[Shireen Garrison] Welcome to Smart Supply Chain, a podcast for supply chain professionals who think and work smarter. I’m your host, Shireen Garrison, along with my sister in supply chain, Sarah Garrison. Hi Sarah.
[Sarah Garrison] Hello, Shireen.
[Shireen] Welcome to the show, everybody. I am thrilled to be joined today by Fabio Paniza. Fabio is a global supply chain executive with over 20 years of experience leading large scale operations. He’s the Director of Operations at J&J, Johnson & Johnson. It’s a leading global medical device and pharmaceutical company that most people have heard of. And he’s also an expert in global supply chains. He’s managing teams both in the U.S. and Europe. Welcome, Fabio.
[Fabio Paniza] Thank you. Thank you for the kind words. Happy to be part of this podcast and meet you here.
[Shireen] It’s great to have you on the show. We really appreciate you taking the time. I would like to start with a little bit about your background and just have you walk through your career path. You are originally from Brazil, as I understand, and you were not starting out in the healthcare or operations field. You were doing something completely different. So how did you end up being the director of global operations at J&J?
[Fabio] Oh, yeah. No, I’ve been very blessed in my career, I like to say. So, I started in a family business. It was really a small manufacturing site that produced equipment for heavy industry, power plants, mining. To my education, I met a teacher which became like a mentor to me. And he thought I would be a good profile for a large corporation. So recommended me to pursue an MBA. So what led me, in fact, to be part of the J&J family was through this MBA I did in the U.S. I was then applied for a job which Johnson & Johnson was interviewing.
It was very interesting because my background was operations and I was hired for a finance role without ever had finance experience. And that allowed me to then join the business. I started in the consumer. J&J divested the consumer business about three or four years ago, but I worked about seven years in the consumer business. Then I was able to move into the medical sector where I had different roles, including network, planning. Most recently, the operations director for a platform that provides orthopedic products and medical device.
[Shireen] And with that, you’re also managing multiple locations and multiple teams. What does your day-to-day role actually look like?
[Fabio] So I like to say that in the operations environment, I would say it’s very standard that you say everything starts with safety and quality. So it’s part of what we do, right? It’s not another task or another job. So it starts with that. So assuming that we are operating with safety and quality, then the main, I would say, day-to-day task is to make sure that we are understanding the business and the customer priorities, right? So we are producing product that is needed for the market or we are working to launch innovation that is also needed for the market. A lot of my meetings go around that.
But there’s always a lot of firefight, right? In supply chain, we always have to be ready to react to the unplanned events, the disruptions. I would say probably 50%, 60% of my time is really addressing the surprises of the day. And the other half, make my best off to invest in the future and how do we shape the organization?
How do we develop talent? How do we look for innovation? Do we have the right skills and capabilities for the future? As we will talk about AI is something that everybody’s considering. So how do we assess the value of AI? Where can we apply? All this is part of my day-to-day and how I try to drive the team toward being ready for the future.
[Shireen] Yeah, I mean, I think the definition of just being a director of operations has probably changed a lot over the last few years. And it’s also probably changed because specifically you’re in healthcare manufacturing is obviously adding challenges in terms of ensuring that quality is built into the process.
[Fabio] I agree. I would say maybe I would say maybe in the past operations were more passive and it was more about producing and providing the output of the product. I believe today’s supply chain and operations have a larger role, which is to truly enable innovation with quality compliance at the same time. So it made us become much more critical from the launch to the service of the product. In our case, we sell capital equipment, which means that have a five-year life. So we are also providing services to the same customers that sold.
So in that realm, I would say operations and supply chain now has, I would say, much more stakeholders to manage than before. It’s exposed to more changes than before, right? Regulations are something that we are looking every day. And we need to be also influencing the shape of the product design to make sure that you produce from quality from the design. You don’t want to launch something and then go back to the drawing boards to say, oh, this process was not stable. So we are much more active in that sense than maybe we were 10, 20 years ago.
