Successful logistics operations are vital if a company is to stay ahead of its competitors. But how canmanagement ensure that the logistics of a business areconstantly running smoothly and cost-effectively? Howcan they guarantee that efficiencies are being drivenright throughout the supply chain? And what is thesecret to providing customers with a quality service that continuously offers them the right products at theright time?

The keyword that holds the answer to all of these questionsis ‘customers’. Successful companies that grow quickly –and sustain this growth – follow a logistics process that hasbeen specifically designed to meet the needs of all theircustomers. An understanding of customers and what theyrequire is an important part of designing a logistics processthat is accurate and efficient for a business.

So how can a company do this? Of course, everysituation is different, and there’s no single solution thatwill fit every business. But what I have learnt from 20years’ experience in the pharmaceutical industry is thatthere are five basic principles that you can see over andover again in all companies with truly successful logistics.If you understand and follow some (or all) of thesegolden rules, I am sure that your business performancewill improve and continuously provide a service that isnot only more efficient but is cost-effective too!

MAKE ORDER TO DELIVERY LEAD-TIME YOUR LOGISTICS FOCUS

Don’t ever forget that each part of the logistics chain isthere to serve the customer – which means that theiropinion on how your business operates is vitallyimportant. When forming an opinion of a business, one

of the most important factors for many customers is theamount of time between ordering and receiving theirgoods. This order fulfilment process can greatly affectcustomers and how they view your company. It involvesseveral departments and large numbers of staff, all ofwhom have their own sets of priorities.

To manage the lead-time efficiently, you must take a stepback and examine the whole picture. Focus on all thedepartments involved in the order fulfilment process –sales order processing, credit control, stock control,production, warehouse, transport – and then tackle theproblem with an holistic approach. It is true that this maylead to an entirely new method of managing lead-time,and changing the way people think is never easy. Butremember, if you look at your business from a customerpoint of view you will soon be aware of the dividends.

MAKE TRANSPORT A CUSTOMER SERVICE ACTIVITY INSTEAD OF A COST

All too often, transport is not taken seriously enough and is looked upon as a necessary evil – it has to be donebut is almost more trouble than it’s worth, providing acost without any added value. Unfortunately, whencompanies adopt this attitude transport is often boughtfrom the cheapest supplier, schedules are designed simplyto keep costs low and nobody monitors performance.Customer requests – such as defined lead-times ordelivery-time windows – are seen as a nuisance thatprevents transport from being operated efficiently.

It is essential for businesses to realise that transport canoffer value, but it is up to you to find and maximise thatvalue and then provide the service; otherwise, you mayfind yourself paying unnecessary costs and missing key

Keynote

18 Innovations in Pharmaceutical Technology

Five Steps Towards ImprovingLogistics PerformanceBy following five simple guidelines, companies can improve their logisticsperformance and provide a much more efficient service to customers.

By Stephen Errey at Lucidea Consulting Limited

Stephen Errey has been Managing Director of Lucidea Consulting Limited since 2001. He has worked in logistics for over 20 years, and during that time has worked with many blue-chip companies. In the pharmaceutical sector, thesehave included: AstraZeneca, Bristol Myers Squibb, Fresenius Kabi and Novartis. His experience covers Europe, the MiddleEast, America and Africa. Lucidea Consulting Limited helps companies improve their business by getting the most out of their logistics.

However, increasing stock levels will also mean an increasein the time it takes for the given item to reach thecustomer. This in turn leads to a slower response tochanges in demand. As a result, instead of order-fillimproving, it is more likely that there will be a surplus ofunwanted products and not enough of the ones thatcustomers want. So, oddly enough, increasing stockdoesn’t solve your problems – it actually has the potentialto make them worse! Increasing stock to improve yourservice effectively says: ‘we don’t know what our customerswant, so we’ll compensate by stocking everything’.

The real answer to this problem has nothing to do withhow you push stock into the system, but everything todo with how you match what you do to the demand ofyour customers. Learn to understand your customers andtheir buying behaviour, and then you can design an orderfulfilment that matches their demands. This will usuallylead to a faster, leaner, more responsive supply chain withless stock clogging it up.

So, an important lesson to learn is that having too muchstock can be worse than having too little. Managing and

opportunities to increase revenue. For example, you maytry to reduce costs by cutting out next day delivery – butif customers really need it, then special arrangements willno doubt have to be made to keep them happy and thiswill result in increased costs.

