How This Pharma Giant Resolved their Theft and Overstocking Challenges with OTIF
How did a pharma giant overcome theft in the supply chain and overstocking challenges utilizing OTIF? Recently, a large pharmaceutical company faced severe challenges when they discovered that their supply chain security and logistics were being compromised.
This company, which is one of the 20 largest pharma brands in the world and was ranked #1 in the Access to Medicine Index, always ensured product availability at each of its retail locations without overstocking at any of its 30 distribution centers in the region.
When red flags went up on these issues about being compromised, the real work began which included achieving lean resilience by building an On-Time, In-Full (OTIF) delivery process across 10,000 shipments, serviced by more than 11 transport partners using door-to-door shipment monitoring.
The following is how this company successfully made the changes to their process to finally eliminate these problems with the supply chain security and their losses due to theft.
Drug Theft & Inefficient Stock Management
The problems began when this major pharma noticed a drug security issue in its South Asian market.
A full-truckload (FTL) was hijacked every year out of the 10,000 shipments dispatched. In the world of pharma, theft is a serious issue, because it not only leads to loss of materials but also has a direct impact on human lives. According to reports, most of the drugs that are hijacked are often used to manufacture spurious contraband. This means that the drug manufacturer often faces legal repercussions and in addition to a downfall in their own brand reputation.
Vaccines were especially at risk for this major pharma because maintaining the right temperature would never be the hijacker’s priority. When these hijacks and thefts occurred, this major pharma had to blacklist the goods across its retailer networks and invest in a series of countermeasures to ensure these drugs did not re-enter the market and not do more damage.
In addition to this ongoing theft problem, the company was in a constant dilemma about whether to run with ample buffer stock across their 30 distribution centers, or move to a lean supply chain model. They were leaning towards running lean and saving costs on inventory holding and working capital, but they did not have predictability of the arrival of transit inventory which increased the risk of stockouts.
Being one of the top manufacturers of generic drugs, this pharma giant also fought a battle to keep both cost and availability optimal to maintain their competitive advantage in a price-sensitive market like Asia.
The problem of theft compounded by stock management issues caused significant brand and financial impact. They had to get control over their logistics, and visibility of their shipments was the logical place to start.
There Are Many Threats to the Pharmaceutical Industry as a whole
Pharmaceutical companies experience many of these same types of threats as this large Pharma company did in other industries, with the threat actors behind ransomware attacks and business email compromise (BEC) schemes targeting largely indiscriminately. Intellectual property (IP) theft, both at the hands of nation-state hacking collectives as well as unethical competitors is of particular concern for an industry where research and development of drugs can take decades.
This Large Pharma Company First Tried GPS Vehicle Tracking & Visibility Aggregators – Unsuccessfully
They knew that the visibility of shipments could, or should solve the challenges of theft and stock optimization across their 30 distribution centers serving the South Asian market. So, they began experimenting with the most common solutions that were available to track their drug shipments.
The GPS Vehicle Tracking Experiment
They explored installing fixed GPS vehicle trackers on the trucks that their transport partners used to ship their goods and launched initiatives mandating each of their 11 third-party logistics (3PL) partners to track their trucks.
However, this did not work out as their 3PLs hired trucks on demand from the market and visibility services were not being part of their core logistics offering.
These experiments went on for more than three years and at the end of it, less than 10% of the transport providers had GPS trackers installed on their trucks. Further, the data was not reliable nor accessible on a single pane, which meant they could not take action on it.
Leveraging Visibility Aggregators
Visibility aggregator solutions also did not work out as this pharma company needed granular visibility into routes, night-time halts, and chain of custody even on trans-shipments to manage drug theft.
Visibility aggregators rely on transporters for GPS or ELD tracking data and thus cannot provide the coverage expected for a major pharma that wishes to monitor 100% of its shipments door to door.
This major pharma finally realized what they needed was first-hand visibility into their shipments without relying on transporters or existing GPS/ELD devices on trucks, so the project could scale to 100% of their shipments. With further investigation who could provide this scale they required, they were finally able to introduce an outside third party solution provider who was up for the challenge.
This third party solution provider devised a multi-pronged approach to put the control back in the hands of the pharma company. They used wireless sensors to monitor the shipments’ location and condition without relying on any of the transport vendors.
They also used real-time signals to prevent night-driving (between 11am to 5pm) in risk-prone areas that were heat mapped through customer inputs and pattern analytics.
Moreover, they used live location data and analytics to accurately estimate the time of arrival (ETA) to all thirty distribution centers about the incoming stock. However, it seemed that these theft warning signals and ETA delay predictions were not enough.
They discovered that every time the ETA was not on track or a risk of theft was detected, they needed a team to stay on top of things and avert a disruption.
This provider thus worked out and implemented a 24×7, data-driven control tower team, to act upon suspicious truck movements or ETA delays. It used pre-determined protocols for response action to bring incidents under control before they escalated. Upon successful implementation, the Head of Distribution & Infrastructure of this large Pharma (name concealed upon request) said,
“This solution provided to us regarding the on-demand procedures, along with the complete management of the forward and reverse logistics, helps us get visibility across all the shipments without relying on our transport vendors. The control tower service does not just warn us about possible security threats or SLA impacts in real-time; it acts as our first line of defense in normalizing disruptions and maintaining optimized inventory at all warehouses to serve our patients better.”
Conclusion: Safe And Always Available Medicines
With real-time visibility across 100% of their primary distribution network and a 24×7 control-tower responding within minutes of an anomaly, this major pharma has prevented 2 hijacks altogether in the last 3 years.
They have almost entirely eliminated the problem of theft by arresting night-time movement of shipments, especially in risk-prone areas using predictive analytics. Even when an incident did occur, they had complete traceability to initiate response action in the area of risk.
They have further implemented a Just-In-Time (JIT) model through better on-time, in-full (OTIF) compliance, ensuring that their patients are never out of supply while running lean on stock. In the South Asian market where the average inventory of pharma is 231 days, they’re gunning to move much closer to the best-in-class global average of 117 days.
By combatting the supply chain challenges that plague the pharma industry, using the power of visibility, data, and analytics, they have become more competitive and have retained their preferred brand status with patients, doctors, hospitals, and pharmacies.