Transformation and Resilience at the New J&J

On Nov. 12, 2021, J&J announced plans to split itself into two publicly traded companies. Kenvue, the new consumer products company, began trading on the stock exchange on May 4, 2023. It is home to more than 40 brands, including Tylenol, Listerine, Neutrogena and BAND-AID. Meanwhile, the 135-year-old Johnson & Johnson company will focus on Innovative Medicine and MedTech.

Spinning off the consumer products division has supply chain implications. Perhaps the most important is breaking apart a highly centralized supply chain that was designed to drive efficiencies across both divisions. On the J&J side, that task was delegated to Kathy Wengel, a 35-year veteran of J&J, who in her prior role as executive vice president and chief global supply chain officer led the transformation of J&J’s supply chain. In the years prior to spinning off Kenvue, “we integrated and matured our supply chain functions including procurement to get scale, performance and quality,” Wengel says. “Now, there are things we are peeling apart. It is the perfect moment to align our supply chain execution with proactive resilience, our technical capabilities and the reality of geopolitics.”

Her new title is executive vice president and chief technical operations and risk officer. It’s a big title with a broad portfolio of responsibilities: She is responsible for strengthening J&J’s core technical operations and risk management capabilities, which are critical to an Innovative Medicine and MedTech company where job one is taking care of the patient. She also leads key technical operations functions, including procurement, engineering, and property services; sustainability; and cross-sector supply chain teams focused on standards, services, strategic services and data science. For good measure, add in quality and compliance, healthcare compliance, environmental health and safety, global security and global brand protection. Wengel notes that J&J is one of the first healthcare companies to have a dedicated chief risk officer focused on building a risk management framework.

So, how’s it going? Wengel recently spoke with Supply Chain Management Review about some of the areas she’s tackling during the transition to the new J&J.

Digital transformation

Every business function you can think of is either in the midst of a digital transformation or planning to start one. The supply chain is no different. To Wengel, digital is an imperative. “The future of healthcare is digital,” she says. “Digital allows us to run trials differently and it unlocks productivity and transparency in the supply chain. From the perspective of the patient, digital allows us to sequence the genome of a cancer patient for individualized treatment. That’s become a standard of care, and it’s done at the snap of a finger.”

She adds that companies no longer have the luxury of designing a semi-automated process and then working that process to become as lean as possible before applying automation. “We have to be digital-first,” she says. “In our business, that means you start with the needs of the customer. We ask what data we need to drive decisions and then design process capabilities and products around the customer needs with digital in the center.”

A few examples illustrate how that is being put into action. For instance, when MedTech designs certain new medical devices, it also builds a true digital twin model that enables J&J to do virtual stress and simulation testing. By utilizing data collected by sensors on the manufacturing equipment all the way out to data that’s collected from customers over the life of the device, J&J can monitor performance of its devices over time, which may lead to improvements in future iterations.

Utilizing hospital data, such as inventory levels at the point of consumption, J&J can minimize the amount of inventory delivered for an upcoming surgery. “If we understand the consumption and inventory levels, we don’t need to keep 10 different knee systems at the hospital,” Wengel says. “We can bring in patient-specific equipment for an upcoming procedure.” Along with minimizing the amount of expensive inventory onsite, it also simplifies the setup required in the operating room.

Last, J&J is utilizing digital twins along with augmented reality and virtual reality as it designs and expands its plants. That allows operators to virtually walk through a design to identify pinch points and improve processes; it has also led to expedited approvals from health authorities who can also utilize virtual process modeling during the approval process. Now, J&J is utilizing virtual technologies to remotely train surgeons on new equipment and devices.

The future is technology

Digital transformation is enabled by emerging technologies as well as expanding the use of off-the-shelf technologies like sensors. One important area of focus for Wengel is expanding track-and-trace capabilities through the internet of things. “The ability to have sensors at lower and lower cost is giving us the ability to get more data that we can apply to real-time processes,” she says.

In the logistics and transportation space, J&J is using IoT technologies to alert customers to when high-value shipments of pharmaceuticals are going to be delivered. During the pandemic, when medicines were often on boats and ports were shutting down, J&J’s ability to know where its inventory was located in real time allowed it to shift modes of delivery to ensure that patients got the medicines they needed. Wengel says the same technologies can be applied on the manufacturing line to give real-time insights into when a process parameter may be shifting so that J&J can take corrective action and still meet FDA approvals.

Risk management

If the pandemic taught Wengel anything, it’s that “once-in-a-career Black Swan events really do happen.” What’s more, they’re no longer limited to natural events that can shut down operations, like a hurricane, a fire or a flood. “They can now be a pandemic or increased tension in the world as a result of geopolitics,” Wengel says. “A lot more of the external environment is impacting how we now look at risk.”

She adds that a company can’t prepare for every event, but it can develop tools, resources and external partners to manage those events when they happen. In her role, she is focused on integrating a strong enterprise risk management framework that first looks broadly across J&J, including operational risk, compliance risk and financial risk, and then segments those into relevant areas, such as patient safety and environmental safety. “You have to have clarity of who has responsibility to prioritize the most important things to work on to identify and then eliminate risk,” she says.

One step: Wengel says that J&J now has a crisis management team at every site around the world with identified leaders who, like FEMA, can be stood up in the course of an hour. “We started working on this in 2017 during Hurricane Maria so that we could get food to employees,” Wengel says. “The pandemic accelerated what we’re doing. And, keeping the patient in the center, our job is to make sure that patients have what they need.”

Sustainability

J&J is perennially in the top 5 of Gartner’s Top 25 Supply Chains, which includes an emphasis on a company’s efforts around sustainability and governance. Gartner has lauded J&J for “demonstrating strong leadership with its Health for Humanity 2025 Goals and achieving progress toward these goals for a sustainable future.”  Or as Wengel says “human health is sustainability for us because without that, humanity doesn’t exist. And, to have healthy people, you need a healthy planet, which is a reason that we look at our products sustainably.” J&J’s chief sustainability officer reports to Wengel.

She adds that in addition to J&J’s internal environmental and human rights goals, the company is collaborating across the ecosystem to work with suppliers on those goals, and to work with coalitions within the healthcare vertical who can set industry goals. Another area of focus, gaining better visibility in order to keep counterfeits out of the supply chain so that the right medicines are reaching patients.

As one of the early members of AWESOME, an organization whose mission is to increase the participation of women in the supply chain, Wengel is also intent on building diverse teams within her organization. “I was the only female in the room for about the first 20 years of my career,” Wengel says. “And at the first AWESOME meeting, we could maybe identify about 100 women in senior-level roles across supply chains of many industries. Now, there are thousands.”

It’s still about people

That brings us to our last topic. Given all that’s changing in supply chain, what does Wengel view as the most important? “We talked about digital, but people are still at the core of every supply chain and people make the difference to patients,” she says. “J&J’s credo, expectations and values have made us a strong company, but we’re still only as strong as the people we put in place, and the supply base we partner with. As leaders, it’s still our responsibility to build our culture.”