Trends & Issues in Logistics

Management for Healthcare and

Pharmaceutical Organization

Prof. Perumal Magayson

Key Logistics Trends

Logistics management’s primary focus is on

optimizing the delivery of service to customers,
by managing complex tradeoffs between
customer service, transportation, warehousing
and inventory. Some World Class companies
have been able to reduce the costs of their
logistics operations to 50% of the levels of their
competitors.
DEFINITION OF LOGISTICS

What is Logistics = Logical thinking + Statistics

"Logistics means having the right thing, at the right

place, at the right time in the right quantity at the
right price."

Therefore Logistics is……

……is an optimization process of the location,

movement and storage of resources from the
point of origin, through various economic
activities, to the final consumer.
Key Logistics Trends

z Globalization
z Supply Chain Integration
z Flexibility and Speed
z Track and Trace Capabilities
z Collaborative Logistics
z Reverse Logistics

Key Logistics Trends

z Transportation marketplaces
z Optimization Technologies
z Growth and expansion of 3PL and 4PL
services
UNDERSTANDING OF SUPPLY CHAIN
MANAGEMENT

z Theanalogy that a chain is only as strong as its

weakest link holds here as well.

z Organizations must first be able to provide quality

products or services in a timely, cost-effective manner
if they want to tackle broader supply chain issues.

z Total Quality Management, Just-in-Time

manufacturing, concurrent product development, are
just as relevant today as they were in the past.

UNDERSTANDING OF SUPPLY CHAIN

MANAGEMENT

SCM often requires significant changes in the

firm’s organizational structure. SCM issues cut
across functional areas and even business
entities. Therefore, the responsibility and
authority for implementing SCM must be
placed at the highest levels of an organization.
Firms that attempt to imbed SCM within a
functional unit (such as purchasing, operations,
or logistics) usually have limited success.
UNDERSTANDING OF SUPPLY CHAIN
MANAGEMENT

SCM requires firms to put in place information

systems and metrics that focus on performance
across the entire supply chain. This is because
individual units that seek to maximize their
performance without regard to the broader
impact on the supply chain can cause problems
a manufacturing unit’s decision to minimize its
inventory levels may reduce delivery
performance to the end user.

UNDERSTANDING OF SUPPLY CHAIN

MANAGEMENT

zThe organizations that make up the supply chain are

“linked” together through physical flows and information
flows.

zPhysical flows involve the transformation, movement, and

storage of goods and materials. They are the most visible
piece of the supply chain.

zInformation flows allow the various supply chain partners to

coordinate their long-term plans, and to control the day-to-
day flow of goods and material up and down the supply
chain.
UNDERSTANDING OF SUPPLY CHAIN
MANAGEMENT

z SCM adds another layer of complexity to a firm’s

strategy development efforts.

– Years ago, firms could succeed by being

particularly good in one functional area, such as
marketing, finance, or operations.

– Now firms recognize that they have to have

sufficient capabilities across multiple functional
areas in order to survive.

Elements of the Supply Chain

Elements of the Supply Chain

z Customer
z Planning
z Purchasing
z Inventory
z Production
z Transportation

MEETING THE CHALLENGE OF

SUPPLY CHAIN MANAGEMENT

How Does Supply Chain Management Work?

MEETING THE CHALLENGE OF
SUPPLY CHAIN MANAGEMENT

MEETING THE CHALLENGE OF

SUPPLY CHAIN MANAGEMENT

How is Supply Chain Management applied in the

Logistics Function?

– It provides for a strategic view of logistics functions.

– It is not simply what occurs inside of a company
– It is completely customer driven
 The Dynamics of Supply Chain
Management

Supply chain management is a holistic, enterprise wide view of how the

productive resources and talents of an allied group of businesses can be
blended to form a single channel system possessed of the flexibility to
successfully respond to any marketplace opportunity with superior
competitive advantage.

It is a boundary-spanning management philosophy that requires companies

to search for competitive advantage by looking beyond the frontiers of their
own organisation.

What makes supply chain management such a potent marketplace force

today is its ability to provide a seamless channel structure that is physically
dispersed and consists of different competencies, yet functions as a coherent
customer-satisfying resource whose boundaries appear invisible to the
customer.

MEETING THE CHALLENGE OF

SUPPLY CHAIN MANAGEMENT

Where Do We Go From Here - Putting Theory to the

Test

1. Unification means that not only logistics activities,

such as inventory planning, purchasing and
transportation, but also core business activities,
such as marketing, sales and product
development, performed by each channel partner
function now as correlative processes.
MEETING THE CHALLENGE OF
SUPPLY CHAIN MANAGEMENT

2. Through the convergence of information systems

networking and telecommunications technologies,
today's channel can bypass the encumbrances of
dealing sequentially with the transfer of critical
marketplace information and the traditional
movement of inventory from collection point to
collection point on their way up and down the
supply channel.

