38


Issue 1 2012


///PHARMACEUTICALS


Dealing with supply chain complexity


Julian Mosquera, director of LCP Consulting says that competition in the sector means more emphasis on accurate forecasting and visibility.


Supply chain cost management in the pharmaceutical sector has finally surfaced as a real board level issue. The rise of generics and the expiry of patents of ‘blockbuster’ drugs, regulatory changes and technology have combined to disrupt the traditional business model. Industry consolidation and globalisation, along with economic turmoil, have only added to supply chain complexity. Every comparative benchmark indicates that this sector needs to make a step change in asset performance, with working capital targeted for direct improvement. All players are planning major


reconfigurations of their supply and distribution operations, from end to end, in a bid to improve cost and service efficiency. This challenge is all the more pertinent with a large number of blockbusters (drugs that generate high volumes of sales, typically $1 billion-plus) coming off patent over the next five years, opening the door to generic producers. They are actively “forging strategic alliances” - say researchers at Frost & Sullivan - to secure the rights to produce cheaper copies. While expenditure on new medicine has risen dramatically over the past decade, regulatory approval for new drugs has declined, according to PharmaFutures. Where big pharma could turn to blockbusters in the past, they are now looking to


smarter portfolio management for competitive advantage. Historical margins meant pharma firms paid little attention to their supply chains. However, over the last decade such complacency has become unacceptable to boards. In the current environment directors are looking to their COOs and supply chain directors to build resilience into supply chain networks, to protect against market volatility and to drive real cost reduction. The industry’s manufacturing


footprint is increasingly challenged by significant overcapacity. Efficiency,


agility and flexibility


are priorities, with slow moving/ low volume production calling for a different supply approach. Now, more than ever, companies should look to increase product speed through the supply chain, challenging inventory touch and holding points in every market in which they operate. Managing the chill chain is


producing real challenges for the sector. As part of a much wider traceability issue, the sector has been slow to adopt the necessary technology and levels of control that may be expected of such a high- value, sensitive product line. Reliance on third parties to introduce such capabilities has had only limited success. It is time for the sector to upgrade its capabilities as the new


pharma supply chains emerge over the next decade, where chill control and traceability challenges will be far more critical. There is an opportunity for


companies to better leverage scale through structural change, working towards best practices, and most notably by improving and integrating sales and operations planning - commonplace in other industries such as fast-moving consumer goods. Competition is becoming fierce,


Pharma supply chains are over- complex and under- managed, says Mosquera


with any accuracy their ‘cost to serve’ - which products, distribution channels, customers or regions need more attention, or less? How should stock holding policies be tuned to these different groups? Where can lead times or touch points be reduced? Cost to Serve allows


companies to calculate


the true cost of servicing any combination of customer, product or market and takes a truly end-to- end approach (materials sourcing,


Healthy business for Gefco


Transport and logistics provider GEFCO has partnered with HPC Healthline – a supplier of disposable personal protective workwear and infection control solutions – to provide 24 hour nationwide transport solutions for its medical products and equipment in the UK. Gefco will collect freight from


putting emphasis onto accurate forecasting and supply chain visibility. Supply chain cost management


is now a priority. Having leveraged scale and rationalised productive capacity, businesses


are looking


for further cost-savings. The global nature of distribution has given rise to over-complex and under- managed supply chains, which are now recognised as a source of major cost reductions. Without a clear framework for delivering these savings, businesses are at risk of compromising service and the integrity of supply. In this context, it is alarming how few pharma businesses know


manufacturing, logistics, distribution and consumption). By establishing clear policies for customer-product groupings, alongside disciplined, systematic control, it is possible to realise dramatic and permanent cost reductions.


Julian Mosquera is a Director at LCP Consulting, which specialises in customer-driven supply chain management. With over 20 years’ experience in the field, LCP identifies where supply chains make major contributions to how businesses operate profitably and compete effectively. www.lcpconsulting.com


Pharma to the fore as Emirates launches direct Dublin flights


Pharmaceuticals, which make up nearly a quarter of Ireland’s exports, are expected to be amongst the major commodities carried on Emirates’ new Dublin


to Dubai


service from 9 January 2012. Local pharma firms already export Botox to South Africa, the Far East and Australia. The new service will initially


include 15 tonnes of bellyhold space on each daily passenger flight but


the service will be upgraded to a 25-tonne capacity 777 this summer. At the moment, Emirates SkyCargo primarily moves goods from Ireland through Manchester and London. Emirates’ regional cargo


manager Robert Siegel, said, “There has already been huge interest from the Irish export market in our new direct service and cargo space and capacity are being filled quickly, due to our network of 118


destinations that will be selling in and out of Ireland, by January 2012. We recently appointed a dedicated Emirates SkyCargo team in Dublin with Michael Meagher, a veteran air cargo professional, as cargo manager to ensure that all our corporate clients in Ireland receive the same award-winning service as our commercial passengers.” He predicted that the new Dublin–Dubai service


would provide a world of new opportunities, not only for pharma but also the food, electronics and agricultural sectors. Emirates SkyCargo’s Cool Chain


temperature-controlled container solution allows goods to be moved at a constant temperature, in the air and on the ground, thus boosting the


lifespan of temperature-


sensitive products such as pharmaceuticals.


HPC Healthline’s collection points in Bourne and Peterborough and provide next-day delivery, five days a week, to distribution centres, retail and medical outlets throughout the country. It will transport an average of 300 pallets per week. Working with HPC Healthline


wiould help Gefco further consolidate its expertise in other areas outside the automotive logistics arena. HPC Healthline operations


director, Scott Prichard, said: “HPC operates in a very competitive industry, it is important that we have a logistics partner which can support this demanding environment. GEFCO’s network provides a strong and reliable logistics solution which ensures deliveries take place within 24 hours throughout the country.” Gefco UK key account manager,


Colin McPherson, added: “As a result of the agreement we have demonstrated our ability to work successfully with new lines of business and increase our activity into new market sectors. We look forward to developing our relationship with HPC Healthline and strengthening our offer within the medical sector.”


Dachser gains Envirotainer mark


Dachser has been accredited by Swedish firm Envirotainer as a Qualified Envirotainer Provider (QEP) for air transport of pharmaceutical products. The accreditation initially applies to Dachser’s Frankfurt, Munich, Münster-Osnabrück and Stuttgart facilities but the logistics provider intends to expand its partnership with Envirotainer on a global level. Envirotainer produces and leases active temperature-


controlled air freight containers for the pharmaceutical and biotech industry. The company offers its QEP programme exclusively to service providers that are capable of properly managing shipments using the Envirotainer unit. In addition to active refrigerated transport for


air


and sea freight, Dachser also offers passive temperature control solutions using validated insulated packaging.


UPS buys in Italy


UPS is to purchase Italian based pharmaceutical logistics company Pieffe Group. The family-owned business has offered storage, distribution and cold chain solutions to some of the world’s leading


pharmaceutical brands for the past 35 years. UPS said the move supported its global healthcare strategy, and follows the opening of five new dedicated facilities in North and South America, Europe and Asia during 2011.


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