3PL Providers

According to a new article on third party logistics in Next Generation Pharmaceutical, “traditional pharmaceutical and medical device companies, along with newer biotech and equipment enterprises, are increasingly working together to produce systems that link drugs with devices and diagnostics. Their products are sent to consumers through multiple distribution channels: traditional wholesale, direct to pharmacies, to retailers for sale over-the-counter and directly to consumers’ homes”.

Bill Hook, UPS vice president of global strategy for healthcare logistics writes “These diversified channels can provide new revenue streams and new growth areas. However, manufacturers’ focus can be lost and critical errors made, particularly in transportation and distribution, when dozens of participants are involved”.

Outsourcing supply chain fulfillment operations is increasing for companies to regain their focus and remain competitive despite new market challenges. A third-party logistics (3PL) provider can help streamline the process – particularly in post-manufacturing handling and distribution.

In fact, more than two-thirds of pharmaceutical, medical device and diagnostics manufacturers surveyed in recent years by consultants at PRTM said they use or plan to soon use a 3PL. By using a 3PL, products can be moved quickly from manufacturing site to store shelf or dispensary. Quick market introduction is enabled because the distribution channels are already in place.

As the medical device industry continues to expand, companies are searching for ways to become more competitive. Medical device manufacturers are faced with intense competition, increasing regulatory pressures, shorter product life cycles, rapid new product introductions, globalization and higher quality standards. As a result, there is an increased focus on creating efficiencies in the supply chain similar to other industries.

Companies today are looking for Supply Chain Services and innovative technologies with proven best practices to improve service levels while reducing inventory and labor costs. In the process, customers gain end-to-end visibility to align their corporate business strategies and processes to their global supply chains.

Globalization

Perhaps the most prominent factor that medical device companies have embraced supply chain outsourcing has been the increase in the number of companies operating in the global marketplace.  Companies are embracing global sourcing, production, centralization of inventories and the centralization of information. 

The difficulties of operating in a global environment can’t be understated; logistics and supply-chain networks have become far more complicated.  Meeting the need to plan and manage logistics as a complete and integrated system has also become far more difficult. 
The best solution for a global company or a company wanting to become global is to outsource their logistics operations.

Jon Nugent | Director Client Services
Business Intelligence Solutions | www.busintellsol.com

I have been asked to provide several key definitions surrounding the Supply Chain:

Supply Chain Management is the organization, planning, control and execution of a product from development and purchasing, through production, warehousing and distribution to the final customer in the most cost effective way possible. 

Logistics management is the planning, implementation and coordination of the details of the supply chain.  

Third Party Logistics (3PL) is the function by which the owner of goods (The Client Company) outsources various elements of the supply chain to one 3 PL company that can perform the management function of the clients inbound freight,  warehousing, order fulfillment, distribution, and outbound freight to the clients customers.

The Allied Group is a 3PL provider to the Life Science industry.  While we don’t create the product we assist our customers with the logistics on the assembly, kitting, warehousing and distribution of medical devices to physicians and consumers.  We are an outsourced Supply Chain Management solution.

In my previous blog I discussed some of the supply chain management principles used in both 3PL providers as well as for trips to the back country. It is useful to consider some guiding principles for Supply Chain Management Strategies. They act as a reminder so that the proper effort is exerted. They are the checks and balances of Logistic Supply Chain Management. Every decision, change, or idea should be judged against these principles to ensure that the criteria of the principles are met. For those with an extensive familiarity with Supply Chain Management Strategies, these principles become second nature. For those who are still developing that level of experience, I advise thinking in terms of the following:

Planning:   Planning is the most critical aspect of any logistical event. Complete plans must be made to cover all likely courses of events. Furthermore, contingency plans should be made for the most likely problems, such as inclement weather or a participants health issues. Planning effort should be given to what-if scenarios. What if we can’t cover the distance due to inclement weather, do we have time on the back end to make up for a lost day? Finally, planning should include numerous decision points that act as balances against possible drift. This keeps the trip streamlined, promotes momentum, and ensures good anticipation.

Efficiency:  Every resource and the way it is used must produce the maximum positive impact possible. Resources that are used infrequently, such as luxuries, will burden the expedition and make logistical management slow and unresponsive.

