, featuring news and information from Testo, your consultative resource for precision measurement technology and digital solutions, serving the pharmaceutical, industrial, and allied industries worldwide.

[0:23] Bill White: Hi again. This is Bill White with the Testo Information Network, and today we're on with Jim Bacon again. Jim is the president, founder of Stay Cool Logistics. It's a consulting company, and he is an expert in the business of cold chain logistics with years of experience. Welcome back.

[0:45] Jim Bacon: Jim. Yeah, thank you, Bill. Glad to be here.

[0:47] Bill White: We're glad you're able to share so much with the folks at Testo, and those who are listening to us were talking earlier about the risk posed by so many things in the pharmaceutical industry and ways to mitigate that. You have given previous presentations on risk management, and you've come up with what you call the four quadrants of risk. Let's focus on that today and talk about what you mean by that and where those risk areas are.

[01:23] Jim Bacon: Yeah, absolutely. You know, so, you know, first of all, I just wanted to talk a little bit about the types of risk in the cold chain, and, you know, what risk really means, and then I'll talk a little bit about the quadrants. 

[01:37] Jim Bacon: So, there's, by definition, there's kind of 3 examples of risk. There's subjective risk, which is really like the perception of risk. It's what somebody's thinking. So, for instance, you could have a statement like, ‘She is a security risk,’ right? Or, you know, ‘The ABC Bank regards company XYZ as a good risk.’ Those are perceived risks. Then there's kind of the idea of objective risk, where you might have an actual chance of some kind of risk. It could be from theft or shrinkage. So, you know, kind of an example of that would be poor security measures put the warehouse at risk for theft. So, you might take actions to try and correct that. And then there's the idea of pure risk. So, in the cold chain, you might have an excursion, which could result in an investigation, which could either mean that the shipment is put in quarantine and needs to be destroyed because there's no more efficacy in the product, or you've been able to investigate and find out that the product is still good for use. So those are kind of the, you know, the definitions.

[02:45] Jim Bacon: But then, more specifically, you think about the different, you know, these so-called four quadrants of risk, and one of them is financial risk, which could impact the company financially. It could be a risk resulting from credit issues, asset reevaluation, or liquidity and cash flow. You know, that's not what we'll really get to much into today. 

[03:08] Jim Bacon: The other idea would be hazard risks, which talk about maybe contamination of product or any kind of lawsuits that might result from some kind of natural disaster or property damage. Then there's the quadrant of strategic risk, which is an area that we'll talk a little bit more about today. It could be changes in regulatory laws. Could be changes in your customer base.

[03:35] Jim Bacon: That could result in product being wasted, things like that. You know, the most important area for the area of cold chain logistics is operational risk. So, you know, during the shipping process, during the storage of product, are there any product quality issues that could result from human error or compliance that would render the product to be placed in a quarantine state and potentially requiring destruction because the product can no longer be used.

[04:05] Bill White: You know, that's a great way to present the concept of risk in that context. What poses the biggest challenge?

[04:13] Jim Bacon: Well, I think in the area of logistics, we're always thinking about, as we set up a process, we're thinking about what kind of events might create damage for the business, but things could go wrong. What's the risk of handoffs, what's the risk of product shipments not going the way they should, and so you want to really try to develop plans or even develop contingency plans in the event that you've identified a potential risk, and so that you at least have some contingency plans to get the product back on track. Those really are the main focus of risk management in logistics.

[04:51] Bill White: And also on your presentation, you've isolated externally driven factors, internally driven factors. I assume that means what you can control and what you can't control.

[05:04] Jim Bacon: Yeah, absolutely. So, you, you know, you've got, as I mentioned earlier, you've got regulatory-type factors based on a number of different situations. The regulations could change. So, in that case, are we still conforming to the proper storage, handling, and shipping of the product? And could any of those changes affect the product integrity or patient safety? From the manufacturer's point of view, so internal or the cold chain partners that we're dealing with, again, you've got compliance and conformance. So, this idea of the core team concept, which I spoke about in an earlier podcast, really comes into play where you've got robust processes in place as you hand off from one partner to the other. And again, you know, impacts there could affect product integrity and patient safety. So, what we're really trying to do is identify, prevent, and mitigate what could potentially go wrong. 

[06:05] Jim Bacon: So, eliminate excursions to reduce the number of investigations. Of course, product loss is a huge factor that has a lot of implications, including supply chain, patient safety, reputation to the company, that kind of thing. The customer experience, if you have too many excursions, then customer experience becomes negative and they'll look elsewhere for alternate supplies.

[06:28] Bill White: Jim, when you take that tapestry and superimpose the Teo product line, not only what they make, but the services they provide, how does that provide some value to the customers out there that are trying to manage this risk the best they can?

[06:46] Jim Bacon: That's a great question. Testo offers a really nice end-to-end solution and array of products that all feed into the same systems, quality management systems, where, you know, Testo takes the time to map out a process, understand the needs of the client, and then during the installation, they also offer the necessary.

[07:13] Jim Bacon: Training and, you know, backups required to, to ensure that the system is compliant and that there are escalation points and also alert mechanisms, whether automated or manual, to ensure the integrity of the product and ultimately reduce risk.

