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Although companies are faced with constraints, regulations, and challenges in this space, the positives supersede the negatives.
Every industry cares about shipping costs. The pharmaceutical industry is no exception. Though any company would choose the carrier that charges 10% less to ship a load if all things are equal, the truth is that all things are not equal between pharma and other industries.
Service can trump price in pharma for a very basic reason—service failures related to transportation of goods have material consequences and associated risks. Optimal exception, given these constraints and regulations, challenges companies trying to balance service, cost, risk, and properly weighing the impact of each. These priorities, and the decisions behind any optimal execution strategy, must be based on the proper information to get it right, and that means—most fundamentally—a master data strategy.
Of course, no one is suggesting that pharmaceutical companies should throw budget caution to the wind and just spend recklessly. It is clear that supply chains need to be managed well. The key is understanding how to ship like a pro, put the premium on service and reliability, while also being mindful of doing it at an optimal cost.
Pharma companies, like most enterprises that spend a material amount of capital in the transportation logistics category, run requests for proposals (RFPs) or requests for quotes (RFQs) to ensure optimal pricing from transportation providers. What is unique, however, for pharma companies is that it matters “what is in the box.” Understanding and separating spend by specialty services, including cold/frozen, handling, etc. all differentiate the type of goods flowing through the supply chain and permit procurement to optimize pricing and make decisions based on whether the box is a commodity or if it requires services that are commensurate with the content. While everything that’s shipped in pharma is important, not everything falls into the category of biopharma. Some things, like PPEs and other medical equipment, can be viewed as commodities. For them, the lowest-priced carrier is probably the best option most of the time.
For things like drugs and lab samples, a carrier or logistics service provider (LSP) that specializes in medical shipping, may be required to meet the service demands. They understand how to keep items temperature-controlled, and they know they have a limited shelf life. Knowing what is in the box requires data and information that associates transportation costs at the product or product category level. Providing insight at this level is paramount to successfully executing a strategy that balances service and cost.
Shipping managers must balance risk and cost every day, not to mention making decisions about near-shoring, whether to ship just-in-time or to consider owning and managing one’s own fleet. If a given course is better, one ought to take it. If it’s too risky, one should consider avoiding it. The only way to get these decisions right is to have viable data. But getting the data right can be difficult. Data comes from a variety of different sources and tends to live in different silos that don’t always communicate with one another. Sometimes, five data sources will have five different names for the same process. Before a shipping manager can make the best use of that data, it needs to be captured and normalized. Often, this becomes a time-consuming process in which shippers are trying to pull data from Excel spreadsheets and make it all work together; some could argue that they’re not achieving the best level of strategy or execution that would be possible if their data was in better shape.
Pharmaceutical companies approach transportation spend management (TSM) solution providers, seeking support and guidance on how to better manage transportation costs and balance those costs with service. They recognize that in today’s landscape, given recent disruptive events in the market and the world, one needs good data to make informed decisions and adjust course when needed. The right time to perform data normalization and cleanup is when it’s transactional—when the data is coming in and getting transformed. Transformed data can then be stored in a data warehouse, making it available for decision support, queries, and advanced dashboards and other analytics.
It’s important to encourage customers to think about data normalization differently. The best use of data allows them to make the best decisions concerning risk, cost balance, near-shore considerations and fleet management. It also puts them in a position to take a crucial step, which is the use of freight audit data to analyze and identify trends and issues. That especially includes auditing the invoice data to identify opportunities for cost savings or process improvements, as well as a critical look at carrier performance metrics.
In pharma, service and data are top priorities. The more we improve the condition of the data, the better the industry’s shipping results will be.
About the Author
Steve Beda is the Executive Vice President at Trax Technologies.