The last part of our series on tomorrow’s pharma logistics wraps up the key take-aways of the series and provides an outlook on how your supply chain can contribute to further margin improvements.
Part V: How to optimize your margins
Pharma logistics experiences far-reaching changes, as we described in our previous blog articles. We see specific market segments growing rapidly like Middle East & Africa and Direct-to-Patient with new requirements and growing value chain complexity. But we also see multiple ways to take advantage of new technologies and improve transparency, efficiencies and margins.
A method of choice to explore cost, risk and safety optimization potentials is a data science-based supply chain assessment. With this assessment, opportunities in the current supply chain setup can be revealed and potential solutions identified. Improvement opportunities along the supply chain can be e.g. changes to the number, function and location of your distribution centers, well balanced stock levels, increased transparency and control of your shipments and reduced exposure to temperature deviations. Exemplary approaches are supply chain simulations without shipping real goods and using collaboration platforms to handle data streams like e.g. SAP LBN, GT Nexus or Amber Road as well as Hypertrust X-Chain for highly sensitive data based on blockchain technology.
Mitigating IT constraints
Working with our customers, we often find IT constraints as a key hurdle for improvements. In times of digitalization, IT will become even more a weak point, if it inhibits gathering data and providing the supply chain transparency needed in the pharmaceutical market environment. Existing IT setups mostly not only lack the capability to provide sufficient order and shipment status transparency to perform track & trace on batch or serial number level. They also do not allow to match and combine different data sources rapidly enabling advanced data analytics. Creating differentiated demand and inventory planning through segmenting data and interpreting clusters and patterns (big data analytics) is therefore just not possible However, with the opportunity to use state-of-the-art data science methods, it is possible to analyze massive data in high speed and create substantial business opportunities upstream along your global network of manufacturing sites including CMOs as well as downstream related for example to “predictive warehousing”. This approach allows the forwarding of goods down the supply chain to specific geographies according to short-term demand as predicted considering multiple causalities. This not only lowers your stock levels but also reduces the variability in your volume flows. In this way, the perceived contradiction of high product availability and shorter lead times while reducing shipping cost can be resolved, improving the competitiveness and optimizing margins.
Achieving cost efficiency
Another key observation we make is a lack of cost efficiency. ‘Make or buy’ decisions are more relevant than ever in pharma logistics as a number of logistics service providers (LSP) in the meantime have reached a quality level allowing them to take over specific parts of the value chain at a higher quality of service. With logistics being their core business, economies of scale, lower labor cost, higher flexibility and a project-driven company culture, they can also help increase flexibility and reduce cost. For example, temperature-controlled packaging solutions are in many cases optimized to a higher degree by freight forwarders than by actual pharma producers. Transport management including document management, deviation management and freight bill auditing are other examples for activities, which qualify to be outsourced, if done in a smart way, and there are many more examples to mention.
It is essential to have a strategic view of the strengths and weaknesses in your supply chain as identified through a related assessment, as well as to automate and upgrade your processes and IT solution, getting access to all your shipment data. A combination of regional service providers (one does not fit all) based on a partnership approach that helps you to continuously adopt and improve according to the changing market requirements, will further complete your setup. Once done, you are ready for 2025!
If you want to explore in-depth current trends in pharma logistics and how to best respond to them, feel free to contact us anytime.