[07:31] Bill White: We're with Jim Bacon. Jim is the president and founder of Stay Cool Logistics here on the Testo Information Network. We'll be back after this.

[07:41] Intermission: You're listening to Measuring Up, Thinking Out Loud, news and information from Testo.

[07:51] Bill White: We're back with Jim Bacon. Jim, talking about risk. How does a corporation embrace the concept of risk mitigation? Who's in charge? Who, where, where do they start?

[08:03] Jim Bacon: Yeah, that, that's a really good question. And throughout my career, I've had experiences working for companies and selling to companies that have what I would characterize as a silo mentality. And what I mean here is that, you know, at the end of the day, when you, when companies are sourcing logistics solutions, quite often that is driven by a procurement or logistics team that is really looking for cost savings, but it's really not just about the cost of the box. It's really a kind of a total concept of what's driving that total cost calculation, and where the packaging material or the shipper box is just one aspect of this total calculation. 

[08:48] Jim Bacon: And so when I think about that, I think about these silos in organizations where you've got quality, you've got regulatory, you've got procurement, and then over to the side here, but not necessarily to the side, you have the finance group which also includes risk management, and companies quite often based on historical losses will budget for some kind of value where they're going to anticipate and expect product losses. But if you put that all together and you consider that to be one impact, and packaging material is another impact, but then you also think about the cost of excursions, and the loss of product and the reputation of the organization, the customer experience. If you have an organization that brings all of those components to the table, you can actually create a total cost calculation where risk tolerance would decrease, and then, because you're buying more robust solutions. 

[09:46] Jim Bacon: A real example for me personally was in the early 2000s, the organization I worked for really embraced that idea because they wanted to, you know, think about the, not only the cost of the excursion or the cost of writing material off, but what kind of insurance coverage they could get by communicating a robust process to the insurance underwriters.

[10:11] Jim Bacon: And most big corporations, most big pharma corporations self-insure. So, you've got all these smaller providers, supply chain organizations that are offering services, and so that are shipping your product, where an excursion of any magnitude they could not afford to pay out because it would break them as an organization. So, you know, the organization I worked for looked at the total picture from end to end. Then, we presented our process to these insurance companies, conveyed to them what we were doing to mitigate any risk in the supply chain. What that ended up doing was instead of having these individual insurance coverages that we were relying on, we went through with what I would call a self-insurance process, where we created what we call stock throughput coverage. So the product was insured by us and our insurance organization from end to end.

[11:07] Jim Bacon: And that, in turn, allowed us to enjoy rates that were quite a bit less than previously contracted. So that the whole idea of risk mitigation extends from the bench to the C-suite. That's correct, yeah. It seems to me like the bedrock for a successful risk mitigation program is, is based in the culture of the company.

[11:30] Jim Bacon: That's right, that's right. Well, I've got this interesting quote that I found. It's by Benjamin Franklin of all people, and it goes like this, you know, it says, “The bitterness of poor quality remains long after the sweetness of low prices is forgotten.”

[11:46] Bill White: Oh, that is so true.

[11:47] Jim Bacon: And you know, it really ties in because risk and quality, they really go hand in hand, because you're embracing quality and compliance to ensure that risk is mitigated or eliminated. All of this is kind of driven by good planning, excellent execution, communication, collaboration, and really the analysis of different scenarios that will ensure that your product makes it to where it needs to be with full integrity.

[12:14] Bill White: So true. Testo’s installs are clearly configured for success in that area from beginning to end, not only the product, but the processes and the evaluations and commissioning and validation, and all of that. Do you think that the technology that we need to mitigate risk is where it needs to be right now?

[12:38] Jim Bacon: Yeah, absolutely. In fact, I responded to a post on LinkedIn the other day that talked about AI, and just behind the post was really that AI was going to replace personnel. So, I disputed that idea by suggesting that, you know, the human factor is still a very important and critical element in the whole process.

[13:28] Bill White: Jim, for someone who wants to reach out to you and engage you professionally, what's the first step?

[13:37] Jim Bacon: Well, I, I mean, the best way to contact me is through LinkedIn, actually, through messaging, and then I can share with them my personal contact information through LinkedIn messaging. My LinkedIn profile gives a very thorough idea of what some of my services are, and if there's an interest there, then I can share more with them through personal contact information and by emailing or calling them back.

[14:03] Bill White: OK. Jim, I, we look forward to the evolution of this whole industry, especially in the cold chain with the products and the services that Testo is introducing in the US, and it seems to be something new every week or month, and I'm sure that that's gonna bode well in the future. Jim, thank you so much for being with us again. We've been with Jim Bacon, the president and founder of Stay Cool Logistics Consulting. Jim is a great resource from the industry with years of experience, and no amount of AI will be able to replace that. This is Bill White for the Testo Information Network.

[14:51] Outro: You've been listening to Measuring Up, Thinking Out Loud, news and information from Testo, your resource for precision measurement technology and digital solutions for pharmaceutical, industrial, and allied industries worldwide.