Effective: There has to be a reason for every logistics effort, and this reason has to promote the success of the trip or enable an objective or goal that will promote overall success. There is no point in pushing many resources at an effort that will have negligible positive impact on the expedition. Every resource and the way it is used must have an effective impact on the progression of the expedition towards its conclusion.

Simplicity: In times of stress or difficult conditions, a simple logistics plan is more likely to survive than a complex one. In project management terms, this simplicity can be achieved by identifying a critical path with as few links as possible. Effort should be made to achieve this critical path.

Flexibility: Despite the best planning, things will not always develop in the way that they were envisioned. For this reason, a flexible approach to the management of logistical effort is required. The ability to anticipate and react to situations in an appropriate and timely fashion is essential.

These principles make it abundantly clear that it is not only impossible to produce a logistics capability that provides for every eventuality, but it is counterproductive and undesirable to even try to do so. For this reason, there is an element of risk involved with every logistical and planning decision. A balance must exist that allows logistics to be robust enough to be effective yet not so cumbersome that it becomes an uneconomical burden. Erring too far in either direction can place a trip at risk. Achieving a good balance reduces overall risk of failure. The primary responsibility of the planning and logistics team is to achieve and maintain this balance. The trip organizer must control this balance, especially when responsibility is devolved to area or function managers. It is easy to become so engrossed in one’s own responsibility that one forgets the overall picture.

Outside my family, some of my passions in life are rock climbing, backpacking and mountaineering. In many ways these passions are complimentary to my profession of supply chain management strategies. Both of them require a keen eye for detail and the need to apply logistic principles.

At a very basic level, good Logistic Supply Chain Management will result in a more cost effective, more efficient, and more enjoyable trip for the participants. At the highest level, good logistics are critical to the safety and well being of the team members.  

Logistics deals not only with the tangible items like food, shelter, equipment, clothing, transport and the other physical elements of an trip, but it also deals with the participants. The central theme of logistics is to provide physical items to satisfy people’s needs. Logistics then is the key to assisting people so that they can accomplish a task. 

Poor logistics may have a negative effect on the morale of the participants and their ability to perform. The maintenance of morale then becomes a logistical effort. To deliver these physical and personal components in a coherent and effective way will provide the conditions that allow the team to perform.

In the next post, I will describe some of those key logistics principles that good 3PL providers will use. These check and balances should be integrated into good supply chain management strategies. 

Does your 3 PL provider understand your business? Do they take the time to comprehend your logistic supply chain management strategy? Do they understand what you are trying to accomplish and recognize what is important to you? What is their supply chain management strategy does it fit with yours? Have they built metrics around those key aspects of your business? Do they understand the quality and regulatory needs of you business? Do they act like a key consultant?  

During the selection process for 3PL providers it is important to ensure that the vendors you are considering understand the quality, regulatory and logistic supply chain management goals of the project. You want a vendor that understands your needs and can respond to them.  You will want a vendor that asks for frequent, open and straightforward communications.  

During this process you need to assess the 3PL providers ability to understand and respond. Do the potential 3PL providers have the ability to anticipate and respond to your needs? Do they have the ability to manage and address issues that arise? You are looking for a provider that can offer suggestions for improvements to your logistic supply chain management strategy to ensure that you are as efficient and you can be.

There is a vast difference in approaches 3PL providers take to achieve customer satisfaction. The simplest form of customer satisfaction is to understand if your 3PL providers will accomplish what they say they are going to do.

You need to go beyond what the potential 3PL providers have told you or what is written on their website.  You need to understand the potential 3PL providers' supply chain management strategies and their strengths and weaknesses surrounding this strategy.  Know whether they have been successful in developing similar logistic supply chain management programs in the past. Have they been on time and on budget?  During you due diligence do they meet your deadlines?  The potential 3PL provider will be doing their best to meet your needs during due diligence.  If they fail to deliver during this process will you be able to trust them once you enter an agreement?

Although it would seem like common sense, make sure to check references and ask those references questions of them about the vendor’s size, technical capabilities, and ability to respond to their needs.

It is imperative that you do your homework to ensure that your Supply Chain Management partner will respond to you.  Have a list of prepared questions.  Ask the reference to explain a time this vendor made a mistake and how they responded.  You can find out much about how a vendor will respond during a crisis.

Once you select a Supply Chain partner, you must set concentrate on deliverables.   You must have an action plan that outlines requirements, due dates and milestones.  You must continue to monitor if their words match their deeds.

Up next: Does your 3PL provider understand your business?