MEETING THE CHALLENGE OF

SUPPLY CHAIN MANAGEMENT

3. Supply chain management is a dynamic and open-ended

approach to marketplace competitiveness. Similar to just-in-
time and total quality management, supply chain
management is not a business formula or a computer
system, but a continuous process of shaping and reshaping
inter- and intra- company performance, information
technology tools, product and services, and organizational
and personal excellence to exploit the ever-changing
context of customer opportunities.

4. Supply chain management provides channel executives with

the opportunity to continually reposition the role of channel
members, the mix of products and services, productive and
distributive processes, human and technological resources
and marketing strategies to respond to the marketplace with
overwhelming competitive superiority.
MEETING THE CHALLENGE OF
SUPPLY CHAIN MANAGEMENT

4. Finally, supply chain management is, above all, a business

philosophy that enables individual companies and channel
partners to achieve high levels of productivity, profit and
growth.

5. In today's global environment, competitive advantage belongs

to those supply channels that can activate concurrent
business processes and core competencies that merge
infrastructure, share risk and costs, leverage the dwindling of
product life cycles, and reduce time to market, and that gain
and anticipate new opportunities for competitive advantage.

MEETING THE CHALLENGE OF

SUPPLY CHAIN MANAGEMENT

The Ultimate Challenge – Can You Achieve This?

The ability to leverage the supply channel is centered around

two critical dynamics:

1. The first can be found in the engineering of cooperative

marketing, product design and logistics processes. This
activity enables the creation of customer-enriching,
individualised combinations of products and services.
MEETING THE CHALLENGE OF
SUPPLY CHAIN MANAGEMENT

2. The second is found in the creation of partnerships, joint

ventures, and “virtual” organisations that provide for the co-
evolution of customer value across companies by merging
similar capabilities and core competencies, engineering joint
development of new processes and technologies, and
structuring new forms of vertical integration and economies of
scale.

Full Potential of Supply Chain

Management – Your Guide to Implementation

Strategic Management Traditional focus SCM focus

Scope
z Products z Interorganisational process
1. Management process z Sales z Extended process
z Revenues z Investment in channel innovation

2. Key Performance targets z Departmental objectives

3. Business goals and objectives
z Process and product
specification
z Consistency of performance
z Departmental alignment
z Key benchmark metrics
z Innovative and value-adding capabilities
of the entire channel
z Alignment of channel objectives and
goals
z Shared competitive channel vision

4. Business relationships z Focus on internal z Structured channel partnerships

structures and organisational
values
5. Business process z Reductions in costs and
improvements defects
z Rate of improvements in
products and processes
z Co-evolving processes and objectives
z Rate of progress of entire channel
z Rate of channel value creation and
innovation
LATEST TRENDS IN LOGISTICS

Radio Frequency Identification (RFID)

The first use of Radio Frequency Identification (RFID) was

documented in the 1940’s by the British Royal Air Force to
identify aircraft in World War II and was part of the refinement
of radar. During the 1960’s RFID was first considered as a
tracking solution in the commercial world. The first applications
involving RFID were developed over the next twenty years.
These commercial applications were concerned with identifying
an item inside a single location.

LATEST TRENDS IN LOGISTICS

The latest attempt to commercialize the use of RFID

started in 1998, when researchers at the
Massachusetts Institute of Technology (MIT) Auto-ID
Center began to research new ways to track and
identify objects as they moved between physical
locations. This research centered on radio frequency
technology and how information that is held on tags
can be effectively scanned and shared in real time.
Mechanics Of RFID

The basic principle of RFID is identifying an object using a radio

frequency transmission. The technology can be used to identify,
track, sort or detect a wide variety of objects. Communication
takes place between a reader or interrogator and a transponder
or tag. Tags can either be active, which means it is powered by
battery, or passive, which is powered by the reader field. The
communication frequencies used depends to a large extent on
the application, and range from 125KHz to 2.45 GHz.
Regulations are imposed by most countries to control
emissions and prevent interference with other industrial,
scientific or medical equipment.

LATEST TRENDS IN LOGISTICS

In a typical system tags are attached to objects. Each tag has

some internal memory which it stores information about the
object, such as its unique ID number, or details including date
of manufacture and item information. When a tag passes
through a field generated by a reader, it transmits this
information back which identifies the object. Until recently the
focus of RFID technology was mainly on tags and readers,
which were being used in systems where relatively low volumes
of data are involved. This is now changing as RFID in the
supply chain is expected to generate huge volumes of data,
which will have to be filtered and routed to ERP or Warehouse
Management systems.
Electronic Product Code (EPC)

Electronic Product Code is the emerging

RFID standard developed by the MIT
AutoIDcenter. It is the RFID version of the
barcodestandard. EPC rfid also provides
access to additional data about the origin
and history of the specific batches or serial
numbers. The EPC tag itself identifies the
manufacturer, product, version, and serial
number.