[Sarah] Well, let’s talk more about compliance and regulations. At ALOM, we work on a lot of healthcare products, so we live and breathe the compliance world a lot. But for those listeners who maybe aren’t in the similar industry, can you help us understand more about what does it mean to manage compliance and regulations, particularly as it relates to manufacturing? Tell us more about the oversight required there.
[Fabio] Yes, so I’m trying to break this down and hopefully we’ll simplify for people, right? So there’s, I’d say maybe three key elements in a regulated environment which applies to healthcare. One is you need a approved quality system. For example, ISO is a way of saying your process is qualified, right? So we use the 13485 quality system. Most of the medical device companies use that. Then you have your own product and process that you establish right under this quality system and you have to prove that it’s a reliable process, right?
So that’s part of selling healthcare is to be able to say that you can consistently meet quality in that you have controls in place to secure that you are meeting quality as you produce. So when you deviate, you are able to say, oh, I deviate from my design. Is it acceptable or not? So a lot of the verbiage that we use in the healthcare industry is the risk-based approach. So you can’t meet everything all the time, but you have to understand what can you deviate and what you cannot. Another jargon is what we call the CTQs, is the Critical To Quality, which are the elements we are always measuring to make sure that our product and our processes comply. And you have then the auditors that are coming to our site to confirm that what we promise we are going to do, are we doing. And now you have to substantiate with data evidence. The evidence could be, I need to generate this output. Did my product created when I completed my final test? Were the team trained on the procedures? So now we have to prove that actually they were trained. Where’s the evidence? So the evidence is going to drive the health care environment and to confirm that we are actually doing what you promised to do.
[Sarah] So OK, those three things are obviously hard things to do and achieve, but there’s lots of companies have done them. There’s roadmaps, there’s a lot of sort of direction on how do you be successful in building those systems. But I think equally important is sort of building that culture where compliance is an important part of what you’re doing. How do you build that where it’s a core part of the culture and not just this systematic layer on top?
[Fabio] I agree. And this is where people brings together, right? I like to say that people produce quality. The process or the equipment are just an instrument to enable that, not the other way around. You need good, I would say, support systems for the people because if we don’t give them the right tools, they won’t be able to produce with quality. But we can give them all the tools and they still not produce with quality. And that’s where the culture goes. So for me, In what I have seen in J&J and other, I’d say, successful companies in the medical space is it begins with the leadership. The example really sets the tone, right? So if I am operating as a leader and my actions show that quality is not that important, then my team is going to perceive that and say, well, quality is important, but it’s not that important, right? So part of that is setting the example.
How do you set your goals is another element. So for example, our GNOs include metrics, including safety, including quality, productivity is an element of that, but it’s not the main one, customer service. So how do you set the goals for the organization also shape your culture, and you have also what we use, we have, I would say to a significant degree are the, we call now EBRGs, I think is the new term, but are they resource teams that our teams have that, you know, they share common interests among them. And there are also avenues to decimate, to share and to promote quality or safety. So we also have a heavy agenda on, I’m gonna call the culture events that are enablers to another way of driving the communication to our teams.
[Sarah] Yeah, that’s really important. Okay, so looking to the future a little more, what do you see as some of the biggest compliance risk points in healthcare manufacturing today?
[Fabio] I believe the software compliance is the biggest challenge and the cybersecurity is probably still a big risk. There are many, I would say, potential entrances for cyber risk. It resides with each one of us, right? My cell phone could be a port for a cybersecurity breach to our network. So I think that will continue to evolve. And if you look in the news, there’s a lot of talks about the AI and the risks that the AI now can overcome any of the security protocols. So at the same time that AI could become an additional layer of safety, I think now it has been seen as an additional layer of risk. So I don’t think this is going to diminish, I think this conversation is going to continue to evolve.
[Sarah] Yeah, I agree with you. Any real world examples of where a compliance issue changed the way that you needed to operate?
