Analysis: Middle East pharmaceutical logistics
Pharmaceutical supply chains are one of the most complicated of logistics processes. Not only do they rely upon infallible temperature control and meeting stringent border regulations across regions, but logistics providers also have to guarantee the integrity and security of the products throughout the process. A single loose link in the chain could mean that costly and essential pharmaceuticals are left in an unusable or even potentially dangerous state, with the spin off problems associated with lack of adequate vital medicinal stocks or even legal procedures. So it comes as no surprise that, according to the Global Pharmaceutical Logistics Report produced by UK-based analysts Transport Intelligence, drug manufacturers can often be reluctant to outsource their pharmaceutical supply chains to third-party logistics (3PL) providers.
But as the geographical reach demanded of the supply chain increases in its complexity, the need to outsource to a regional logistics expert could well hold the key to the fail-proof supply chain. In the Middle East, with its warm climate and complicated customs control regulations, the transportation and distribution of such highly-regulated, temperature-sensitive products requires special consideration. Furthermore, with regional countries such as Egypt and Jordan continuing to be important manufacturers of drugs, and the Saudi Arabia and the UAE key importers, the business prospects for the logistics industry have never been better. However, in order to capitalise on this lucrative market, the regional logistics sector has to first convince the pharmaceutical manufacturers that it is up for the challenge.
Madhav Kurup, CEO (Middle East and North Africa) for Hellman Worldwide Logistics counts his company as one of the few 3PL operators in the region who have invested heavily in validated pharmaceutical cool chain management. A few years back, the company’s vertical subsidiary Hellmann Healthcare Logistics was selected by pharma firm Actavis to manage the regional hub and distribution of its products at Hellmann’s dedicated healthcare distribution centre in Dubai. “We realise that healthcare is a fast growing sector, and it needs to be supported with a proper supply chain,” he says. “Our expertise in providing specialised industry solutions through the efficient integration of logistics services, and seamless distribution chains to advanced IT systems, is globally recognised.”
When it comes to the storage of pharmaceuticals, the Middle East, and the UAE in particular, also houses several world-class facilities and service providers. As a regional leader in warehouse and storage designs, SSI Schaefer ensures that the right technologies are in place to deliver a smart warehouse design that provides easy transport routes, fast put-away times and quick transfers. Any potential risks to the supply chain are mitigated as far as possible. “The highest risk to any temperature-sensitive stock is definitely the loss of power for the production and storage facilities. In a very short time this would lead to a complete loss of stock,” says Matthias Hoewer, GM for SSI Schaefer Middle East & Africa. “To avoid this we assist our clients with designs and power backup scenarios to secure their business as much as possible.”
Overall, Hoewer believes the biggest improvements in the region have been in handling the cold chain. In the future, he is expecting the regional requirements in pharma distribution to change considerably, moving away from the weekly replenishment to local pharmacies seen today. “Similar to the European markets, the demand for daily or even twice daily deliveries will grow,” predicts Hoewer. “The technologies which allow a 30-minute turnaround time for individual customer orders are now available; it is only a question of time until the first companies will implement these technologies to enhance the service levels to their own customers.”
His forecast is backed up by the report from Transport Intelligence, which finds global pharma logistics providers set to turn more towards technology such as cloud-based IT systems as a solution to its needs. With the expansion of suppliers and changes in regulations and trade requirements, and the need for supply chain to reach the remotest areas of the world, pharma firms are demanding more real-time visibility to monitor their supply chains more stringently.
The dependency on technology in the pharmaceutical supply chain is most apparent when it comes to managing temperature-sensitive products. This remains a huge challenge, particularly when faced with the warmer climates of the Middle East. To combat this, technological solutions have to be adopted at all stages of the supply chain to ensure that the perfect temperature of the shipment is maintained and managed throughout. More recently, sensor-based systems have become increasingly commonplace, programmed to alert at the slightest change of temperature, or even lighting fluctuations.
