Logistical Challenges

An Executive Interview with LifeScience Logistics

Richard Beeny of LifeScience Logistics on meeting the challenges of logistics and supply chain in the pharmaceutical industry.

NGP. Inefficient logistics and supply-chain networks contribute significantly to rising costs and compromised quality of care and patient safety. What can pharmaceutical companies do to meet these challenges?
Richard Beeny. For a variety of reasons, pharmaceutical companies have tended to focus more on R&D than on the efficiency of their supply chain. Given today’s market demands, however, an inefficient supply chain is no longer an acceptable cost of doing business. In order to lean out inventories, enhance regulatory compliance, and respond to market demands for greater safety and lower cost, most manufacturers are now turning to outsourcing.

Third-party logistics providers offer the pharmaceutical industry a scalable, lower-cost solution. Since they must meet the requirements of multiple clients, they bring a set of best practices to operations while maintaining regulatory compliance. More and more, pharmaceutical companies are realizing that by outsourcing their supply chain, they can concentrate on their primary business of developing and manufacturing life-enhancing and life-saving products without compromising quality or safety.

NGP. The pharmaceutical industry is facing the same problems regarding temperature-controlled transport as the food industry. Can you outline what some of the problems are in the cool chain and how they could be overcome?
RB. The growth in cold-chain products within the pharmaceutical industry has been dramatic. Such products tend to be high dollar and the margin for error in their supply chains is therefore relatively narrow. In addition, development has lagged in the transportation infrastructure for these products. While refrigerated and frozen trailers are common in the food industry they are not well suited for dual assignments. The major parcel carriers have been reluctant to modify their operations to accommodate such products, and the limitations of packaging forces costly overnight or two-day air transport.

There are also gaps at the wholesaler level. Manufacturers can document transit conditions to the wholesaler, but lose visibility once it hits their docks. As a result, patients cannot be assured that their medications have been strictly maintained to the manufacturer’s guidelines. I believe we’ll begin to see greater oversight, with respect not only to refrigerated and frozen products, but to controlled-ambient products as well.

NGP. Can you outline some of the supply chain trends for the US health care sector, including those associated with the changing relationships between suppliers, physicians and hospitals?
RB. Both manufacturers and healthcare providers seek greater transparency and collaboration in their supply chain. By sharing information, they will improve patient care while driving down costs. Demands for greater security, pending and current pedigree legislation, and consumer demands for lower costs seem to be at odds. While a direct-to-consumer model is promising, it is separated by a wide gulf from today’s wholesaler-dominated supply chain.

Specialty pharmaceutical companies have made some progress in narrowing that gap, but the rest of the industry is far behind. The current trend in the US healthcare sector resembles that in the high-tech sector of 15 or 20 years ago. We’re doing a lot of work on direct to consumer and vendor managed inventory projects. I think that trend will only increase as the power in the supply chains shifts away from wholesalers and toward consumers.

NGP. What are the technical innovations that are currently improving the pharmaceutical supply chain?
RB. There is little doubt that RFID has grabbed the lion’s share of attention over the last few years. Security and pedigree issues are driving more and more pilot operations, but most pharmaceutical companies are reluctant to be on the bleeding edge of adoption rates. Once the standards and expectations have been clearly defined, we’ll see much more progress in that area.

From my perspective, some of the more intriguing projects that we’re working on are Vendor-Managed Inventory (VMI) initiatives, which enable manufacturers to eliminate or significantly reduce the carrying costs for raw materials. This approach is beginning to gain traction in the pharmaceutical industry. I believe an adoption of VMI may prove to be the most effective tool a manufacturer can utilize to reduce the cost of bringing products to market.

Richard Beeny is cofounder and Chief Executive Officer of LifeScience Logistics. He has more than 15 years of supply chain experience and has held a variety of operations, marketing and business development roles. Beeny most recently held leadership positions at United Parcel Service and has served in both the US Navy and US Coast Guard.