Pharmaceutical industry : challenges and opportunities

For the past 20 years, GCL Canada has developed an expertise helping pharmaceutical companies overcome logistic challenges and implement processes and systems that have ensured growth for the years to come.

As we all know, the Canadian pharmaceutical industry is tightly controlled by Health Canada, making its quality analysis and quality control groups all the more important. Below are some of the major challenges and opportunities GCL Canada has come across over the years.

• Adapting to the cold chain requirements. Controlling your product’s environment throughout the warehousing and distribution process requires solid planning and adequate tools.

• Cold chain warehousing ( freezer -25C to -10C or fridge 2C to 8C);
• Temperature monitoring, alarms for excursions and 24/7 response;
• Quality control using temp charts, excursion and inspection reports and product specs analysis;
• Temperature controlled transportation ( Reefer/ambient trucks and cold chain certified packaging);
• Final delivery with temperature monitoring, receiving instructions and excursion procedures.

• Mergers & acquisitions. Vertical integration has become an important facet of pharmaceutical growth, in order to make it work you need a solid change management plan.

• Synergies often come from leveraging departments, workforce optimisation and warehouse and freight consolidation;
• Change management is about involving the workforce in the optimisation process, monitoring their morale and clearly identifying roles and responsibilities;
• IT requires excessive planning, mapping and testing of the ERP, OMS, WMS and EDI integration, but also thorough training sessions for the future users;
• Implementation should start with live testing and golden transactions, the progress should be monitored using adequate KPIs and everyone should be involved with assessing lessons learned to identifying wins and losses.

• Insourcing VS outsourcing. Focusing on your core business often brings up questions about your other departments.

• Insourcing advantages usually revolve around having total control and flexibility of your operations, lower OPEX, faster future implementations, not being limited by the 3PL’s processes and easier inventory management;
• Insourcing drawbacks are few but nonetheless important, large initial investments are required, it is important to have an accurate growth plan and depending on the industry there is a possibility of unionisation;
• Outsourcing advantages include leveraging the 3PL’s expertise, economies of scale, lower CAPEX investment, possibility of turnkey solution, use of 3PL’s past experience to resolve certain issues and growth/reduction flexibility of operations;
• Outsourcing drawbacks examples are extensive IT implementation process, doubling of certain tasks, being at the mercy of the 3PL for future integrations and frustration with certain 3PL processes.

• GMP and ambient requirements. Goods Manufacturing Practices are regulated by Health Canada and ensure drugs are safe for human consumption.

• These practices include hygiene, controlled conditions, validated manufacturing, instructions, procedures and training, data recording, system for recalling and investigation of complaints and defects.

• Dealing with multiple plants and CMOs. No one can do everything on their own, having good allies and partners will help you grow.

• Raw materials, packaging components, semi-finished and finished goods and services can all come from different suppliers, therefore EDI interfaces, online inventory and a solid KPI solution are all excellent tools to monitor multiple sites and find cost savings.

• Narcotics, Special Access Programs and QPIC. Operating in the controlled drugs and narcotics field is a lucrative but highly controlled business.

• Narcotics are often required to be stored in a vault. The level (1 to 10) of the vault depends on the product type and total value of the products stored, it also needs to be inspected by Health Canada prior to utilisation and also during the yearly audit;
• Depending on product type, their storing requirements might only be a cage, also regulated by Health Canada but a cost effective alternative to the more expensive vault;
• Whether a vault or cage is used, a Quality Person In Charge (QPIC) is required to sign off on anything coming in or out of the controlled environment;
• Narcotics and controlled drugs orders are required to follow a Chain Of Signature (COS) which is a document that needs to be signed by all parties involved in the distribution of the product.

• Managing lots, expiry dates and serial number. Accurate product information may not only greatly simplify the recall process but also help save patient lives.

• Managing master data requires solid ERP, WMS  and OMS integration in case of any recall;
• There are other reasons to invest in accurate data management, such as client specific orders, exports, inventory management, patient safety, FEFO/FIFO and facilitating new integrations or moves.

• Kitting, displays and promotional material. Choosing the right strategy for your promotional incentives is key for them to have the expected results.

• Managing marketing assemblies in-house makes for easy approval processes and cost management, it also limits transportation costs although dedicated resources might be needed to proceed with this operation;
• Using a 3PL or co-packer to manage these activities provides a highly specialized partner, a pay-per-use strategy and past experience to solve issues. The drawback to this strategy is the need for stock transfers between warehouses and the need for quotes or solid cost analysis.

• International exports. A great way to expand your business but planning is key.

• International order tracking should become a priority to ensure continuity in service levels. The challenge here is integrating all carriers involved in the door to door process and providing this information to the customer;
• It is possible that customers place batch or product specific orders in order to comply with their international import laws. It is therefore important to have an IT infrastructure that enables such specific orders. Exporting products will also require the warehouse to oblige by certain standards towards product stability, pallet height & weight and specific labelling;
• Customs clearance can be a challenge when it comes to exporting products to certain countries, the required paperwork should be flawless;
• Incoterms or International Commercial Terms are a set of rules that clearly communicate the different tasks, costs and risks related to international transportation. Choosing the right incoterm and agreeing with the clients as to what responsibilities each party has is a lengthy process but one that will enable energy and costs management down the road. As per the International Chamber of Commerce, below are two examples out of the eleven different incoterms :
  • FOB “Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
  • DDP “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

• Choosing and maintaining the correct logistics KPIs. How to not only manage your operations but increase productivity and decrease costs?

• There are ways to motivate warehouse employees to perform at the highest level, such as installing screens in the building to show real time performance, implement incentives for productive workers and GPS monitoring of employees.
• Apart from motivating employees, it should also be a priority to monitor them using KPIs, for example inventory accuracy, on-time QA release, freight costs, outbound accuracy, on-time receiving and picking & packing productivity.