A strategy for logistics

What are some of the key factors to consider in a logistics strategy? Two Nordic life science firms share some crucial points.

Logistics is becoming an increasingly important issue for the life science industry, making sure medicines arrive at the right time and in the right place for the patients, that they contain the right ingredients and contents and that all this happens in both a time and cost effective manner, while still maintaining patient safety. Many of the life science companies, international as well as Nordic firms, are choosing more and more to outsource their supply chains to third party logistics providers. As a life science company decides to outsource its supply chain, there are some crucial points to consider. We asked two well-established firms in the industry, active on the Nordic market, about what they find important in the choice of a distributor and what they need to reflect upon in their logistics strategy.

Choosing the right distributor

Making the right decision about a distributor can determine a great deal. For the Swedish pharmaceutical company Meda AB there are several factors that are important when choosing a logistics company, such as cost, flexibility and service.

“Networks, transport planning, availability and service level are high up on the agenda. Of course, the mode of transportation is also important, that is, choosing to transport by plane, car or boat, or through a combination of these. When it comes to selecting a new distributor the cost level for the distribution is naturally important to us as a company. But qualitative goals for the end customer, such as delivery dependability, high level of service towards the client and flexibility are also crucial factors,” says Mia Brundin, Country Manager at Meda AB.

At Bayer AB the strategy lies in finding a match with the company’s own business model, according to Johan Fourie, Head of Controlling & Administration.

“We see logistics as a partnership between Bayer and the service provider. As such we choose partners firstly that are GDP compliant, and then it is about how they best fit into our business model. We are looking for solution-oriented partners that take the logistic and customer service burden from our shoulders and provide a service appreciated by our customers.”

Critical parts of the logistics chain

In the healthcare transportation industry there are some crucial issues to consider, two of these being security and product integrity. Pharma companies all over the world need to make sure that their products are secure from tampering and exposure to extreme temperatures, for example. The most critical part in the chain for Meda, from the point when the product leaves the company to when it arrives at its final destination, mainly involves temperature impact.

“The distribution from Meda to the end customer is overall very safe, with low wastage and secure and regulated transport that is outsourced to experienced distributors that only deal with pharmaceuticals. Nevertheless, there are of course some risks that our products are handled in an inadequate way, for instance that they are exposed to external factors such as detrimental temperature conditions, which can make the product useless. But there are largely good regulations that minimize these eventual influencing factors on our goods.”

Johan Fourie says that for Bayer AB the most critical parts of the logistic chain are GDP-compliant warehousing and deliveries, excellent, reliable customer service, and facilitation of customer requirements for deliveries to pharmacies, hospitals, wholesalers or other distributors. Also, the supplier must be flexible and meet customer demands at an acceptable price level.

Strict standards and agreements

Dealing with the fact that someone else has control over your products requires well thought-out plans. Meda has learnt to take careful precautions and set up detailed contracts before their products are placed into the hands of a distributor.

“Before we let a transport firm or distributor take over the handling of any link, well-reviewed quality agreements and process documents are written to regulate the hired company’s responsibilities and obligations, ensuring that they follow our intended quality demands. Follow-ups are then made through regular reviews with the hired suppliers,” says Mia Brundin.

Bayer AB take great care to hire experts in the field and make sure that strict standards are followed.

“We want to use specialists in the industry and specialists in the game of logistics. We of course require them to comply with strict standards, which we verify with them, including audits. This gives us comfort that our products are safe,” explains Johan Fourie.

Adapting to new regulations

An important aspect to keep in mind is being aware of rules and regulations. These not only change frequently, but also differ from country to country. Furthermore, there are regulations that concern specific factors, such as temperature. Not long ago the European Union passed new regulations that in part specify temperature ranges for shipping and storing drugs.

“The regulations can sometimes be difficult to interpret and are not always completely clear. Every EU country can have their interpretation and transition period, which affects our conditions. However, in general we in the Nordic countries adapt quite quickly and are often prepared for changes,” says Mia Brundin.

Johan Fourie finds that different interpretations, earlier adoptions and so forth by member countries can complicate matters, and this requires multiple solutions. Adjusting to new rules can be difficult and “therefore an extended specialist logistic service provider is needed.”

Room for improvement

To sum up the opinion of Meda, logistics in the Nordic region and out into the rest of the world appears to be well-functioning.

“Overall, we feel that the distribution in the Nordic countries works really well. Accessibility is good, there are several alternative solutions and a good infrastructure,” Mia Brundin says.

From Bayer AB’s point of view, Johan Fourie agrees that the logistics sector is largely well-functioning, but believes that there is room for improvement, for example by extending service offerings to encompass making sure that they can accommodate customer requirements beyond traditional pharmacies. He also points out some issues that result in additional processes in the logistics chain.

“For the Nordic countries there are different views in each different country. In some you have very limited competition due to the distribution structures, with a few big players that dominate. Competition does not only refer to economics but also to the terms of services they offer and solutions that they bring. For example we have not found any distributor that as a service provider could provide us with a ISAE3402 report issued by their auditors. This implies additional processes in the logistics chain and duplication of effort with resultant costs. We also note that since the privatization in some countries the logistics service providers have had to change their service offerings and become much more flexible,” Johan Fourie concludes.

Mia Brundin. Photo by Petter Karlberg