Alfresa : Furthering IT and DX

Financial and Capital Strategies / IT and DX Strategies

Furthering IT and DX

Toshiki Tanaka

Director, Vice President &

Executive Officer

Corporate Strategy, Human

Resources Planning, IT /

Digital Transformation (DX)

Alfresa Holdings

Corporation

Positioning of DX and Aims

The aim of digital transformation (DX) is to establish competitive advantages by not only changing products, services, and business models but also reforming businesses, organiza- tions, processes, and corporate cultures.*1

As a corporate group that plays a role in the total supply chain for life-related products, the Alfresa Group views as essential the continuous advancement of services based on its social mission of developing, manufacturing, distributing, and providing pharmaceuticals, diagnostic reagents, and other life-related products to patients.

In pursuit of our long-term goal of becoming a Healthcare Consortium that provides information, products, and services

DX Promotion Map

The Alfresa Group has drawn up a map of its approach to DX, as shown below.

The Alfresa Group's three main initiatives that it is actively pursuing under the DX strategy in the 22-24Mid-term Management Plan are optimizing back-office departments and unifying operations, categorized as defensive DX; enabling data-informed management by utilizing information within the Group; and developing digital businesses that provide solutions to customers, defined as aggressive DX.

in each health-related field, we will engage in DX by utilizing the upstream and downstream data generated by each business within the Group, as well as externally, fostering digital collaboration as we work to create social value. In the fiscal year ending March 31, 2024, we will continue to promote the themes outlined in the 22-24Mid-term Management Plan. At the same time, we will cultivate human resources who can thrive in a digital society, transform the corporate culture, and update IT platforms.

*1 "DX Promotion Indices and Guidance Therefor," published by the Ministry of Economy, Trade and Industry

DX Initiatives in the 22-24Mid-term Management Plan

1. Optimize back-office departments and unify operations
2. Promote the sophistication, standardization, and optimization of logistical functions (pharmaceuticals wholesaling business)
3. Increase sales capabilities of MSs and MRs (pharmaceuticals wholesaling business and manufacturing business)
4. Enable data-informed management

In furthering DX, we have developed an IT infrastructure that prioritizes safety, flexibility, and reliability. We have also established a data integration platform*2 to gather data on finance, logistics, human resources, and sales from within the Group. Furthermore, we are working to enhance data analysis and the precision of decision-making accuracy, as well as cultivating human resources who will drive digitalization.

*2 Data integration platform: A platform that enables the centralized management of data collected from mission-critical and peripheral systems and which facilitates its utilization for a variety of purposes

Map of the Alfresa Group's Approach to DX

	IT	Data integration platform
		Reform businesses
		Optimize and enhance efficiency of
		back-office operations
Defensive DX	Utilize information
		Enable data-informed management
	Aggressive DX	Create businesses
	Develop digital businesses
		DX personnel​
	Human resources

• Make data visible and build a platform for analysis
• Transform operations by optimizing business processes
  Expense bookkeeping system, talent management system, use of AI-OCR, etc.
• Increase sophistication by using information gathered on the data integration platform Management dashboard, sales dashboard, etc.
• Solutions for customers
  Improve connectivity with digital technology
• Develop and train DX personnel
• Enhance IT literacy and digital skills

Alfresa Group Integrated Report 2023

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Financial and Capital Strategies / IT and DX Strategies

Furthering IT and DX

Progress of Initiatives

1. Defensive DX

"Defensive DX" refers to initiatives that aim to transform operations by optimizing business processes, mainly those of back-office departments, through the use of digital technologies such as RPA*3 and AI.

As one specific initiative in this category, the Company has improved the flow of bookkeeping operations for expenses generated by people working outside the Company. We have increased efficiency and productivity by automating the checking of inputs and eliminating paper-based approvals. Similarly, we have reduced the amount of time and labor needed to reconcile accounts payable by using AI-OCR*4 technology to automatically reconcile paper invoices with core data rather than by checking paper invoices visually.

In addition, the Group is rolling out its talent management system*5 successively across its subsidiaries to consolidate human resource data; enhance human resource functions such as development, evaluation, and rotation; and bolster employee engagement.

We will continue to invest in new digital technologies and strive for further efficiency and productivity improvements through business process automation going forward.

*3 RPA (robotic process automation): This refers to the use of tools that automate and outsource routine tasks. Using robots to perform repetitive tasks hitherto done manually is expected to improve business efficiency and reduce human error, freeing people to focus on more creative tasks.