The risks associated with pharmaceuticals that have been stored or distributed without the necessary temperature control has led to a tightening of regulations to ensure the integrity of the supply chain. But although the level of regional awareness of regulations across the Middle East has improved over the past five years, regional experts like Nadia Ghazal, founder of the Middle East Cold Chain Association (MECCA) remain unconvinced when it comes to actual compliance to the standards. Her association, an interest group made up of various senior professionals from the MENA region, Europe and the USA, was set up to specifically address the need for Good Storage and Distribution Practices (GSDP). “It is imperative that we first understand the risks in our region, and then examine how to comply with national and international standards and guidelines to build a GSDP compliant system,” says Ghazal. “This means that all parties involved in the cold chain must be trained to understand the importance of meeting these requirements.”
Others in the logistics industry agree that more needs to be done. According to Juergen Hirsch, GM of Tranzone Logistics, the most important measure to ensure an effective pharma supply chain lies in having a well-trained and professional team. “It will always be the professionals who control the process, perform the checks and take the right corrective actions when necessary,” he says. “Only experienced staff will know about the sensitive risk areas and take special care in monitoring those areas.”
And when it comes to these sensitive risk areas, the pharmaceutical supply chain certainly has more than its fair share. Security issues present a dual problem, with logistics providers facing the danger of the criminal loss of expensive drugs as well as preventing counterfeit pharmaceuticals from entering the supply chain. Hirsch acknowledges that a significant volume of counterfeit drugs are handled through Dubai – though the authorities responsible have been very active in tackling the problem. But the logistics operator clearly has a key role to play. “Logistics managers have to work together with government, particularly if they suspect that the assigned shipment has been tampered with or re-labelled,” he says. “Even in commercially challenging times, any good company should refuse business if there are any doubts about its legality.”
Another challenge lies in managing expired or recalled products that have to be disposed of quickly. Reverse Logistics, as it is known, can be a minefield, as disposal is rarely as straightforward as it is for any other product. For the firm’s reputation, it is vital that the recalled shipment is returned quickly and checks undertaken to ensure that all of the product has left the supply chain.
Taking into account all these risks, it may be understandable that a pharmaceutical company could be reluctant to outsource their supply chains to a third party. Regionally, many distributors have instead opted to keep their supply chain management in-house.
NMC Healthcare is a prime example. The pharmaceutical distributor manages all its regional logistics requirements through its subsidiary NMC Trading. NMC’s warehouses are segmented, allowing the company to successfully juggle the efficient storage and distribution of different types of products. Although it can be a challenge to manage the logistics of such a wide range of goods under the NMC umbrella, Binay Shetty, CEO at NMC believes that there are numerous advantages in handling logistics in-house. “We get improved distribution efficiency, as well as expanded and flexible storage capacity,” he says. “It is an integral part of our existing operations, and is what set us apart from the competition and make us unique in this business.”
However in reality very few firms have the luxury of in-house access to this level of infrastructure. The only alternate remains to find a capable 3PL firm with a distribution centre that can consolidate all product flows into one hub.
More recently, this type of distribution model has been growing in popularity. Certainly in the future, Tranzone’s Hirsch expects to see more manufacturers of pharmaceuticals moving away from the direct deliveries of factory to distributor, and instead establishing distribution hubs. “This model works really well within the Middle East, apart from Saudi due to regulatory difficulties,” he says. “It allows the manufacturers to make more use of the cost-efficient sea freight option – compared to 100% air freight deliveries before.”
In the end, the choice of whether to outsource or keep the supply chain in-house will most likely come down to whether the pharma firm has the resources available to develop the required high level of infrastructure. For those who opt to outsource to a 3PL instead, Hirsch believes that selecting the right logistics provider would result in the company getting a good deal. “Regional 3PL service providers are usually more flexible and fast when it comes to finding solutions and decision-making,” he says. “There is a huge cost advantage of the solutions offered from 3PLs, in comparison to the cost structure a multi-national pharmaceutical company would have borne.”