AutoID could lessen the industrial storm facing pharma
Voice and vision identification offer practical options for pharma companies looking to reduce their supply chain cost base. Ultimately, every situation is unique and a careful review of existing processes and technologies available will ensure the best balance of efficiency, accuracy and cost effectiveness can be achieved.
As an industry, pharma used to be regarded as recession proof and highly profitable, regardless of the economic climate. This is set to change as the industry enters a critical period between now and 2016. In a research report by Deloitte and Thomson Reuters, the internal return on investment rate for R&D departments is expected to drop this year to 8.4% from 11.8% in 2010, in part due to increasing costs of bringing new drugs to market.
Launching new products is more difficult now than in the past. Firstly, developing drugs is extremely expensive, both in terms of costs and achieving final regulatory approval. Added to this, most drugs that could solve the major health problems affecting the largest economies have already been invented, making it harder to identify real product development opportunities.
Another problem is increased competition due to generic drugs. According to the IMS Institute for Healthcare Informatics, 18 out of the top 20 best-selling drugs globally will lose their patent protection by 2015. Analysing the figures another way, it means 40% of pharma’s existing core revenues will be open to attack from competitors able to replicate their formulas with cheap, generic medicines.
"Pharma needs to optimise its supply chain and find new, innovative ways of distributing products to protect eroding profit margins."
This rise in the volume of generic medicines will significantly increase price pressure on branded products. To counter this will require some rethinking of core elements of their business operations, of which the supply chain is a critical variable cost centre. As already seen in the retail industry, the traditional linear supply chain model is changing for pharma, as direct sales via the Internet and mail order become more prevalent.
Pharma companies therefore need to adapt and identify new, more innovative ways of working and distributing products to protect their profit margins. Examining the way key supply chain processes could be optimised with auto ID technology, they can potentially eliminate unnecessary costs and thrive in the face of these challenges.
Generic warehouse technologies for a generic new world
The warehouse is a significant cost centre and one where processes can be optimised relatively easily. Many warehouse operations are highly labour intensive yet with a moderate investment in technology, can be streamlined to not only improve productivity and associated costs, but be more accurate, which in turn, supports lean inventory models.
"Retailers with successful multi-channel businesses offer useful case studies having optimised stock picking to juggle different order profiles."
Manual stock picking can absorb half of warehouse costs
Efficient and accurate stock picking is a fundamental part of good supply chain management. In Zetes’ experience, half of all costs associated with the warehouse function relate to picking which is manually driven. Whether stock is being picked for delivery to a pharmacy, hospital, or being shipped directly as an e-commerce order, picking with voice technology delivers very fast operational returns.
For pharma companies selling directly via the Internet, retailers with successful multi-channel businesses offer some useful voice case studies. They have optimised stock picking processes to juggle entirely different order profiles, combining the picking of cases and bulk orders with large volumes of single item e-commerce orders. Getting the balance right is fundamental, since online orders are expected to arrive very quickly and be correct, which can be costly to achieve without the right investment in autoID technology.
Voice directed working lends itself well to an e-commerce environment because of the speed and accuracy achievable, especially for multi order picks. If voice picking is combined with Automated Guided Vehicles (AGVs), further benefits can be achieved because pickers no longer steer their pallets or roll cages to the next location, but can instead dedicate their time entirely to optimising the picking process.
100% shipment accuracy and supply chain visibility
There are other opportunities for pharmaceutical manufacturers and distributors to benefit from data capture technology. Image-based solutions can ensure that the right medicines are sent to the right pharmacy or hospital. The effectiveness of these systems to achieve 100% accuracy of shipped pallets is proven. This technique is also straightforward to inspect items when preparing boxes or crates on the production line, manage returns and create a log of all unique identifiers placed on crates and cartons in order to maintain a record of products shipped. For manufacturers adopting the Direct To Pharmacy distribution model, a technology such as this will help to control labour costs and minimise errors.