You Are Life Support

May 1, 2011
Efficient material handling is the oxygen of industry. All companies need it to survive, but some don’t think about it until they’re gasping for it. By then it’s sometimes too late.

It’s ironic that while pharmaceutical makers were living off the fat of the profit margins from their blockbuster drugs for so many years, they didn’t think too much about the comparatively paltry savings their material handling managers were pumping back into their coffers. Those days of supply chain complacency are gone.

Companies that have historically focused on making massive quantities of oral solid-dose medications to run through their mass-market supply chain are being forced to adopt a new model. Now that these brand-name blockbuster drugs are coming off patent, their makers are finding themselves competing with generics selling for a fraction of the cost of their high-end equivalents.

Big Pharma is now devoted to more profitable but more logistically challenging biopharmaceuticals. These temperature-sensitive liquids are being formulated for more individualized markets and supply chains. That can sometimes mean markets of one whose geography is a hospital ICU. Imagine juggling the management of these supply chains simultaneously, commissioning and decommissioning them on a regular basis.

The shift to a world where almost everything is special has brought more respect to the world of material handlers and logisticians. Whether those professionals work directly for the pharmaceutical companies or for a third party service provider, they’re the ones responsible for giving manufacturers the track and trace capabilities required to safeguard their consumers and therefore their profit margins.

In other words, material handling and logistics are pharma’s new competitive advantage. It’s funny how skinnier profit margins can turn a necessary evil into a mandatory skill set.

Logistics providers like UPS are now considered partners to companies like Genzyme Pharmaceutical. Why? Because Big Pharma has to comply with Big Government mandates for track and trace. And, indeed, according to a UPS survey of pharmaceutical companies, “increasing regulations” is this industry’s top business concern, and second largest supply chain concern (cost was the number-one supply chain concern). That’s understandable, considering the need to compete in global markets—all of which have their own sets of regulatory issues.

So as you read this month’s cover story on page 16, you can take pride—and even comfort—in the fact that the value material handling and logistics professionals provide to an entire industry’s competitive position is on the rise.

That feeling should continue as you read Don Kuzma’s article on maintenance and repair operations (page 28). Even those working in that nitty-gritty realm of supply chain life support are becoming more integral to businesses—of all kinds.

According to research on Strategic Service Management by the Aberdeen Group, more than 60% of the executives they surveyed indicated that the uncertain economy has made the role of “Chief Service Officer” more important. These individuals are important because, whether they’re responsible for extending the life of their own company’s assets or those of a client, they are constantly finding new ways to cut costs and improve revenue streams.

The logistics of moving and tracking products, and maintaining the infrastructure responsible for those services, is the new competitive advantage in all industries.

If you don’t believe me, believe UPS—or at least their advertising budget. They spent a lot of money to take out a full-page ad in The Wall Street Journal recently, touting their healthcare service capabilities. The headline on the ad said it all: “How Logistics Can Save Your Life.”

That applies to companies gasping for competitive advantage too.

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