Changing consumer habits and their impact on the pharma warehouse

Consumer habits have changed and the recession has made people more careful with money and more likely to buy products when they need them, rather than having stocks in the cupboard. For instance although most people will have a stock of ibuprofen available – in overnight bags, office desks, kitchen and bathroom areas, they probably will not have a wide array of more expensive items like shampoos, vitamins or deodorants. As a result, the sales orders processed are smaller, requiring more regular deliveries rather than full pallets and trailer loads.

For the warehouse, this means a busier environment in which a wider array of stock is held within many different locations. The way pharma warehouses are being organised now demonstrates the trend towards holding smaller stock quantities and warehouses are typically smaller in size, with high density storage for managing smaller batches and part pallets of stocks. In situations where a pharma company does need to hold large stocks, they will tend to keep stocking units within their own four walls where possible, rather than rent additional third party space, because property costs are becoming prohibitively expensive.

Trends that are influencing pharma warehouse operations

As a result of economic and price pressures, distributors of pharmaceutical and healthcare products are adapting to two primary trends, which occur depending on the types of goods being distributed.

Pharmaceutical distributors involved with niche products e.g. specialist drugs or healthcare items and veterinary products, are typically holding much smaller stock quantities in their distribution centres with manufacturers increasingly making to order in smaller production runs. Neither distributor nor manufacturer wants to be holding large volumes of stock and tends to manage balance sheets according to either 1) having days rather than weeks of available stocks or 2) a stockless model whereby goods are shipped only to order. Additionally, tying money up in finished goods limits the resources available for R&D, providing more verification for the trend for pharma companies to stock fewer items.

Conversely, distributors of high volume consumer healthcare products and generic drugs will be continuing to ship high volumes as before, although they are also likely to reduce levels of stocks held because of the impact this has on profitability and available resources.

Receiving smaller stock deliveries more frequently means put-away processes need to be very well structured. Distributors rely on a sophisticated WMS that can operate in accordance with FDA guidelines and ensure that every item is correctly and safely stored and can be located quickly. For example, strict guidelines must be followed to comply with regulations for storing allergens and preventing product contamination.

Impacts from the requirement for improved traceability

The demand for better traceability means the amount of information a distributor potentially needs to store is much greater. This creates a problem because it requires a large amount of potentially unnecessary administration effort since tracking the serial number or lot numbers with any kind of consistency and clarity is a near impossible task without the use of technology.

As an example, for many end user retailers, the serial number of an electrical appliance is typically only recorded once a product is sold to a consumer and not before. For the Pharma industry this is simply not good enough. If a carton is damaged (or lost) in the warehouse, the pack needs to be accounted for at a cellular level and so data must be captured at manufacture and then traced right through the supply chain to the end user.

Imagining the pharma warehouse of the future

The pharma warehouse of the future will be equipped with scanning equipment to identify whether products coming into the facility are genuine and to prevent counterfeiting. Pharma and healthcare products are increasingly reliant on serialised identification using a unique identifier on every pack.

The majority of fakes enter the supply chain through distribution channels where they are either substituted for authentic goods or sold as an additional batch.  Distributors will have a responsibility to ensure that all products coming into a warehouse are genuine and block the trade in fakes. The onus will be on the distribution provider to provide this as an additional service and guarantee.