[Fabio] I would say if I continue in the softer discussion, right, about five years ago, the European FDA, if I can use that way, like the equivalent of our US FDA, we launched their regulations for medical device under a directive called MDR. In this rewrite of this guidance, software became a big thing. So one of these chapters is called part 11 or chapter 11 that talks that software is now considered a medical device in itself, right?
[Sarah] Okay.
[Fabio] So the amount of controls that we have to gain and to create to make sure that you have compliance software has has become almost unbearable, right? Because this is not easy to document and to prove that you are in control and that your software was not changed over time because now your product is in the hospital, they are exposed to other networks. So I think that has shifted our mindset a lot because medical device was mainly driven by product, right? Now medical device is as much software as product. It’s a lot of diagnostic software, for example. So that for me has been a big change, right? So I think about doing a physical product and now we talk about doing a virtual solution and selling that as a medical device.
[Shireen] It definitely changes the world that you’re in. You have to think about things differently. You know, you mentioned earlier that one of the things that you have to really think about is how your staff is important, that it’s still the people, not necessarily the process. You have to really make sure that the people have been trained, that they’re doing the right thing, and they’re really the most important part of the process. We’ve been talking recently with several different people who have talked about some of the challenges of finding the right kind of staff in the manufacturing world, and that’s a very specific skill set. What challenges do you guys have in terms of your pipeline of people that are coming into the industry?
[Fabio] I think we share the same challenges today. The technicians and the operators that we are looking today, ideally, they need to have, say, two elements, right? One element is the understanding of a regulated environment. They don’t have to come from medical device, aerospace. There are other industries that are also highly regulated, and that is kind of core to what we do. Then the second is the knowledge in the, I would say electronic assembly space, where I can see that today we continue to struggle. We are not trying to hire engineers, we are trying to hire technicians. And I feel there is a gap in the pipeline of talents in that space.
So for example, we can do or we can find talents to do, let’s say car maintenance, and they can have technical trainings that enable them to do that. The type of work that we do is not an engineer, but a mechanic is not the ideal profile as well, right? And I don’t see standard, I would say education programs in that space where people are trying to do a two year, you know, like undergraduate technical course. So I feel that for us, or at least in our specific industry, we are, I would say, be impacted by the shortage of talent.
[Shireen] So you really have to focus on onboarding and retaining staff well. Talk to us a little bit about how you onboard people. How long does it take somebody to actually be productive and be good? And then how do you keep them around and continue to upskill them?
[Fabio] Yes, I agree. Again, I would start with safety, quality, and compliance. So that’s the first layer of training. This is the foundation of everything that we do. Then we’re going to go to educate in process and procedures. So he or she needs to understand what is a quality system. Why does he or she need to go through a lot of training? I give you an example to you.
When I joined this role, I had to go through more than 300 different training documents just to be in compliance with our quality system. Then you’re going to go to, I’m going to say, a training where it’s not in production. So in a manufacturing environment, we call this like a non-GXP because it’s not doing sellable product. They are in a room where everything they do is for training purposes. In that room, they get exposed to actually doing the product and practicing that.
Then they have to be qualified. Usually the qualification happens in the production room. They are being oversight by someone. And he or she is proving to us that they learn the basic skills that they need and that the product will pass quality. Then from that point, they are autonomous in the floor. So if you take a candidate that has, I’m going to say, no regulated environment and no electronic assembly skill, it’s a six-month journey for sure. So again, this is from an acquisition of talent right now. The retain that talent for me, I would say compensation is something that we always have to be watching, right? The industry usually regulates itself. And I remember in the COVID times that many restaurants were upskilling their price and they were taking people from the industry, right? So the competition is coming from many directions today. They have to feel that the site culture is positive to them. The culture of the site does retain a lot of talent. If they don’t work in a place they don’t like, they will find ways to leave.
