Time and cost savings
The competitive environment in the sector and the different expectations and cultures of NYK's pharmaceutical manufacturing
customers required extremely sensitive management, but the benefits were apparent; a trial involving the consolidation of
seven shipments from the UK to Europe delivered impressive cost savings and it is anticipated that the full year saving for
all routes out of a single UK site will be substantial. Importantly, all shipments maintained their ontime delivery and collection
targets, with no reduction in quality or security standards.
At an operational level, improvements in vehicle utilization increased average load fill factors by more than 15% and decreased
the average km/pallet by 17% — the equivalent of nine trips from the UK to Turkey's Istanbul per month. This resulted in fuel
cost savings of £30000/month (based on 2.8 km/L and £1.07/L of derv.) and a reduction in CO2 emissions of more than 16 tonnes. Additionally, despite fuel price increases, further cost savings were achieved because
of the scale of NYK's European activities within and outside the pharmaceutical sector that place the company in a very strong
negotiating position with suppliers. This is something that individual AZ sites would not have had.
There are also benefits from a management perspective; NYK produces a single invoice for the whole of Europe that is backed
by detailed invoice sheets by site. NYK also reports key performance indicators (KPIs), benefits/missed benefits and quick
wins — overall and by site.
In addition to reducing administration costs and saving management time, this gives AZ complete visibility of its panEuropean
freight costs and performance. NYK also produces monthly distribution incident reports that detail late collections/deliveries,
quality issues, temperature excursions and damages, and conducts a root cause analysis. This enables all sites to be benchmarked,
and problems and potential improvements to be continuously identified and addressed. Each site is accountable for its own
costs and performance, encouraging competition, cost reduction and continuous improvement. As a result the cost per pallet
has reduced by 21% within 18 months.
Following a 2-month process design period, sites were phased in during a 5-month period based on their relative readiness
and location. Despite the implementation timescale being halved from 12 to 6 months, it was completed on time, under budget
and without significant failings against the two main KPIs — on-time collection/delivery and quality/product integrity. The
following key outcomes were achieved by the AZ/NYK partnership:
- Implementation completed on time and under budget.
- Shipments maintained ontime delivery and collection targets.
- Improved vehicle utilization leading to cost savings and reduced CO2 emissions.
- Single European invoice reduced administrative costs.
- Ability to continually identify and address potential problems and improvements.
- Creation of an unprecedented pharmaceutical shared user network.
At an operational and cultural level, the relationship between AZ and NYK is based on shared commitment to achieve not only
the original project objectives, but also continuous improvements and cost savings.
NYK's ability to identify and exploit synergies between its pharmaceutical manufacturing customers' collection and delivery
profiles, and the willingness of AZ (and others) to embrace radical change — most significantly in the sharing of a pan-European
transportation network with competing organizations — has the potential to deliver even greater cost and environmental benefits
in the future, and to create a blueprint for the 'perfect' pharmaceutical delivery based on maximum quality and security,
optimum availability, and minimum cost and environmental impact.
David Evans is Head of Pharmaceuticals at NYK Logistics (UK) Ltd.