*4 AI-OCR: This entails the combination of optical character recognition (OCR) and artificial intelligence (AI) technologies to improve the accuracy of character recognition substantially compared with conventional OCR.

*5 Talent management system: Taking information about the abilities and skills of talented people who work together to be an important management resource, this human resource management support system uses such information in recruiting, placement, and training to maximize the performance of people and their organizations.

2. Data-Informed Management

Data-informed management guides decisions and informs actions by retrieving and referring to essential data in a timely manner after it has been uniformly collected from Group operations and individual businesses.

As part of our efforts to improve sales performance, we are developing various tools, such as a sales dashboard that aggregates and makes visible the customer information, tasks, and alerts required for daily sales activities. We are also working to make quotations more efficient by using AI in a system to optimize the setting of prices.

Moreover, we have created a management dashboard to enhance Group management and improve operational effi- ciency. The dashboard allows us to quickly monitor the Group's business situation and analyze it from various per- spectives, so we can promptly identify and address any issues.

In the future, we aim to leverage data outside the boundaries of our business segments to maximize Group synergies and realize data-informed management.

3. Aggressive DX

We provide digital solutions that use data to connect various clients across multiple business segments. Moving forward, we will keep expanding our digital business to address unmet medical needs.

In some instances, aggressive DX can itself become a business, as is the case with GEKKA WORKS Co., Ltd., a new company working to promote medical cooperation on a regional basis. We describe such businesses in more detail within this report in the sections on individual business seg- ments, the section on other new businesses and overseas business, and the section on total supply chain services.

P.27 Business Strategy

4. IT Platform and Human Resource Training to Support Our DX Strategy

To support defensive DX, data-informed management, and aggressive DX, we will update our IT infrastructure and focus on training human resources.

For the IT infrastructure, we will accumulate financial, logistics, human resource, sales, and other data in a data integration platform and develop an analysis environment that can help make decisions on how to resolve issues.

In the future, we plan to make it possible to collect, visualize, and analyze data related to the Group's business activities in a unified manner via our data integration platform and thereafter link it to external data to create new data-driven businesses.

With regard to training human resources, we define DX personnel as human resources with knowledge of digital technologies who are able to find simple solutions to issues based on their understanding of operations and the identification of issues that need to be solved. In this endeavor, we will create and deploy a training map.

As digitalization advances, businesspeople need to have ever-higher levels of IT literacy and stronger digital skills. We thus intend to deepen our pool of human resources who can embrace new methods and tools without becoming overly entrenched in existing business processes.

We plan to strengthen the human resources in each department who are assigned to business improvement. Their training will focus on exercises using data, helping them acquire the knowledge and skills to use data analysis for identifying issues and employ digital technologies to devise solutions.

We will cultivate core human resources to drive DX at Group companies. Through training, said human resources will gain knowledge and skills to apply in business opera- tions. At the same time, we will implement a development program that involves identifying the Company's issues and formulating and implementing solutions thereto.

By establishing such IT and human resource platforms, the Alfresa Group will steadily promote DX and strengthen its competitiveness by honing the ability to adapt flexibly to change even in unpredictable times.

DX Personnel Structure

Data-informed management

Types of human resources

Elements / focuses

Expected roles and talent needed

Alfresa Group's

Data integration platform

Collect data from core and peripheral

systems at each company

Core system transition

Improvement of sales capabilities

Human resource management

Production plans

Reduce waste

Group management

Response to

Equip MS and MR personnel with information (develop sales dashboard)

Visualize Group personnel and build an allocation evaluation system

Optimize production plans by using business data

Reduce waste by using data for six wholesale companies

Utilize real-time management of consolidated budgets, consolidated results, and sales reports

Reduce CO emissions using real-time measurement of

Core human resources to drive

the Company's DX

Human resources who work on

upgrading their own

departments' operations

Business
reforms	Practical abilities
	Discovery of
enhancement	issues
Operational	Digital solution
	capabilities
	IT skills

Business transformation

Identify the Company's issues, develop solutions thereto, and use data and digital technologies to transform existing businesses

Advancement of business operations

Have the knowledge and skills to use digital tools to identify problems and develop related solutions, thereby promoting operational enhancements and efficiency

Switch systems in the future

environment

2

electricity usage

Human resources with the IT

literacy and digital skills required of working adults

acceptance	Digital skills	DX acceptance
adapt to the changes in business operations associ-
	IT literacy	Understand the necessity and importance of DX and
DX		ated with digitalization

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Alfresa Group Integrated Report 2023

Alfresa Group Integrated Report 2023

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