Strengthen the links in your supply chain: 3PLs and 4PLs
As discussed at the 2018 Temperature Controlled Logistics event, shippers should improve their partnerships with 3PLs and 4PLs to advance their drug supply chains.
Millions of people don’t have access to the medicines they need. Better supply chain management can help tackle this widespread problem.
Billions of pounds of product is moved within medical supply chains and compliance with regulation is quite literally a life or death requirement. So needless to say, trust is a vital element of the partnerships that operate within these chains.
One top ten pharmaceutical company has chosen to have complete transparency with their 4PL regarding finance governance and spend. This required the 4PL to be entirely open about costs, profit and margins. This joint management structure was implemented to reinforce the trust in the partnership to ensure fairness and prevent any scepticism.
Signing on the dotted line
At the point of contract signing, goals and metrics must be agreed upon and finalised. These can be used to measure the trajectory of the collaboration with the supply chain partner.
4PL partnerships are extremely helpful for uncovering inefficiencies in networks which can help shrink the cost of lane operations. The 4PL’s oversight can identify the fragmented 3PL and supplier relationships and even identify warehouse access the shipper may not have realised they had.
However, these rewards should be expected on a continuous improvement basis. Many make the mistake of demanding instant and rapid ROI. Partnerships need sturdy foundations and culture planning in order to fully fruit.
What is the difference between a 3PL and 4PL?
3PLs govern a certain leg of a supply chain whereas a 4PL will manage the supply chain at large for a manufacturer.
The golden rule of Kevin Kissling, Vice President, 3PL Services, McKesson Specialty Health is to ensure these strategic relationships go far beyond just pick, pack, ship, order to cash.
He said the 3PL should view themselves as the manufacturer’s employee and seek ways to make them more successful, increase sales, remove costs and meet their priorities.“If I don’t stay close with the manufacturer, I can’t provide the level of service and the opportunities to help them meet their business objectives.”
Limiting the amount of manufacturer partnerships each point of contact has within a 3PL is a strong method to preserve the quality of the relationships they have in the market.
Specialized pharmaceutical expertise
3PLs have witnessed a desire for specialized expertise which supports the move towards personalized medicine.
This shift towards producing significantly higher potency, large molecule biopharmaceutical drugs and biologics places new pressures on transportation and shipping. This is because these expensive and more complex protein based drugs are highly sensitive to temperature change.
Any deviations from their ideal storage or transportation temperatures can disrupt their protein structure and make them ineffective. Kevin Kissling notes that cell and gene products are often ultra-frozen. He explained: “It’s one thing to keep it at ‑120 degrees in a distribution center, it’s quite another to keep it at that temperature when it leaves the distribution center and is transported to the manufacturer, or hospital.”
Also, some cell and gene based products require unique supply chain structures: going from patient to manufacturer to patient. Tracking is crucial with these structures to preserve the efficacy of the medicines.
Despite its considerable outsourcing experience, the medicine industry is still trying to find the perfect recipe for the selection stage. Even the most rigorous selection process can fail to get things right the first time – with problems being flagged up 12-18 months after entering a partnership.
Across its various functions a pharmaceutical or biotech firm may work with over 350 external partner contacts, unsurprisingly many in the industry wish to shrink this number. Manufacturers are seeking strategic partnerships so they can maintain a global reach with the technologies they require but via a smaller base of contacts. Interestingly, the past few years has seen a consolidation of 3PL market and carriers.
Kevin Kissling highlighted that many pharma firms fail to appreciate that preparation is key with selecting your 3PL of choice, he notes that engagement and relationship building should happen as early as 24 months before launch.
Manufacturers should approach the 3PL with all the information they will need to be successful, which includes:
- Preliminary commercialization strategy
- Volume estimates
- Temperature requirements
- Projected sales volumes
- Targeted regions
- Patient population
- Place of delivery
- Is it an orphan drug?
Blockchain and technology
Rising public pressure on pharma’s spending and the price-points of medicines further drive the appeal of outsourcing to cool costs.
However, emerging trends are suggesting that cheaper running costs are no longer the primary motive behind outsourcing.
In fact the respondents of the 2016 NICE insight CDMO Outsourcing survey were most concerned with reducing the risk of supply shortages, improving quality and efficiency and gaining technical/operational expertise. The top focus in 2017 was gaining access to specialized technologies.
With many keen to see harness the benefits of blockchain and other new intelligent technologies, suppliers will need to equip themselves with the technological expertise shippers desire.
Kevin Kissling maintains that even though the technology has a little way to go – standardized formatting being one key need – blockchain is set to have a real impact on the future of pharmaceutical supply chains and their 3PLs.