By: Sakthi Prasad --
15 April, 2014
Pharmaceutical firms end up spending a lot of money on logistics as they continue to widen their product range and enter new markets.
Those firms that spend only about 3 percent of revenue in transporting their drugs around the world are generally known as "best in class". But there aren't many companies who manage to keep a tight lid on their logistics spend. Besides the "best in class" group, there are other pharma firms who on an average spend about 6 percent of revenue on their logistics requirements.
According to Beroe's Logistics expert, Syed Abuzer, those pharma firms which don't fall under "best in class" category can potentially end up spending 6 to 9 percent of revenue on logistics in the next three years.
Pharma firms mostly transport their wares by airplanes and trucks. Even though two-thirds of our planet is covered by sea, only 5% of medicines are moved through ocean freight.
Of course, air freight is the fastest mode of transport with minimal damage or product deterioration. However, it is also worth evaluating the option of shipping medicines by sea.
The main challenge confronting the category managers in charge of pharma logistics is: how best to optimize the cost of moving drugs around the world and what are the savings potential?
Technological development in the reefer ocean freight has enabled pharma firms to shift part of their volumes on specific trade lanes to ocean freight.
Abuzer says category managers can effectively put a lid on rising logistics spend by opting for ocean freight, and can potentially save about 70 percent of costs.
The disadvantage, however, is that there is an average additional transit time of about 12 days. Given the time constraint, not all product types can be shipped by sea.
Category managers can explore shipping certain types of non-critical cargo via sea. Such products can be classified as powders, liquid compositions, tablets and non-time sensitive vaccines. These products aren't easily perishable.
Whereas critical product group, such as blood plasma products, liquid APIs and Biologics, which are the core R&D related products of pharmaceutical companies, ought to be carried through air freight.
Of course, category managers will have to determine which route has minimal trans-shipment, as it extends the transit time. There is also the issue of striking the right insurance contract.
Frequency of liner departures at ports may not match the manufacturer's shipping schedule and this is a major non-financial risk.
However, Abuzer says certain freight forwarders have come up with tailored services to overcome this issue.
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