Pros and Cons of Logistics in Pharmaceuticals


Logistics Management:
Logistics management is defined as a process of management that joins the movement of products, services, data and capital from the stage of raw materials to the consumer end product.

Pharmaceutical Supply Chain

Supply chain management is defined as the amalgamation of key business processes across the supply chain for the rationale of generating value for customers and stakeholders. Indeed supply chain management integrates supply and demand within and across companies in an efficient business model.

The Council of Supply Chain Management Professionals defines supply chain management as planning and management of all activities involved in sourcing, procurement, conversion, and all logistics activities. There are a variety of aspects of evaluating in the supply chain; eliminating bottlenecks, balancing between tiniest material cost and transportation, optimizing manufacturing flow, maintaining the right mix and location of factories and warehouses, vehicle routing analysis, dynamic programming and efficient use of capacities, inventories, and labors are of main aspects of supply chain optimization

Benefits of Supply Chain Management
Supply chain management in the pharmaceutical industry can renovate the organization to make better use of assets and resources, to engender profits, to boost shareholder value, and to optimistically respond to customer demand. Effective supply chain management can effect and develop virtually all business processes, such as data accuracy, operational complexity reduction, supplier selection, purchasing, warehousing, and distribution. Other benefits include:

  1. Quicker customer response and fulfillment rates
  2. Shorter lead time
  3. Greater productivity and lower costs
  4. Reduced inventory supply throughout the chain
  5. Improved forecasting precision
  6. Fewer suppliers and shorter planning cycles

Main Issues Related to Pharmaceutical Supply Chain

  1. Issues related to Counterfeiting.
  2. The unfavorable reaction of the drug to the patients.
  3. Issues rose due to entities of supply chain operations.
  4. Manufacturing issues like mixing incorrect input raw materials, or cross-contamination due to manufacturing more than one drug in the same facility, or improper labeling of the final product.
  5. Retailer’s issues including improper temperature controls and handling.
  6. Transportation issues caused by mishandling, improper temperature controls, and the use of improper shipping mode.
  7. Storing and warehousing issues such as using improper temperature controls, improper handling in the warehouse and mixing products with raw materials.

Temperature Controlled Logistics

India is a vast continent with different temperatures and environmental conditions varying from 25 to 500c in different places. This presents a whole different set of challenges for the drug manufacturers to ensure drugs are maintained at the requisite temperatures throughout their lifecycle. The problem of temperature-controlled logistics is one of the common noteworthy problems. The failure to maintain drugs at their prescribed temperature often results in the loss of efficacy. The drugs that require stringent cold storage and transport are often expensive and are often targeted by the drug counterfeiters due to their high value.

Pharmaceutical supply chains: key issues and strategies for optimization

Supply chain optimization is now a major research theme in process operations and management. A great deal of research has been undertaken on facility location and design, inventory and distribution planning, capacity and production planning and detailed scheduling. Only a small proportion of this work directly addresses the issues faced in the pharmaceutical sector. On the other hand, this sector is very much ready for and in need of sophisticated supply chain optimization techniques.

Global supply chain planning for pharmaceuticals

The shortening of patent life periods, generic competition and public health policies, among other factors, have changed the operating context of the pharmaceutical industry. In this work, we address a dynamic allocation/planning problem that optimizes the global supply chain planning of a pharmaceutical company, from production stages at primary and secondary sites to product distribution to markets. The model explores different production and distribution costs and tax rates at different locations in order to maximize the company’s net profit value (NPV).

Logistics developments within the Pharmaceutical Industry:

In comparison with pioneering sectors such as FMCG, retail, and electronics, the pharma industry is somewhat behind when it comes to logistics developments like distribution network optimization and Sales & Operations Planning (S&OP). However, change is inevitable, since various developments currently underway in the pharmaceutical industry are making the logistics situation increasingly complex.

Power struggle over who manages logistics in the Pharma Supply Chain:

Pharmaceutical wholesalers have diversified considerably in terms of the services they offer in recent years. While few of them have the pan-European reach, they all carry considerable weight in their local markets. A wholesaler is often a business division of a pharmacy chain, or may operate as a pre-wholesaler – in other words, logistics service supplier – which makes them direct competitors of the likes of DHL, UPS, and DSV. As a result, wholesalers’ influence in the supply chain is increasing both upstream and downstream.

In order to protect their own market position, pharma manufacturers are eagerly looking for ways to weaken the wholesalers’ position of power through logistics. One option is to move from a national logistics approach to a regional one, using just one pre-wholesaler for a number of countries. This helps a manufacturer to create more buying power without completely losing sight of local market needs.

In view of the wholesalers’ various financial interests, however, this is a delicate process for manufacturers. In fact, many regional initiatives of this kind do not come to fruition because manufacturers are afraid of damaging commercial relationships with wholesalers/pharmacies by canceling the logistics contract with their sister companies.

Logistics sophistication, manufacturing segments and the choice of logistics providers

The analysis tests three research questions on the individual and combined relationships of logistics sophistication, measured on a logistics sophistication index (LSI), and process type (according to Goldratt’s V‐A‐T classification for materials flow analysis) with the choice of type of 3PL provider; the methods of analysis were cluster and logistics regression analysis.

Obstacles and preconditions for logistics and manufacturing:

Supply chain management refers to an integrated organization of the supply of raw materials, and the manufacturing and distribution activities in a supply chain (Gopal and Cypress, 1993). In developed countries, this integration is linked to the introduction of information and production technologies that are directed towards the external integration of different firms in a supply chain. In developing countries, however, is it often difficult to realize supply chain management because basic conditions for it have not been fulfilled. Transportation and distribution networks are underdeveloped, production technologies are old-fashioned and there are no spare parts for defective machines.