Benefits Of RFID

Supply chain management is investing in RFID as it can give

them advantages in visibility of their products through the
supply chain. The benefits are seen as improving on other
methods of visibility such as EDI, bar coding and Advance Ship
Notifications (ASN). Other benefits of RFID can be seen outside
of normal supply chain such as a reduction in theft from the
store, transport or storage, and a deterrent to increasing
product counterfeiting. Both of these issues are costing
companies billions of dollars each year. Pharmaceutical
companies are increasingly worried about counterfeiting and
RFID tags on each product may help with this issue.
Advantages Of RFID Over Barcodes

Unlike barcodes, RFID technology does not require line of sight

reading. The tag can be read through other items while barcodes
require line of sight. This implies that a RFID reader could read a
pallet of mixed products, all of which contain individual RFID tags,
without having to physically move any of the items or open any
cases. If the pallet was full of mixed items, the large number of
RFID tags can be read almost instantaneously. The tags are not
read simultaneously but the tags are read sequentially, but the
time to read the tags would be microseconds.

Advantages Of RFID Over Barcodes

The data on tag can be changed or added to as it

passes through specific operations. Read-only tags
are less expensive than read/write tags. RFID tags
are less susceptible to poor environmental
conditions where barcode labels can become
unreadable. RFID tags can be sealed within a plastic
enclosure eliminating many of the problems that
affect barcodes in harsh environments where they
are exposed to chemicals, heat and other harsh
environments.
TRENDS IN LOGISTICS

Globalization

- Long and complex supply lines

- Global Distribution
- Global Competition

TRENDS IN LOGISTICS

Customer power

– High Level of Service Expectations

– Explosion of SKU-s

– Short Product- Life Cycle

– Strong Pricing Pressures : Price-Based Cost

– Lower Customer Loyalty

TRENDS IN LOGISTICS

Information and Communication Technologies

- Huge advances in technology

- The Internet
- Strengthen our Trends

TRENDS IN LOGISTICS

Outsourcing

- More actors in Supply Chain

- Need for collaboration – greater than ever
- The rise of 3PL/ 4PL
TRENDS IN LOGISTICS

Security

- Terrorism
- The war on terror

LATEST TRENDS IN HEALTHCARE

NEW MODELS FOR NEW MEDICINE

Chain Simplification
In March 2007, Pfizer introduced its new
"direct to pharmacy" model. This new
distribution arrangement allows Pfizer to take
full responsibility for its medicines from its
manufacturing centres until the point where
they are sold to the pharmacists and doctors
who dispense them. The improved visibility
achieved by the new system also means that
Pfizer can be more responsive to stock
shortage situations and better able to trace
and recall its medicines if required. This was
the first move of its kind by a pharmaceutical
manufacturer in the UK.

NEW MODELS FOR NEW MEDICINE

For the pre-wholesale logistics provider Alloga,

through its partnership with UDG in the UK, it means
delivering to one single company and fewer
warehouses. The whole chain has been simplified,
not only in terms of geography but also in terms of IT
systems and processes; product monitoring can be
more holistic, information management systems
standardized and the margin for error significantly
reduced.
NEW MODELS FOR NEW MEDICINE

Overall, reducing error and product tracking has always been high
on the industry's agenda. Identification by individual box should be
possible. RFID has been presented as a possible solution, but the
technology is yet to find its place in the pharmaceutical supply
chain. The costs are high but the major issue is the apportioning of
the cost;

z who should be the party to shoulder the cost burden?

At some point it may become a regulatory requirement but is not

as yet. Mass serialization, by contrast, is a viable alternative.
Reimbursement issues have already pushed this practice through
in Europe, with a tendency toward 2D barcoding at batch level.
Ultimately, interorganizational collaboration and the blurring of
boundaries will help the industry to overcome its tracking
limitations.

NEW MODELS FOR NEW MEDICINE

Delivery Specialization
The second trend, delivery specialization,
has seen healthcare logistics become more
sophisticated, high tech and precise in its
operation.

Biotechnology products being developed by

pharmaceutical companies and specialized
biotech firms are high-value and low volume
but, most importantly, high maintenance.
Delivery requirements are more demanding.
NEW MODELS FOR NEW MEDICINE

It's not simply about getting a product from point A to point B,

temperature levels have to be regulated and, in cases of some
chronic conditions, delivered to the patient's home and followed
by a homecare visit. The system should now not only monitor
the fleet's progress and status, tracking every batch and
reporting in real-time the completion of the delivery, but the all-
important temperature levels of the cold chain can be monitored
centrally, alerting head office to any potentially damaging
changes. Although cold chain capabilities are not new to the
market, the prevalence of the offer amongst healthcare logistics
providers is certainly on the increase.

