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Team tactics

‘Partnering’, ‘collaborative working’ and ‘integrated supply chain’ are frequently mentioned when the pharmaceutical industry talks about improving its coolchain performance. In this excerpt from his paper, ‘Strategic Pharma-Logistics Partnerships – Medicine or Snake-oil?’, collaboration champion and speaker at the upcoming FlyPharma Conference Alan Kennedy presents the case for genuine teamwork

Businesses have always collaborated. In fact, it is impossible to conduct any form of business without a degree of collaboration. But it was not until the last quarter of the 20th century that the potential for win-win collaboration became broadly accepted in the commercial world. Integration refers to a strategic, long-term, multi-party approach in which an entire supply network, including, where appropriate, external stakeholder groups and supporting services, is aligned and managed within a single procurement system.


Why integrate?

Supply chain experts and pharma shippers are emphatic in their calls for dramatic increases in productivity and huge reductions in cost. Hardly surprising in an industry which is currently spending close to $10 billion per annum on cold-chain logistics alone, and where market expectations of service and quality are continuously advancing. The sophisticated health-product consumer of today seeks and expects more service, more safety, more value and more customisation.


Four steps towards supply chain integration

To meet these accelerating expectations in a world of value-driven and choice-driven demand requires enormous and continuous efficiency gains on the part of the pharma manufacturer. And, invariably, many of the resulting performance pressures are then passed along the manufacturer’s supply chain. From a logistics provider’s perspective this is an environment where it is becoming increasingly difficult to reconcile the continual demands for reduced cost with those for improved performance and reduced risk. Logistics companies are being forced to negotiate an ever more intricate labyrinth of buyer demands, regulations, performance standards and shipping routes while, at the same time, having to maintain the profitability necessary for innovation, business development and shareholder return. It all makes for a conundrum that is only going to be satisfactorily resolved with a fundamentally new approach to pharma logistics; one that leads to automatic risk reduction and efficiency improvements.


Although a major pharmaceutical company will invariably put in a large amount of effort and consider a large number of criteria when selecting its immediate logistics service providers, in practice, the entirety of a pharma-logistics chain is usually a highly fragmented affair. A typical end-to-end supply structure comprises an essentially disarticulated collection of organisations, most having a contractual responsibility that goes no further than their immediately adjacent links.


It’s a supply configuration that is inherently sub-optimal. For a start, many upstream supply relationships are the simple result of crude bidding processes. While competitive tendering may be an extremely efficient means of keeping initial prices low, it is not nearly so efficient in delivering whole-life value for money. Traditional buy-bid relationships also tend to dump risk down the contractual chain, militate against innovation, are inherently sub-optimal from an efficiency standpoint and lead to an unnecessarily antagonistic operating environment. However, these days, it is not enough for a pharma company to integrate with its immediately adjacent tier of the supply chain and then rely on good old-fashioned adversarial tactics to painfully squeeze the necessary cost savings, efficiencies, regulatory compliance, safe working practices and the like out of the remaining parties.


The upshot of this type of behaviour is that a pharma company can easily end up with a logistics supply network that is both dysfunctional and badly matched to its specific needs; especially if the main selection criterion for the majority of upstream suppliers has been the submission of a temptingly low initial price. It is a situation which readily brings to mind a quip attributed to US astronaut John Glenn. When asked about how he felt when he was sitting aboard his capsule listening to the countdown, Glenn said: “I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts – all built by the lowest bidder on a government contract.”


Silo mentality

Traditional bid-buy relationships are further characterised by silo mentalities and adversarial service contracts, both of which serve to create conditions which are more conducive to supply-chain collision rather than supply-chain collaboration. Although there is much lip-service paid to the concept of ‘teamwork’ in pharma logistics, 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.


Nevertheless, there can be little doubt that the management of both market and coolchain disruptions is going to be quicker, cheaper and less traumatic when addressed by a synchronised logistics team that is dedicated to protecting the interests of the ultimate client rather than by a chain of disengaged businesses whose primary focus lies in self-preservation, fending off claims and maintaining short-term profitability. Both logistics suppliers and logistics buyers tend to see no further than their own narrow goals when what is really needed is an end-to-end buyer-supplier system that automatically creates interdependency and mutual trust. This sort of genuinely symbiotic relationship allows pharma manufacturers to focus on their core activities – what they do best – and leverage the capabilities of their collaborative partners.


In other words, the real opportunity with an integrated approach rests in the creation of stable delivery mechanisms that harmonise and leverage the supply chain including its ‘peripheral’ parties such as packaging suppliers and IT providers. Only by permanently escaping their ingrained silo mentalities can shippers, outsourced contractors, logistics suppliers, equipment suppliers, support providers and others capitalise upon greater mutual understanding. >>

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