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Close collaborative working between disparate stakeholders lies at the very heart of many pharmaceutical industry operations and, to varying degrees, is the norm for activities such as product licensing, product co-development and outsourced manufacturing where it is either commonsensical or unavoidable.

But one part of the pharmaceutical industry that remains a long way from embracing the full potential for supply chain integration is that of specialised logistics. The current turbulence in both the global pharmaceutical sector and the global logistics industry makes taking action now to integrate the process an urgent imperative. For some this will be an uncomfortable experience. For others, it will open the doors to huge opportunities.


DISTINCTIVE CHARACTERISTICS

"Pharma-logistics" refers to the process of transferring pharmaceutical products between physically remote locations before, during and after the manufacturing stage. It covers the distribution of both finished products and their ingredients and, in its broadest sense, includes the distribution of the product to the patient or end user - the so-called 'final mile'. A pharma-logistics chain, then, is comparable to any other supply chain except that it has some distinctive characteristics. Three of these stand out:

Firstly, pharma-logistics frequently involves the long, often tortuous, transcontinental movement of delicate, high-value, goods through a distribution sequence characterised by significant variances in the quality and availability of facilities, transportation modes and qualified personnel.

Secondly, it has a requirement, applicable to a considerable and growing proportion of its input and output, for rigorous temperature controls to be maintained throughout the transportation process.

Thirdly, for security reasons it is increasingly accountable for the scrupulous tracking and tracing of all pharmaceutical products passing through its hands.

These quality and traceability requirements are increasingly enshrined in law. The result is a global distribution sector that is subject to an increasing degree of regulatory supervision and where the regulations that are applied, and their enforcement, can vary greatly between jurisdictions.


SILO-MENTALITIES

An Integrated Logistics Network requires its constituent businesses to not only understand their own respective roles but requires them to understand the needs of their own suppliers, their immediate customers and those of the ultimate consumer in order to align their efforts towards the overall goals of customer satisfaction and safety.

Traditional bid-buy relationships are characterised by silo-mentalities and adversarial tendencies both of which are behaviours more associated with supply chain collision than supply chain collaboration. And while there is much lip-service paid to the concept of 'teamwork' the hard reality is that when serious problems occur or significant costs need to be cut, as sooner or later they always do, the defensive drawbridges quickly go up and the protective shutters quickly come down.

Such instinctive knee-jerk reactions not only serve to further aggravate supply chain relationships but also incite the collaboration-naysayers who advance this type of start-stop behaviour to give credence to their opposing views.

The truth is that true supply chain collaboration and convergence can work, and work well, when conducted professionally and systematically. However, the pursuit of an Integrated Logistics Network is a long-term, strategic ambition, the realisation of which will always result from a progression of incremental steps.  


DRIVERS AND ENABLERS

Although the concept of supply chain integration has been around for more than a quarter of a century, the potential for widespread adoption has only recently been made possible by the advent of easy, low cost communications based on digital technologies.

Other drivers of integration include the gradual harmonisation of quality standards and the growing pressures to meet stringent environmental standards.

Supply chain integration has also been encouraged in recent years by greater levels of technical specialism, by the demands of globalisation, by the need for greater efficiencies and by Big Pharma corporates eschewing vertical acquisition strategies. These market changes have resulted in companies needing to develop ever-closer working partnerships with their suppliers in order to maintain control and contain costs.


TOMORROW’S PHARMA SUPPLY CHAIN

The rapid contraction of pharma product life cycles, in particular the R&D and development phases, together with escalating environmental, regulatory and energy issues, greater competitive pressures, growing market volatility and the huge impact of advancing technology is going to have a transformational effect on the pharma-logistics chain of the future. Tomorrow's pharma supply chain will need to apply network responses to these challenges using technology to integrate processes, monitor performance, improve communications and facilitate data exchange.

The accelerating expectations and sophistication of todays's pharma consumer is creating an unprecedented wave of value-driven and choice-driven demand. The winners in this scenario are going to be those companies that have established the most effective integration models and are able to create sustained customer satisfaction and loyalty by deploying this asset to their competitive advantage.


CHARACTERISTICS OF AN INTEGRATED PHARMA- LOGISTICS NETWORK (IPLN)  

Strategic supply chain integration is more than just the outsourcing of production and extends way beyond the immediate supply of materials, products and services.

The distinguishing hallmarks of an IPLN can be seen by clicking the graphic and some, if not all, of these properties will always be apparent. However, these features need to be more than just visible, they must be embedded. Deeply and universally. A supply chain integration strategy must go beyond the boardroom and it must never be the preserve of a single person, department or function within an organisation.

This is because integration is a 100% long-term, company-wide, strategic commitment and requires engagement and a cultural shift throughout each of the participating organisations. These organisations will typically include product suppliers, logistics providers, distributors, retailers and major customers.

In practice, the pursuit of a supply chain integration policy to include most, or even some, of the attributes shown in the graphic can be a long, hard, journey. IPLN planners must be prepared to adopt a planned,identification of partners that subscribe wholeheartedly to the Principles of Integration.


OPTIMAL BALANCE

Being part of a strategic network is not an end in itself or a panacea, but a means of continuously managing the business interactions to mutual advantage. A truly integrated series of relationships can only work when the parties involved have an interest in each other’ success. That said, integration will never replace self-interest as the primary driver of business performance. The key to making Integrated Logistics Networks work is to create an optimal balance between self-interest, mutual advantage and consumer satisfaction.

At the end of the day, the rationale behind supply chain integration is easy to grasp and a majority of business people have little trouble in subscribing to its basic precept. It's analogous to being given the choice of achieving a goal through peaceful or aggressive means. Most people will naturally favour the former. Similarly, when asked if they prefer working collaboratively or confrontationally the vast majority of business executives will instinctively choose the former. The hard part is translating this rhetoric into reality.

Fully Integrated Logistics Networks are characterized by:

  • Common vision
  • Clarity of purpose
  • Mutual trust and understanding
  • Alignment of objectives
  • Risk-sharing
  • Defined roles
  • Agreed responsibilities
  • Extensive communications
  • Visibility of information
  • Knowledge sharing
  • Lean, efficient processes
  • Co-engineered solutions
  • Interlocked resources/facilities/systems
  • Benchmarked performance measurement
  • Collective cost management/'open-book' accounting
  • Pain-gain compensation
  • A 'no blame' culture
  • Mutual Interdependency

Some, or even most, of the above characteristics will be present in any integrated supply network. Typically an integrated network will initially focus on those areas deemed absolutely salient and gradually embrace other areas as the group matures and collective trust and commitment develops.

Some Background