Pharma Logistics Undergoing A Tech Renaissance

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Technology has emerged as a key factor to develop more astute oeration models for pharma logistics. It has become a prime differentiator to gain a competitive advantage as the sector undergoes a transformation, driven by increasing regulatory scrutiny, time-constrained, product specific demands and user experience

India Pharma Inc has emerged as a noteworthy competitor and a significant partner in the global pharma arena. However, with thinning product pipelines, lessening blockbuster drugs, increasing regulatory scrutiny, pricing pressures, quality concerns, increasing duration of clinical trials, shifting disease profiles and patterns etc., challenges and barriers to success too are mounting.

This, in turn, has led to pharma companies expanding their horizons to emerging markets, exploring untried strategies and revamping their product mix. In this scenario, the role of an effective supply chain to become a major differentiator in the value chain, as companies seek the next phase of growth, cannot be undermined.

Yet, the supply chain has often rated very low in the priority list of life sciences companies until recently. As an Accenture report, released a few years ago, stated, “The net effect is that real, enduring success has become tougher for life sciences companies to attain. More than ever, sustainable and profitable growth requires a solid foundation built on longer term fundamentals. Interestingly, very few companies in this industry consider supply chain excellence to be one of those fundamentals. Life sciences companies typically spend more time and effort on the commercial and research sides of the business and, conversely, place a lower priority on supply chain improvement.

Thankfully, the pharma companies are gradually waking up to the revenue building, cost-reducing potential of supply chain excellence. They have also recognised that revamping the supply chain, of which logistics is a major part, will enable pharma players to capitalise on unexpected opportunities, maximise customer loyalty and diminish risks, and be more agile as well as responsive to customer needs. And, technology has emerged as the partner to bring about this transformation.

A (tech) tonic shift

In the pharma logistics sector, technology is driving disruptions as never before. There is rapid adoption of information technology, communication technology and automatic identification technology, not just in pharma logistics but across the entire supply chain to enhance the effectiveness and efficiency of the existing systems. Various technological advancements are being deployed to reduce inventories and augment order fulfilment rates, efficiently manage in house inventory, effectively handle customer sales projections, lessen shipment lead time and several other crucial functions.

This has led to the rise of several innovation-driven start-ups which utilise various technologies to simplify processes and enhance outcomes of logistics services. Let’s take a look at a few such ventures.

Six pillars of logistics excellence in the life sciences industry

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Locus: Enhancing delivery

Locus is a B2B enterprise platform, utilising machine learning technology to optimise logistics and last mile deliver and help conventional logistics businesses gain a competitive edge. The logistic management solution provides route optimisation, packing engine, tracking, and reporting. It claims that its users can optimise their fleet capacity utilisation, reduce fuel usage, improve operational competence, regulate the delivery process and provide great customer experience by adopting its solutions.

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Nishith Rastogi

Explaining their role in the logistics cycle, Nishith Rastogi, Founder, Locus.Sh says, “Like any other distribution heavy business, the consumer being a part of the supply chain is now impacting the decision-making process in pharma logistics. Rising competition is making pharmacy and end-customer servicing the most critical piece for the entire supply chain. We believe last mile deliveries to retailers and customers is being disrupted because of technologies such as Locus. Delivery models such as one to three hour delivery, same day deliveries etc., is forcing pharma distributors and pharmacies to adopt technology as human decision-making leads to significant loss of business.”

He further adds, “We believe that shift from bulk to patient-centric pharma solutions and personalised treatments will lead to more adoption of solutions like Locus.”

Rastogi opines, “Technology remains one of the most important areas for pharma companies to focus on. Leaders admit that one immediate result is greater transparency, which leads to better decision making. Technology can be used to integrate functions across the network, increase visibility of products across the value chain and automate processes to improve the supply chain’s responsiveness and reliability.”

PharmaRack: Enabling efficiency

Pharmarack Technologies, a Pune-based tech start-up, is focussed on augmenting the pharma value chain through automation of order processing and inventory management. It uses a software-as-a-service (SaaS) application to connect drug manufacturers, distributors, local pharmacists and pharma e-tailers with an aim to increase sales and enable transparent communication between the stakeholders.

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Pradyumn Singh

In an earlier interview with Express Pharma, Pradyumn Singh, Co-founder and CEO, Pharmarack had revealed, “We could easily gauge the inefficiency in the supply chain. On one side there is five per cent return of goods due to expiry and other reasons while on the other side, estimates through sources say that there is a parallel counterfeit medicine market which amounts to 25 percent of the overall India domestic pharma market.”

Explaining how Pharmarack helps to get rid of these inefficiencies and bottlenecks, Singh says, “Our platform works across supply chain right from companies, carrying and forwarding agents (CFAs), distributors, retailers and hospitals. Apart from increase in topline for distributors there had been a significant percentage of cost reduction.”

