Few industries today are coping with as much radical change as the pharmaceuticals business. Tighter regulations on the content and delivery of medications always seem to be in the pipeline. Proprietary drugs that cost billions of dollars to develop are up against a new wave of low-priced generics. Healthcare reform has given rise to a slew of unanswered questions. And customer demands for rapid, reliable service are more intense than ever.
Against this backdrop of uncertainty, Sofrigam SA operates a successful business as a provider of "cold-chain" packaging for bio-pharmaceutical manufacturers. Headquartered in France, the 33-year-old company is the largest of its kind in Europe. It sells a wide variety of products for ensuring temperature control during shipment, from pouches and bags for individual syringes to full pallets containing high-value payloads for export by global customers.
Sofrigam is an expert in "passive" systems for temperature control, consisting of outer protective cartons, insulation and gel packs. (Active systems include refrigerator units with their own power sources.) Virtually all of the products that move in its packaging are subject to U.S. Food & Drug Administration regulations. The company must also conform to stringent ISO quality standards, as well as the varying specifications of individual customers.
To survive for more than three decades in the pharmaceuticals industry is no small achievement. In recent years, however, Sofrigam has come up against a whole new set of challenges, chief among them the demand by customers for faster delivery and shorter order cycles. At the same time, a globalized customer base is asking for packaging systems that are standardized across North America, Europe, and Asia. It's all about having "the exact same solution delivered on time and on demand, all across the globe," says Chris Day, vice president for North America.
Time to Outsource?
In addition to the need for satisfying new requirements specific to the world of bio-pharmaceuticals, Sofrigam found itself asking the same question posed by all industries today: how much of its logistics and distribution activities did it need to handle in-house? In a time of rising costs and uncertain markets, every company must focus on its core competencies.
"Where we add value is in constantly evolving our products," says Day. "Not in having major [distribution] real estate around the globe. That's not the best use of our capital and resources."
The obvious move for Sofrigam was to secure a logistics service provider to handle at least some of its warehousing, fulfillment and transportation duties. The company's primary objective, says Day, was to position product closer to the customer. With the emergence of lucrative new markets such as Brazil, Saudi Arabia, Singapore and China, Sofrigam's business "had grown so substantially that we needed more than the ability to put [product] into a container and get it there in a few weeks."
The search for the suitable partner ended with ModusLink Global Solutions Inc., although the choice might not seem obvious at first glance. Lorcan Sheehan, senior vice president of marketing and strategy with Waltham, Mass.-based ModusLink, acknowledges that it had no experience in serving pharmaceuticals shippers. The closest it could come was a handful of clients in the medical devices arena, whose requirements are equally strict yet differ in kind from those of drug manufacturers and packagers. What ModusLink did have to offer, says Sheehan, was deep experience in another sector with high customer expectations - consumer electronics - and complex vendor-managed inventory (VMI) programs.
In fact, ModusLink's lack of direct experience in pharmaceuticals packaging ended up being a plus, in the eyes of Sofrigam. As Day explains it, the company was leery of hiring a logistics provider that was already well-established in the pharmaceuticals supply space. Such entities are often eager to range beyond the providing of basic services, with an eye toward boosting margins, he says. "Some are very aggressively working to make the packaging system the commodity, and make themselves the face to the customer." That wasn't a risk with ModusLink.
The IT Advantage
As for what ModusLink could provide Sofrigam, "we tried to peel it back to what it takes to serve the customer's needs," says Day. One especially attractive feature of ModusLink's offering was a single instance of an enterprise resource planning system from SAP AG, the standard for most pharmaceutical companies, according to Day. The system links all 30 of ModusLink's warehouses, located in 15 countries.
For the moment, Sofrigam isn't availing itself of ModusLink's entire global network. The original idea, says Day, was to "start small." At the outset, ModusLink is maintaining minimum levels of inventory at one facility, supporting a Sofrigam client in the Americas. Services include basic product handling and order fulfillment, along with customer service for those items.
"We're at the initial stage," says Sheehan. "The intention is to broaden to multiple regions." ModusLink also hopes to provide a wider range of services to Sofrigam, including a VMI program on behalf of the company's manufacturing operations. Says Day: "That's the direction we're moving in rapidly."
Day expects ModusLink to be a valuable partner in North America and Asia, with a particular focus on China, Japan, Korea, Singapore, Indonesia and Australia. "All are pharmaceutical hotspots," he says. For Europe, it's too early to tell whether the logistics provider can be of help. "We're covering Europe fairly well now," explains Day. "Sofrigam is a French company. Because of where we're located, we're able to provide pretty rapid service."
Sheehan says ModusLink has the capability to provide a range of other services, including final packaging, assembly, distribution, a full VMI program and even network optimization. For now, however, Sofrigam is adjusting to the outsourcing initiative, with an emphasis on quality and customer service.
"Our pharmaceutical customers are not used to seeing this level of sophistication ... from their cold-chain packaging company," says Day. "Once we get a few of these early customer success stories out and publicized, I think the sky's the limit."
Keywords: supply chain, supply chain management, inventory management, inventory global, 3PL, global logistics, logistics management, warehouse management, supply chain planning, supply chain outsourcing, pharmaceuticals supply chain
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