NEW MODELS FOR NEW MEDICINE

Ultimately, the manufacturing company at the source of the

supply chain will be able to view a complete history of the
product in transit from manufacturer to end-consumer. Track
and trace, 2D barcoding and, potentially, RFID will contribute
to this service, in conjunction with best in class back-office
management software that will be able to interface with
customers' systems. One of the most valuable products
resulting from the increasing IT sophistication and supply
chain control is information. Previously diluted by the various
layers involved in delivery of the product from source to
consumer, logistics providers are now in a prime position to
offer customers access to elusive sales and usage information.
Product sales volumes and timings to customers, often
pharmacies, hospitals or dispensing doctors, have historically
been distorted by wholesalers' isolated stock management
systems and a lack of transparency.
NEW MODELS FOR NEW MEDICINE

On the Horizon
Personalized medicine has been a topic much
discussed in the past but is yet to materialize. This
involves the development of new treatments that
take into account the patient's genetic make up to
reduce the emergence of side-effects. Each
treatment therefore would be specific to that patient.
The current delivery specialization model would
transform into a more customized model, created for
each treatment and each patient.

NEW MODELS FOR NEW MEDICINE

For chronic conditions, it is suggested that many

products will be delivered directly to the patient,
making the logistics providers the main interface and
brand representative to the end-consumer. It is also
feasible that they could take on the responsibility for
homecare and support, checking compliance and
treatment efficacy.
NEW MODELS FOR NEW MEDICINE

For those treatments wherein DNA sampling is initially required

in the development process, the logistics team would be best
placed to provide this service, collecting the sample and
returning it to the biotech company in the required condition.
The skills required to perform this process would be of the
highest level and the service completely customized. In an
industry where training uptake is claimed to be the lowest.
Future of the healthcare sector could see qualified nurses in the
driver's seat. As the healthcare industry evolves, so will its
logistics counterparts in an effort to offer the best solution to
meet their needs and the needs of their patients.

NEW MODELS FOR NEW MEDICINE

Sidebar
For chronic conditions, it is suggested that many
products will be delivered directly to the patient,
making the logistics providers the main interface and
brand representative to the end-consumer.
LOGISTICS IN HOSPITALS

LOGISTICS IN HOSPITALS

Logistics in its original military usage is defined as

the practical art of moving armies and keeping them
supplied. In hospitals, logistics is the practical art of
moving patients and staff and keeping them
supplied. The effect of logistics on strategy and
organization survivals has been profound through
the centuries. When supply lines fail, for example,
battles and wars are lost. Logistics is rocket science.
LOGISTICS IN HOSPITALS

Healthcare services of many countries are faced with

challenges due to tremendous changes with their
environment. Changes like rapidly transforming
demographic composition of the population, new
medical procedures, and growing demands for
healthcare services lead to steadily increasing costs.

LOGISTICS IN HOSPITALS

National authorities constantly reduce their financial support by

lowering the subsidies and in some countries by the
implementation of lump sum compensation systems. The cost
pressure for healthcare service providers is rising enormously.
In order to ensure the provision of high quality and cost-
effective health services for all the population across income
groups, the control of costs in hospitals is becoming crucial.
The reduction of operational costs by optimizing hospitals
logistics is still a novel method. A comprehensive view of
supply chain and workflows is of highest importance for
hospitals as well as for their suppliers. Experience shows that
the optimization of logistics processes can lead to substantial
cost savings.
Logistics Processes in Hospitals

1. Automated Material Transport

The transport of material is of highest importance in

almost all logistics processes. Transport is
executed either scheduled or on-demand.
Compared to industrial operations the quality of
material transport in hospitals is essential. Wrong
deliveries or inaccurate handling of items during the
transport can have severe consequences for
patients, employees, and hospital visitors.

Logistics Processes in Hospitals

On- Demand Material Transport:

- Pneumatic Tube Systems

- TranspoNet
Logistics Processes in Hospitals

Scheduled Material Transport

- Track vehicle systems
- UniCar/ MultiCar
- Automated Guided Vehicles
- TransCar LTC 2

Logistics Processes in Hospitals

Automated drug management / pharmacy automation

- Unit Dose- Automated Packaging
- Pill Pick
- Drug storage and retrieval
- Box Picker
Logistics Processes in Hospitals

In medical secondary process

-Patient logistics
- Ambulance service management
- Drug management
- Logistics of laboratory goods
- Logistics of medical goods
- Logistics of sterile goods
- Handling of data and documents
- Disposal of hazardous waste

Logistics Processes in Hospitals

In non-medical secondary process

- Food management
- Management of linen
- Management of beds
Logistics Processes in Hospitals

In tertiary process

- Management of administrational demands

- Mail service
- Disposal of hazardous/non-hazardous waste

Thank You………………

END