And another, I would say, avenue is, how do you give them opportunity to grow if they want to grow? So I call that the career path. You need to be very, I would say, flexible and I would say smart to allow people to grow in different ways. A way that I was developed some years ago, I call the horizontal growth, is to enable people to learn different skills and they would get paid because now they master more skills. So sometimes there’s no way for them to grow vertically. So we have to find for them to grow horizontally. And give them the chance to try new things. Some people want to try new things. How do you in your functional collaboration allow people to move between functions. Maybe they’re in operations, they want to go to quality, they want to go to engineering. I tell my team that I am very happy if I lose them to another function, but I don’t want to lose them to the market, right? Because at least you are disseminating this knowledge across our organization. So retaining talent, in my view, it’s key imperative for our organization to move fast. If you have a lot of turnaround, you will not be agile and you will not be able to drive innovation with more speed.
[Shireen] I love that you’re focusing on culture and cross-training within your teams and allowing people to grow. That’s an amazing story. Now we’re just going to take a quick break, Fabio.
I want to thank everybody for joining in to the Smart Supply Chain podcast.
This podcast is for supply chain professionals who think and work smarter, and we hope that you’re enjoying the discussion with Fabio so far. If you’re enjoying any of the insights, we encourage you to come to alom.com, that’s A-L-O-M.com, and check us out. We’ve got podcasts blogs, white papers, and lots more. So you can check it out. And if you find any value in our podcasts, please follow us or leave a review. We would love to hear what you guys want to hear about next. Now let’s get back to our discussion with Fabio Paniza, Director of Operations at Johnson & Johnson.
[Sarah] When you think about where AI can actually add value within your landscape and your operations, What do you think is realistic now versus what might be realistic in the future?
[Fabio] So I think realistic now. So in our case, it’s very interesting, just so you know, because we sell product that does diagnosis using software, right? So our customers have benefiting from the use of AI. We already have some products with AI solutions on it. From an operations perspective, I would say they are very, I would say, low-hanging fruits for the use of AI. So the use of analytics, in my view, it’s no-brainer. You can really ask AI to look a lot of data and find trends that a person most likely would not find. So that, for me, is really something that we already seen in our quality space. They already have launched some structure AI models to do deep analytics. In operations itself, I think visual inspections are going to become an easy and, I’d say, achievable way of using AI. Because you can train a model if you can train the model properly to use actual problems to identify problems for you. Not that the AI is going to learn by itself.
There is a perception that you buy something that you can immediately use. Most of the effective AI models are trained, which means that it’s the same concept of ERP, garbage in, garbage out. So if you train the model properly, the model will give you good output. So I see that well. And another area that we are effectively using AI today is in the training room. And I think you’re going to like what I’m going to say because one of our projects to embedded AI in our training is called Smart Desk. So the concept was created with the intuitive environment where the operator can guide itself to simulate an assembly of a product. And all the package of information for the operator was built to an AI model. So it’s pulling together drawings, pictures, instructions, and he can play with that on a, I’m going to use the term, in an environment where when he goes to training, he already learns 50, 60% of what is needed to learn. But we make our on hands training much more effective by implementing this preliminary training environment.
Now, in my view, that is going to unfold a lot of more things for us to use in production because we’re going to be able to test the models and see if the model can help us do different ways how to assemble. Because now the model is learning from us as we are practicing, which means that maybe in a few months, the model could be able to say, well, why don’t doing this a different way? So I think in the near future, if you are able to add AI to your manufacturing without the necessary, I’m going to say, proposition that is going to replace the production, I think we’re going to be able to learn to evolve together and collaborate from each other.
And I see this very similar to when we launched Excel in the 1990s, right? People thought that Excel was going to eliminate all the jobs. In reality, made people work more and more efficiently.
[Sarah] Yeah, get a lot more done. So, I mean, if you talk about production in some cases, unless we’re talking robots where something can be automated, right, you still have a physical element. And then I think even more importantly, there’s this human judgment element that has to be a part of that production process. How do you think AI is going to either help there or that you are going to have to upskill people to help AI? What’s your thoughts there?
