Peru is a country that presents huge logistical challenges to shippers. Its geography ranges from the rugged Andes mountain range to forests and subtropical desert. Most of the land is rural, while nearly a quarter of the population of just under 31 million lives in the capital city of Lima. No wonder, then, that many retailers prefer to concentrate on that urban cluster.
For many years, InkaFarma was no different. Peru’s largest retail pharmacy chain had 60 percent of its stores in Lima, a typical ratio for businesses in the country.
But InkaFarma had ambitions to grow well beyond the city limits. It wanted to blanket the country, notwithstanding the difficulty of maintaining a steady flow of product to stores in the remotest areas.
Three years ago, InkaFarma had 550 stores. It set a goal to nearly double that total, to 1,000 stores, by 2015. “We wanted to ensure a presence in every place in the country,” says Christian Higa Ramirez, head of logistics and operations. That included locations for which reliable routes had yet to be established.
It was more than a question of finding the right transportation equipment. InkaFarma had been operating out of a single distribution center in Lima, one that lacked a modern warehouse-management system. Operations there were mostly manual, with employees working from sheets of paper, and packing boxes with little help from automation.
To expand its reach throughout Peru, InkaFarma would require an entirely new D.C. It could still be in Lima, but had to be equipped with the necessary systems, both hardware and software, to support a more aggressive, nationwide merchandising strategy.
InkaFarma needed to start from scratch – but not, it turned out, from the ground up. Having been bought by the holding company Intercorp Retail Inc., the chain found an existing building that was already partially occupied by its new parent. The location offered 8,000 square meters of space, along with the chance to create an entirely new distribution facility.
Design and implementation of the D.C., which was only a 20-minute drive from old one, took about two years. New material-handling equipment provided a high degree of automation, combining a state-of-the-art conveyor, sorter and pick-to-light system with a conventional picking setup. Which process the company would actually employ depended on the type and volume of product to be handled.
The Need for a WMS
Central to the design of the new facility was an up-to-date WMS – one that could ensure maximum efficiency of order fulfillment for a wide range of products, many of them highly regulated. Because InkaFarma was selling pharmaceuticals, even the everyday consumer items that accompanied them were subject to government certification. Within the distribution facility itself, prescription drug products had to be segregated and handled according to strict guidelines for security and control.
InkaFarma ended up acquiring its WMS from LogFire, whose systems were already running at three other companies in Peru that were also part of Intercorp, according to David Ernesto Monge Teramae, head of support and professional services for the software vendor.
But it was more than a matter of corporate nepotism. Higa Ramirez cites three reasons for InkaFarma’s ultimate selection of LogFire: the cloud-based nature of the software, which offered a high degree of availability coupled with low infrastructure needs; positive feedback from existing users, and the system’s relatively low cost. “It was a very competitive value proposition,” he says.
Monge says the D.C. designers’ main challenge was synchronizing the WMS with the new material-handling equipment. The ability to manage projected volumes was also an issue; InkaFarma today prepares and ships around 300,000 units of product from the facility per day, with each store receiving deliveries three times a week. Given the small size of those stores, and resulting lack of warehousing space on site, order fulfillment and transportation need to be carried out with maximum accuracy and dependability.
The LogFire WMS provides order tracking and tracing, keyed to each product’s expiration date, serial number and batch number. It is closely tied to the facility’s warehouse control system, which oversees the mechanical aspects of the operation.
In addition, the system allows InkaFarma to track the movement of inventory returns, a key part of any pharma seller’s compliance effort. The WMS also runs on mobile tablets, boosting flexibility and efficiency throughout the warehouse.
A Productivity Leap
Automation and a fully functioning WMS have yielded big productivity gains for InkaFarma. Staffing needs have dropped from 500 at the old facility to 300 at the new site. That 40-percent reduction in workforce requirements was accompanied by a 40-percent increase in shipping volumes, says Higa Ramirez.
Once product leaves the facility, InkaFarma faces the challenge of reaching its stores over roads that are anything but suited for commercial shipping. Higa Ramirez says the retailer relies on a multimodal transportation system, employing both trucks and small ships on rivers.
“Every time we open a new store in a place where no distribution network is established, we have to define a new transportation route,” he says. The company relies heavily on carriers that have a local presence in each part of the country it serves. These subcontractors are better able to address the unique problems that exist within the various regions. The partnerships help InkaFarma to offset the costs that arise from the lack of scale, and inability to utilize truckload services, in remote areas.
The company’s growth strategy is far from complete. Currently the network in Peru stands at 760 stores, with 150 new locations opening each year. Higa Ramirez expects to hit 800 by the end of 2014, and the 1,000-store mark by 2015 or 2016.
Nor is the automation effort at an end. With the WMS up and running for about a year, InkaFarma plans to concentrate on maximizing the technology’s benefits. It has set three priorities for the coming year: further improvements in worker productivity; new efficiencies in the supply chain, linking the centralized D.C. to point of sale at all stores, and a linking up of the WMS with transportation planning and dispatch. At the moment, says Higa Ramirez, the company lacks a formal transportation-management system, with that aspect of operations being carried out manually. Better planning of routes and deliveries, he says, “opens up many possibilities.”
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