Does Your Distribution Strategy Need a Diet? Leaner Supply Chains and Effective Pharmaceutical Distribution Channels through Outsourcing

Competition from generics companies from off-patent drugs, Big Pharma is continually searching for new revenue generation models against increasing costs. External factors such as stringent health care reforms worldwide and the pressure to drive drug costs down from developing economies are only exacerbating challenges faced by the industry. The common thread to help alleviate these concerns is a concerted effort by these organizations to structure and tighten their supply chain and distribution capabilities. There is a clear trend in pharmaceutical companies adopting outsourcing as a strategic tool to develop their distribution channels and enhance their customer network footprint. Distribution outsourcing has shown a significant impact on all aspects, including transportation planning, warehouse management, order management and network strategy.
Access to market with improved logistics

Service providers with a strong global delivery model and an established logistics practice are ideal partners to improve distribution between drug manufacturing centers and consumption sites worldwide. The consumer base is moving slowly towards larger populations in the Asia-Pacific region. The global service provider base has a very strong footprint in these regions and will be able to provide additional support in terms of product security and regulatory compliance requirements for these countries. Connecting all the elements in the distribution chain such as drug distributors, wholesalers, prescribers and patients can be executed effectively through the expertise of service providers rather than investing in building these capabilities in-house.

Leaner n’ meaner supply chains

In order to adapt to ever changing customer and market needs, the distribution strategy must have lean and agile aspects. This could mean effective penetration through emerging markets with high potential, improving speed-to-market for new drugs and increasing the flexibility in response time for recalls and demand spikes. Expertise gained by service providers in dealing with high volatility markets gives outsourcing an edge as they offer proven business models and processes with flexi-resources (people, transportation and assets). This will lead to streamlined product interactions for pharmaceutical companies with their suppliers and end customers.

Taking the plunge to outsource

The Pharma sector is amongst the most progressive in terms of outsourcing services such as R&D and manufacturing. Over the past 5 years, we have witnessed a slow shift in outsourcing to include partnerships with outsourcing partners for their supply chain and distribution processes. The industry is now moving into a phase which will include a well structured relationship with their service providers. These agreements will encompass features such as clear and open communication, regular feedback and clearly defined service level agreements will show a pronounced impact on the level of satisfaction for the pharmaceutical supply chain and distribution networks.
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