He cites the example of one of its clients and informs, “One of India’s large pharma companies did a digital launch for one of its key seasonal products (new variant). Despite slowdown due to GST, within 60 days there was three per cent additional uptick in sales apart from its organic growth.”

He further states, “At the point of care (POC) level, we have successfully done automations for specific operations through our machine learning tools and are closely working for IoT deployment. There had been many instances where doctors, clinics and hospitals were able to source lifesaving and speciality drugs through the Pharmarack platform within hours.”

4TiGO: Facilitating a transformation

It is a cloud-based technology platform that brings together consignors, consignees, fleet owners, transport companies and agencies to exchange information, transact and manage their entire business. Nandan Nilekani is one of the investors in this online freight exchange facilitator for truckers which offer numerous services such as live monitoring and tracking, application-level integration with partners for cashless purchase of diesel and electronic toll.

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Anjani Mandal

Anjani Mandal, Co-founder and CEO, 4TiGO informs, “The core of this idea is to use technology to overcome the constraints to improvement due to the fragmented nature of the industry and the lack of transparency of the road transport ecosystem to eliminate inefficiencies. The challenge was to realise this functionality with the ease of use and simplicity that is essential for its adoption in this segment. We have used a combination of 14 different streams of technology to create an intuitive user-interface so that a truck driver, anywhere in India, can find a load, close the deal and be on his way, all within three clicks.”

A strategic tool

Mandal also states, “The emerging new technologies are creating strategic opportunities for organisations to build competitive advantages in various functional areas of management including logistics and supply chain management. However, the degree of success depends on the selection and implementation of the right technology in the right place.”

He gives his take on the technologies which will find wide-spread use in the pharma logistics sector in times to come. He says, “One widely used form of technology in the pharma industry is automatic identification technology which is the term used to describe the direct entry of data or information in the computer system, programmable logic controllers or any microprocessor-controlled device without operating a keyboard. This technology displays transparency and ensures safety of information. Another form of technology is the use of Radio-frequency identification (RFID) which uses electromagnetic fields to automatically identify and track tags attached to objects. The tags contain electronically stored information. The use of RFID is efficient when it comes to quick turnaround time for perishable products.”

Elaborating on the concept, he recommends a combination of various technologies to effectively leverage the growth potential in the pharma logistics sector by facilitating a supply chain transformation:

  • Cloud-based solutions that connect the entire ecosystem of the industry i.e., all the supply chain components as well demand points
  • Low cost mobile computing devices
  • Mobile Internet connectivity across the country
  • Browser-based secure application and secure communication that can be changed virtually overnight to align with new regulatory norms
  • Data-analytics for understanding demand patterns and demand shift trends across different geographies

This seems to be an opinion that the rest of them share as well. Rastogi states, “Over the past few years, there has been a sharp spike in the near real-time data that logistics providers collect through various sources — sensors, smartphones and other telematics tools. This data is now being leveraged to optimise delivery schedules and even forecast, with the aid of predictive analytics, future demand in order to maximise resource utilisation. Therefore to improve supply chain practices pharma organisations will move to AI, Big Data and cloud technologies which will help in supply chain automation.”

Singh says, “Supply chain automation, IoT-enabled cold chain, real time intelligence, faster market roll out with digital platforms etc., are a few areas that have just started. Technology is still at a nascent stage in the pharma industry and has a long way to go, with IoT playing a crucial role.”

In times of GST

Thus, the sector seems to be on a growth path but there is a lot of headway to be gained on multiple fronts, especially in the post-GST era. As an AT Kearney report titled, ‘India’s Pharma Supply Chain: Does the Industry Have What It Takes to Win?’ states, “The goods and services tax (GST) regime will influence the sourcing, manufacturing and distribution footprint, with particular impact of transportation and warehousing.”

So, how are things likely to change in these times and what would be required of the pharma players? What do our experts foresee and recommend?

Another AT Kearney report, ‘Creating Competitive Advantage through Supply Chain: India Insights,’ points out, “Supply chain functions have been eagerly awaiting the GST rollout. This will enable the supply networks to be ‘Operationally optimised’ from the current ‘Tax optimised’, and potentially reduce supply chain complexity.”

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Dinesh Agarwal

Dinesh Agarwal, Executive Director of Khaitan & Co, a renowned law firm also reiterates this view and informs, “With the advent of GST, we believe that pharma companies will remodel their storage and distribution centres. Earlier, they used to have state-wise branch office/forwarding and commission agents to take advantage of zero tax on consignment sale/ branch transfer. Now, such models don’t offer any tax advantage, rather state-wise distribution centres brings logistic inefficiency and inventory load. Under GST, most of the pharma companies are planning for mega storage facilities at strategically located geographies near the market. Automated storage and distribution centres will add to just-in-time delivery model, reducing inventory and financial losses due to expiry of medicines.”