[Fabio] Again, this is only my opinion, right? So I think there is a paradigm around automation. Automation is only viable if you don’t have a high complex product mix. I haven’t seen a plant that can really drive automation with too many skills. So you have to build automation only pays back when you really have a scale. So that’s why we still have a lot of the manual labor processes. In my view, AI could be a great partner to these processes. So you can really make your manual processes much more efficient, higher quality. which could potentially compete with the automation that is coming down the pipeline that would eliminate a lot of this work. Again, if you have a small plant with very efficient people, it’s very hard to justify automation and really eliminate people. So I think if we can see AI as a potential– it’s going to protect jobs if we can use properly. I think it could drive a different, I would say, opportunity for the small companies, which today, I would say, have a lot of challenge to compete with large companies that can scale the automated processes.
[Sarah] Yeah, I really agree with you there. So let’s talk about how AI can help with compliance. I mean, I think that’s something that we at ALOM have thought a lot about, but there’s still that concern about what if AI gets it wrong, how do you hold it accountable? Have you started using them in any compliance applications?
[Fabio] So for some of our customers, we are releasing diagnostic software that does provide potential, I would say, conditions. In my view, software in product is not that different on how we’re going to manage with our customers. In the medical regulated environment, we have a document we call the IFU – Instructions For Use. It’s like when you buy a device and it comes with instruction manual, right? The IFU is a very important piece of equipment because it’s almost like your contract with your customer. It says, how can you use the device? What can you not use the device for? What frequency of service is supposed to have and what are the limitations? If you do have a good IFU, I would say most likely the company is bonded from many litigation issues, right? Because you are disclosing that you can do this, you cannot do that. If your IFU is not that strong, then I assume that the liabilities will become a big issue for many of the companies selling medical device software product in the future. But in the end, If the product is not good, it does not matter. So you need to have a product that is assertive, and you need to make sure that your customers know how to use the product. Because if they are not satisfied in the end, then litigation or no litigation, they don’t get the value they’re looking from what they bought.
[Sarah] Yeah, for sure. Making sure they have the information they need in the IFU is really important. I agree with you. So in terms of your frontline workers, what has your experience been in terms of their reaction to AI? Are they fearful, skeptical, embracing it?
[Fabio] I would say people are in different stages of it. I do think there is a trend where because now AI is embedded in our cell phones. People already using AI, they may not realize that. So it’s more about education, right? We are not really introducing a technology in the manufacturing floor that everybody’s not already exposed. Most recently, we have deployed, and I think this is a J&J platform, the Copilot from Microsoft. And I have seen people using it and having very positive, you know, like outputs from it. So I think the adoption is happening in the production environment. Again, with some level of considerations, but maybe on the day-to-day administrative tasks, I can see people already using with some frequency. The biggest challenge for me is still how do you use this in the manufacturing floor, and you can prove the value of that in the manufacturing and you are in compliance. That is still going to be, for me, the biggest challenge many of the medical device industry will have to go through.
[Shireen] I mean, you’ve given some good examples about how you’re using it really successfully today in terms of the training pieces, which is fantastic. And of course, trying to make very basic processes a little bit simpler and doing the data analytics and making sure that everything is working the way it should. Do you think that AI is going to have a big impact in the healthcare space in the next five years or so? Or do you think things will be about the same? You have to convince all your workers your job’s not going away. You’re still going to be here.
[Fabio] I would say on the operation side, I don’t know if things are going to move that fast. Again, compliance is a basic mandatory requirement. I can’t implement AI if I am not in compliance. So that bear is going to take a while to settle in my point of view. I do think there is significant opportunities of how AI can design a manufacturing process or design a product. So I don’t know how much have you really invested into that, but I believe that is probably the biggest impact. It might not be how we, you know, I would say produce on day-to-day, but the actual design in manufacturing that should be used through the use of AI could shape how we produce.
