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Logistics excellence can change the fortune of pharmaceutical and medical device companies

We offer insights to help life sciences companies rethink, reshape or restructure.

Overview

Many pharmaceutical companies and medical device manufacturers fail to see how supply chain initiatives can help them overcome their most daunting barriers. This is especially true for players who have failed to embrace supply chain transformation as a way of moving from traditional operations to a model where desired outcomes define how every point on the chain is set up.

We recently completed a comprehensive Supply Chain Mastery study of capabilities and improvement opportunities associated with high performance in supply chain management. Over two years, we surveyed more than 1,500 executives in 21 countries and developed scores of cross-industry performance benchmarks.

The study clearly illustrates the cost-reducing, performance-enhancing role of logistics, while demonstrating that logistics excellence has different meanings and characteristics across industries.

In life sciences, we have identified six pillars of logistics mastery and discussed their potential benefits. We have also created capability maturity models (CMMs) for each category—a way for life sciences companies to measure their current status and begin forging a path to high performance.

Background

The pharmaceutical industry is a challenging one: pipelines are thin, blockbuster drugs debut less frequently and the duration of clinical trials has increased drastically.

Along with device manufacturers, pharmaceutical companies are setting their sights on emerging economies, but untested strategies, new product mixes and limited market insights make local market penetration unpredictable and expensive.

In both drug and device sectors, volatile trade conditions combined with fluctuating fuel and commodity prices are complicating logistics, even as new competitors—often in developing regions—enjoy low-cost infrastructure. The net effect: real, enduring success has become tougher to attain.

Yet, life sciences companies spend more time and effort on the commercial and research sides of the business, and they place a lower priority on supply chain improvements. One reason may be that the industry’s average logistics costs as a percent of sales is just 1.5 percent—much lower than that in many other sectors.

Even if logistics and other supply chain-related costs are low, this does not justify subpar supply chain performance. The simple truth is that supply chain improvement opportunities are extensive and attainable.

Key Findings

We have identified six categories of logistics improvement opportunities for life sciences:

  1. Logistics Strategy: Employ a dynamic, demand-driven logistics strategy that maximizes responsiveness to changing business conditions.
  2. Compliance Mastery: Manage supply chains with stringent key performance indicators (KPIs) and metrics-guided processes to ensure timely delivery of high-quality, compliant products.
  3. Distribution Management: Develop advanced distribution networks with multichannel fulfillment.
  4. Inventory and Order Management: Integrate order management and inventory capabilities to excel at fulfillment.
  5. Global Transportation: Follow a proactive approach to transportation planning, with tight controls and end-to-end visibility.
  6. In-market Optimization: Take a center-led approach to blending global reach with local relevance.

To get started, you’ll need to understand your life sciences company’s current level of maturity for each category and establish future-state goals. Then, identify the severity of need and the potential for improvement. Next steps include creating targets and developing a road map that translates priorities into specific action items.

Analysis

Pursuing logistics mastery in all the six areas may neither be essential nor advisable for life sciences companies.

However, choosing and establishing the right capabilities is critical to achieving two ubiquitous goals: raising revenue and reducing costs. Our research confirms that logistics mastery can help life sciences companies do both.

The formula for achieving success in logistics for life sciences is here.