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New pharmaceutical innovations, such as large molecule biologics, stem cell therapy, and personal medicines, drive the need for innovative thinking beyond the area of research and development. Transporting these kinds of precious and sensitive drugs across the globe increases the risk of damaged goods dramatically, as well as raises the demand for innovative logistics solutions. How can the procurement process be adapted so that the quality requirements of the new drugs do not bloat the cost of transportation? Here we present new options for supply chain procurement, with focus on long-term strategic purchasing.
Innovations in logistics can innovate the procurement process
Similar to the pharmaceutical industry, innovation takes place also in logistics.
And as in every other business, the collection of large amounts of data and data analytics is starting to have a real impact on the logistics industry. The most obvious example is the increased use of sensors on packaging and containers that can monitor for example ambient temperature and humidity, and track events in near real-time. This kind of data is important not least for the growing number of sensitive products on the market and makes it possible to take action during the actual transport. For example, a shipment could be rerouted or the batteries in an active temperature-controlled container recharged, should there be disruptions and delays.
There are also other insights to be gained by using intelligent data analytics for strategic purchasing.
Analyses of thousands of shipments of temperature-sensitive pharmaceuticals could for example identify which trade lane actually is the most suitable for precious biologics.
Shorter is not always faster, and some trade lanes are safer than others for these kinds of products.
Communicating with and learning from logistics suppliers about new innovations is an expected approach when developing an innovative procurement process where the use of new options can keep down total cost of ownership.
Widening the scope of collaboration for supply chain procurement
Developing long-term collaboration with logistics stakeholders is another strategy for supply chain procurement, in order to increase efficiency and keep costs at acceptable levels. One example is a multinational life sciences company, which decided to work closely with its raw material suppliers by means of data exchange. Instead of the company performing its own tests on the raw materials, it can rely on the test data from its suppliers (when quality and compliance are met), thereby saving the company weeks of manual labor, where previously the materials were sent to the lab for testing. Another effective approach is the use of Raman spectroscopy, the company can also carry out an identity test, in order to verify that they have received the right shipment, without unpacking the material.
Another example is an Asian biotechnology company that, while building a new manufacturing facility in South Korea, investigated how temperature-sensitive products could best be handled and shipped out from the facility and what adjustments could be made to improve air cargo transport efficiency.
These are two examples that show how a strategic procurement process can be developed for the transport of raw materials and finished products long before the production of the pharmaceutical has even started.
Strategic purchasing of logistics – unexpected types of collaboration
A good example of strategic purchasing of logistics services is horizontal collaboration. In 2011, Baxter International Inc. started collaboration with UCB, a Belgium-based pharmaceutical manufacturer. The Belgian service provider, Tri-Vizor NV, analyzed the freight flows of the two companies, revealing that there was a considerable overlap between them and that the companies could benefit from shared transport[i]. Since then, Baxter has expanded its transport collaboration with other companies; such as the US filter manufacturer Donaldson and personal care cooperation Kimberly-Clark[ii].
Collaboration with competitors or partners in other industries could be a way to overcome the high cost of transportation of specialized low volume pharmaceuticals. Companies can for example share temperature-controlled containers for intercontinental airfreight and use the same trucks across Europe.
For very small amounts, such as personalized medicines, new distribution models are needed. It is probably not a question of if, but rather when, and e-commerce logistics giants such as Amazon and Alibaba will launch home delivery of personalized medicines that will create pockets of opportunities for other nimble and innovative services to enter the market and fill demand. Partnerships with unexpected new players of pharmaceutical logistics services could innovate the procurement process and combine highly specialized medicines with low transport costs.
All the examples above – the use of data analytics, a wider scope of collaboration for supply chain procurement, and unconventional partnerships – are new options for procurement teams in order to control the cost of transport for the increasing amount of sensitive, high value pharmaceuticals.
[i] CSCMP’s Supply Chain Quarterly, Logistics, Collaboration without borders, James A. Cooke, from the Quarter 3 2013 issue, http://www.supplychainquarterly.com/topics/Logistics/20131108-collaboration-without-borders/
[ii] The Smart Cube, Ready for a Make Over: What’s Trending in the Global Pharma Logistics?, Sue Hope, https://blog.thesmartcube.com/item/ready-for-a-make-over-what-s-trending-in-the-global-pharma-logistics