Case study: creating a blueprint for pharmaceutical distribution - Pharmaceutical Technology

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PharmTech Europe

Case study: creating a blueprint for pharmaceutical distribution



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.

Main outcomes

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.

Conclusion

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.


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