But what if you take the initiative and offer yourcustomers different levels of service? Your customers willfeel as if they’re in control – and you have the chance tocharge a premium rate for a premium service. Not onlydoes the customer feel cared for, but also you are able tocharge realistic rates for the services that they want.Automatically, you steal a march on your competitors bydelivering a service that suits all of your customers’ needs.

REDUCE YOUR STOCK PIPELINE TO CUT COSTS AND IMPROVE SERVICE

Sometimes the most obvious response to a business needis not necessarily the right answer – in fact, it may evenmake things worse. For instance, imagine a business has apoor order-fill. The immediate reaction is to increase thestockholding to ensure that customer demand can be met.

planning is essential – not just in stock handling butthroughout the logistics process. If the planning iswrong, no amount of money and resources will be ableto solve the problem.

PICK AS SOON AS YOU CAN

Most logistics operations involve ‘picking’ in some formor another. At some point, decisions have to be made inorder to turn what your supplier sends you into a productthat your customers want. A lot of people are involved inthis process as ‘picking’ usually occurs every time theproduct moves from each stage of the supply chain to thenext. Generally, people like to keep things simple by notpicking more than they have to and making decisionswith little thought of their effect. Unfortunately, everydecision that is made throughout the supply chain has aknock-on effect – it costs money, it’s a potential source oferror, and it’s a potential source of damage.

The best way to avoid this problem is to reduce thenumber of picks by making the real ‘pick’ – that ispicking into the form your customer most wants, as soonas possible. So the further back up the supply chain youpick, the better. It used to be difficult to avoid picking atevery stage in the supply chain, as there was no practicalway of transferring information on a customer’s orderback up the supply chain. However, this is no longer thecase, as technology now gives companies the opportunityto share information and transfer it to where it’s neededquickly – and at almost no cost.

What’s needed is the opportunity to overhaul yourpicking strategy – pick once, pick right and you will cutcost, time and errors.

IS EVERYTHING YOU’RE DOING REALLY NECESSARY?

Every company is operating in a business environmentthat is becoming more and more competitive. You need

to find ways to stay ahead and stand out in your market.This means you have to be looking at ways of providinga better service, at a lower cost.

The traditional response of many businesses to this issue isto shave a penny off here or there, and then work a littleharder to stop the cost-cutting affecting customers. Ofcourse this helps, and no company can afford to let up oncost control and work rate. However, this doesn’t enablecompanies to make the jump that propels them into thelead and leaves the competition racing to keep up. In orderto make a real difference, you need to adopt a newapproach. Try cutting out whole swathes of cost, movingup a step in service levels, generally changing the way youdo things and, in particular, cutting out whole activities.

This may seem daunting, and it’s difficult to believe thatthere are activities that people could just stop doing. Afterall, why would anyone do unnecessary work? But you willbe surprised by how much unnecessary work departmentsare doing when you start looking more closely.

Are you sending your products through intermediatewarehouses or distributors? If so, you could dispatchstraight to the real customer. When you’re picking, doyou pick into one container and then take everything outand pack it into another box? If so, you could pickstraight into the delivery box. Do you spend some timeevery day checking and correcting mistakes thatshouldn’t be happening in the first place? If so, you needto tighten up the department so mistakes don’t happen.

The big advantage of this approach is that it doesn’t justcut costs; it improves lead-times and customer servicebecause whole activities disappear. By cutting out activitiescompletely, you lose the costs plus the time associated withthem, and this is a whole lot easier than squeezing anotherfew per cent out of something you’re still doing.

So there you have it – I hope this has given you a goodidea of how you can use logistics to give your businessthat competitive edge. Of course, my advice can onlyscratch the surface, but I have found that these keymethods are making big improvements in logisticsperformance at successful companies I have worked with.By following these five simple guidelines, your businesswill move closer to providing a much more efficientservice ... so over to you!

The author can be contacted atstephen.errey@lucidea.com

20 Innovations in Pharmaceutical Technology

Every company is operating in a businessenvironment that is becoming more and

more competitive. You need to find ways tostay ahead and stand out in your market.

This means you have to be looking at ways ofproviding a better service, at a lower cost.