[Sarah] Great point.
[Shireen] Yeah, that is a very good point. Is there a conversation that you think that the industry needs to be having that maybe is not happening now?
[Fabio] I would say in the healthcare industry, with all the respect that I have for the regulatory bodies and the countries and the need for them to make sure they have the right regulations, I think it’s very hard to talk about bringing accessible health care to a lot of people who need health care and understanding that the cost of compliance and regulations today is significant. So how do we enable, I would say, and again, there’s many ways to explain this, but for example, there is the U.S. FDA. You have European entity. Brazil has its own entity of regulation. China has its own. Like to be able to comply with all these regulations is a big, big cost, right? And they have different rules, they have different symbologies. If you really wanna make healthcare more accessible globally, I think we need to have a discussion on, can we agree on something that is like more reasonable across most of the countries, right? And there is some level of collaboration. I’m not saying that doesn’t exist, but how do we translate that to the design and the manufacturing process? Because there is a good amount of cost that could be removed if we can make this more, I would say lean, I would say overall.
[Shireen] That’s a great point. It is complicated because everybody’s got different roles and different things that they want you to focus on. What are you most excited about in your work right now?
[Fabio] There’s a lot of innovation coming, at least in my platform. I think we are today growing at a very fast pace. We are playing a bigger role in our, I would say business because of that, because we are the front of our business. So we sell, you know, surgical robots and tools that help in surgery. They are advancing with the use of innovation, digital, and the growth is very strong. So I think we are very excited that we are seeing this realized and it motivates a lot our team, right, to see that we have worked very hard and that we are seeing the growth of the business and the customers embracing the technologies we are offering.
[Shireen] It’s good when the employees all understand the impact that they’re having on the world and on the people who are using these products. And the cultural piece is so important. And it’s great to hear that you’re really focusing on that at J&J. We do that at ALOM as well, really focus on our culture and making sure that we have a lot of information sharing and alignment in our team. You’ve shared a lot of really, really valuable information today, Fabio. Thank you so much. We do have one final question for you. It is not a work-related question. It’s more about vacation. So I always want to know, what’s the best vacation you’ve ever taken, or do you have a dream destination that you want to go that you haven’t been to yet?
[Fabio] Oh, I think the best vacation is always the next one.
[Shireen / Sarah laughing] That’s a good answer. I agree.
[Fabio] My family, my wife and my daughter and I would like to travel. So if the opportunity arises, we’re going to try to be visiting and knowing other countries. So we are, again, continuing our bucket list, let’s say. We try to take the best that each place can offer. I think, again, there’s always something local and unique. Maybe I will give you one example because it was really something surprising for me, if you’re okay. So, we were doing a travel to Spain and we chose three cities, right? The big one is Barcelona, Madrid, and then I said, let’s go to Valencia. One of my J&J friends mentioned that Valencia was a nice place to go. And there was a very local cultural event happening the week we were there. I had no idea that was happening. And it was a big event. So we go to the train station. We leave the train station and for 20 blocks it’s all people on the street. And it was funny because we have all the big luggage with us, and we were trying to find a cab to go to the hotel. And I talked to the cab driver, he says, how you don’t know this? This is the biggest event on earth, right? Which is true for the event. But it was a great surprise because we didn’t plan for that, but we had three amazing days. And we learned a lot about the culture of Valencia? Which is something that we wouldn’t learn if you weren’t there in that week of the year? I like when these unplanned things happen to us? It was a great surprise.
[Shireen] That sounds very fun, actually. I love it. Thank you so much, Fabio. We really appreciate you taking the time. Fabio Paniza is the Director of Operations at J&J. We really appreciate you joining us. And thanks to everybody else for tuning in to the Smart Supply Chain podcast, wherever you enjoy your podcasts, or also check us out anytime at alom.com. Thanks, Fabio.
[Fabio] Thank you.