On similar lines, Singh says, “Moving ahead, GST will help in significant reduction in cost of supply-chain/ distribution, long working capital cycle. Instead of having multiple, state-level depots, now companies may move towards the hub & spoke model to reach out on a pan-India level. A maximum of seven hubs would be required. However, it is important to have micro level information real – demand to build intelligence and data science around it for better planning and forecasting. For instance, based on our platform intelligence, beyond 40-45 miles of a metro city there are 15-20 per cent stock-outs compared to 3-4 per cent within metros and it becomes doubly worse in case of specialty drugs.”

According to him, this kind of insights will help pharma companies to strategise better on eliminating bottlenecks and apply them on improving companies’ performance.

He further recommends, “In the post-GST era, the pharma industry will have to realign their entire supply chain and work towards rationalisation of the CFA model. With easy movement of goods inter-state due to input credit, inter-state logistics will be a flourishing business, especially for the ones who are pharma-compliant ready.”

However, Singh also cautions, “All the ERPs needs to be GST-format ready. This is a challenge as there are close to 400+ softwares in India used by distributors and pharmacies. At the company level this may not be a problem but integrating it with their supply chain would remain a challenge.”

Mandal suggests, “Supply chains that truly optimise the overall cost of logistics (in terms of warehousing and transportation) with no consideration of state-boundaries is the first step. However, he also says, “Integrating the complete supply and demand side information flow and capturing the entire ecosystem data onto a single platform followed by data analytics to ensure all demand points are served adequately are steps to be undertaken, irrespective of GST.”

Trends of the future

Thus, pharma logistics, as a sector, is on the cusp of a great change. Moreover, if the opportunities in this sector is leveraged well, one could rake in a lot of benefits for the pharma industry as a whole. Describing the future trends in pharma logistics, Rastogi informs, “With pharma companies looking to move into new markets for growth a fully-integrated global supply chain has become paramount.”

He also lists down the areas which could see rapid transformation:

Global inventory management – Organisations are pushing forward global inventory management systems to ensure as little overhead as possible. End-to-end visibility in logistics has grown in importance and companies have increased investing in ERP footprint.
Rise of cold chain logistics – Rise in biologics based products that need to be stored at colder than average temperatures for the duration of their long expedition to market is rapidly growing. This has caused difficulty for pharma companies to manage fluctuations in demand for temperature dependent drugs, which can result in exceedingly high inventory costs due to cooling requirements. Here real time temperature monitoring during transit can help companies reduce wastage and overhead costs.
Increased use of reverse logistics – Consumers and retailers are increasingly returning sold and unsold goods, respectively, to manufacturers. This has led to an extensive focus on customer satisfaction and environmental impact. Technologies like Locus’ allow companies to manage reverse flow of products and lowering cost associated with the process.

Conquering the challenges

However, there are certain challenges that need to be tackled to accelerate the growth momentum. One major impediment in the growth path seems to be costs. High investments required by technology is a deterrent in their adoption. The operational costs are also quite steep, at least in the initial period. For instance, high operating costs are one of the main reasons why truck fleet vendors are not investing in newer technology. Thus, India requires solutions which are affordable and scalable, especially in areas such as active temperature control, traceability and security requirements.

Another thing that needs immediate attention is creation of appropriate infrastructure. As Mandal points out, “In India, pharma logistics sector needs an ecosystem and infrastructure to facilitate smooth operations. Players in the logistics industry should build their capabilities to meet world class standards in pharma transportation.”


Technology: Unblocking benefits in logistics and distribution

  • More agile, responsive market reach
  • Better use of warehouses and trucks
  • Better coverage of pharmacists
  • Faster go-to-market with better product availability
  • Lower product inventories with reduced product returns and rejects
  • Better customer service

Source: AT Kearney


Singh highlights the need for more focus on pharma logistics per se. He says, “There are great logistics start-ups however not many focus on pharma end-to-end. We would see a lot new businesses flourishing with a focus on pharma logistics which has very different needs when compared to the FMCG sector. Pharma logistics is deeply integrated with the entire healthcare ecosystem and has various complexities with skewed supply-demand.”

Nevertheless, he is also optimistic about the future and believes, “We are on the cusp of a new model for domestic markets and it is exciting times for start-ups in this space. There had been slow acceptance from the industry for a long time due to various reasons, however, things have changed in the past six months with companies forming dedicated digital/ tech teams to work on innovation.”

Way to go

Summing up, it is clear that the outmoded ways of logistics will be redundant in the future. Companies will have to devise logistics strategies which are closely aligned with their manufacturing and commercial strategies.

As the AT Kearney report, ‘Creating Competitive Advantage through Supply Chain: India Insights’ recommends, “With businesses becoming increasingly global and complex, the ability to translate macro-economic factors into implications for the supply chain is critical. Having an all-encompassing business view helps in designing a supply chain that is proactive to changing business needs.”

Thus, be it temperature control, security or regulatory compliance, strategic supply chain management including logistics, with the aid of technology, is pivotal to tackle important issues of the pharma industry.

lakshmipriya.nair@expressindia.com

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