Chain of Thought

Reverse Flows Raising Stink

It happened again. The smell of mold has prompted another drug recall. Last time the story involved J&J and Tylenol. This time it's Pfizer and Lipitor. Lipitor is a cholesterol drug taken to reduce the risk of heart attacks, so I hope the logistics folks at Pfizer had a good dose of it when news of this problem made the rounds.

The company is recalling 38,000 bottles of this stuff due to two consumer complaints about a musty or moldy odor on Lipitor bottles, according to an AP report. That represents two product lots. The problem seems to be that the packaging is made by an outside company in Puerto Rico. Pfizer has recalled more than 360,000 bottles of Lipitor in the last three months because of the issue. The company recalled 140,000 bottles in August and another 191,000 earlier this month.

Patients have complained of nausea and diarrhea after using those products, making the cure seem worse than the disease itself. The Food and Drug Administration has assured the public that the risk of serious harm is remote.

As we reported recently, that moldy odor has been tied to a chemical called 2,4,6-tribromoanisole (TBA), which is used to treat wooden pallets often used to store and ship bottles. TBA has been identified as one of the chemical compounds responsible for “cork taint,” a moldy or musty smell problem that has haunted the wine industry as well—costing it a good $10 billion in damages worldwide, according to a group of grape growers, wine merchants and restaurateurs known as Professional Friends of Wine.

Pfizer inspectors found the chemical in packaging materials and wooden pallets at the Puerto Rican plant which supplies its bottles. This time, the company assured its customers in a statement, "We have identified the source of the odor and we are enacting rigorous measures to prevent odor-related issues going forward."

It's not the going forward they have to worry about as much as what's coming backward. It hedged its public reassurance by warning that product that has already shipped from the plant may still be subject to recalls. If you do wind up with that moldy odor wafting from your next bottle, take it back to the store for a free replacement.

This is a dramatic example of how complex a logistics professional's job can be. You can spend thousands on technology to make your product meet its delivery dates, and you can spend thousands more on systems to tell you if that journey has been interrupted and why. But until you have someone with boots on the ground responsibility in your supply chain, customer satisfaction is a crapshoot—literally, if you believe those customer complaints.

Managing reverse logistics is a growth opportunity. A few more of these recalls and J&J and Pfizer should get pretty good at it. In the meantime, entrepreneurs in the 3PL world are taking it on as a value-adding, profit-making enterprise. As consultant James Tompkins will tell you in his article on reverse logistics—coming up in MH&L's November issue—returns cost companies in the retail world plenty. Here are some numbers he cites:

Average rate of returns across all industries: 9.1% (12.1 % during holiday season);

Returns as a percentage of revenue: 6-14%;

Cost to process returns: 2.7 times greater than outbound shipments;

Average asset recovery cycle time: 55 days.

“Add to these the lack of visibility due to non-integrated processes with outsource service providers and the lack of aligned incentives across supply chain partners, and it is surprising that many companies do not view the service supply chain as a differentiator,” Tompkins says. “Nor do many turn reverse logistics into a source of high-margin revenue.”

I know a couple pharmaceutical companies that are nervously eyeing the performance of their margins as a result of the backup in their supply pipelines. Let's hope their sense of smell improves as a result.

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