Insider advises on revamping your pharma supply chain
04 November 2015
The pharmaceutical industry is facing enormous changes. Before joining Swisslog, Michiel Veenman spent 5 years optimising warehouse operations and IT systems for a pharmaceutical wholesaler. Here he explains the ways in which the industry can overcome the challenges of the future.
New centres of manufacturing
Two decades ago most pharmaceuticals for Europe were made in Europe. Today the majority are made elsewhere, in China, India and Pakistan. It presents issues of integration and consistency amongst a dispersed organisational structure.
India has a rapidly growing pharmaceuticals biotechnology market currently estimated to be worth over US$ 1 billion, and at the turn of the millennium was spending around US$ 66 million on medicines R&D, up from just US$ 2.2 million in the mid-1970s. Five of the world’s ten biggest pharmaceutical companies are based in the US, while the remaining five come from Switzerland, the UK and France, but this does not mean that’s where their products are made. The world’s largest pharmaceutical company for example, Pfizer, has manufacturing operations at 86 locations worldwide supporting all major markets.
New regulations, increasingly more complex products, steadily expanding product portfolios and ever smaller batches increase costs and risks in logistical processes.
Changes in legislation and the move towards temperature-sensitive pharmaceuticals and OTC medications has now changed the storage, logistics and distribution process. Temperature control, monitoring and tracking is now done as a matter of course, with deliveries coming with their own ‘temperature map’.
The Place&Trace solution is an automated logistics system that can be expanded as needed by modular components, exactly what is needed. The benefits of this solution are clear to see. Compared to manual pallet warehouses, automated logistics systems use existing warehouse space up to 60% more efficiently. Automated systems also offer significantly more effective handling processes in the warehouse and verifiably lower error rates in goods deliveries.
To meet the requirements associated with international compliance regulations, Swisslog’s software solutions, implementation processes and know-how allow pharmaceutical companies to validate their systems efficiently. Providing validated supplies allow customers to carefully document all drug-specific information. Place&Trace also makes it possible to trace and log all drugs, both at the batch and product level.
Some suggest that the growth in temperature-sensitive products is also in direct response to the competition companies face when exclusive product licensing expires. Under a centralised procedure, pharmaceutical companies submit a marketing-authorisation application to the European Medicines Agency (EMA). Once granted by the European Commission, a centralised marketing authorisation is valid in all EU Member States, as well as in Iceland, Liechtenstein and Norway. By law, a company can only start to market a medicine once it has received a marketing authorisation. The process is understandably complex, and the cost of developing of new medicines can be prohibitive. On average, only three in 10 drugs launched are profitable and producing medicines that can only then be manufactured under specific circumstances offers some level of protection against future competition. The spin-off is a need to maintain strict temperature controls throughout the supply chain.
The trend towards ever smaller batch sizes is keeping the industry on its toes. New drugs with modified – sometimes even personalised – ingredients are being brought to market. Production logistics is becoming more complex than ever.
At the same time, the traditional sales channels, via wholesalers, are coming under the microscope. To obtain better control over the supply chain, and for drugs to reach pharmacies even more quickly, the pharmaceutical industry needs multichannel logistics systems.
With its Place&Trace solution portfolio, Swisslog is expanding its expertise in this field with approaches that combine specific know-how in pharmaceutical logistics with state-of-the-art logistics systems developed for e-commerce logistics.
Governments have squeezed some of the profits out of the industry by renegotiating national deals in response to austerity measures. It means that manufacturers and wholesalers have had to work hard on stripping out costs, as with the trend to smaller batch sizes the result is pharmaceutical companies actively working on building new and more lean sales channels. In the traditional pharmaceutical supply chain, products move from the manufacturers to pre-wholesalers and pharmaceutical wholesalers until they reach the pharmacies. This reduces visibility on the product and its end users. It also increases stock value in the chain. Therefore, parallel to this classic sales approach, some companies have already come up with specific plans to build new sales channels, such as direct-to-pharmacy and direct-to-patient delivery.
Fear of change
The pharma world is fairly conservative, and there can be a reluctance to innovate procedures in sharp contrast to the R&D that goes into product development. The other side to the coin is experience is greatly valued. Swisslog helps customers to find an optimal, proven solution that is also tailored to their needs. Pharma companies are, of course, very knowledgeable regarding their own business, but the details of implementing automated warehouse solutions in their environment are often new, so our advice can be of great use. With new generation software that is modular, configurable and pre-tested, the opportunities to reduce implementation and maintenance efforts are now also at hand.
As always in material handling, complex moving machines attract attention, and manufacturers are more interested than ever in advanced robotic solutions for handling products around production lines.
Michiel Veenman, Global Market Leader Pharmaceutical
Having studied logistics, Michiel has experience working for the Dutch Department of Defense and in automation systems simulation and analysis. Before joining Swisslog, he spent 5 years optimising warehouse operations and IT systems for a pharmaceutical wholesaler.