Written by: Jeff Luthman, Vice President, Life Science Solutions
Third-party logistics (3PL) providers specialize in maximizing their customers’ supply chain processes. Recently, 3PLs have innovated their practices to extend pharmaceutical supply chains for special projects, such as packaging and kitting. Vendor-managed inventory (VMI) is a natural evolution of these extended services.
Q: What is VMI in the life sciences and pharmaceuticals industry?
A: Pharmaceutical supply chains are strictly regulated and require an extraordinary degree of oversight. This necessary control makes it difficult to anticipate inventory levels, and lessens the ability to respond to fluctuating order volume. VMI solutions offer the ability to anticipate demand in real time and adjust supply levels accordingly, allowing the distributor to assume the role of inventory planning for the customer.
This presents an opportunity for the pharmaceutical industry, as many products are either costly or out-date quickly. VMI is achieved by offering value-added service, such as kitting or holding inventory onsite to be closer to the customer’s manufacturing facility.
Q: What is required for implementation?
A: A fluid and effective VMI solution requires the three following elements to work together:
- Integration. The best 3PL providers offer robust information technology services that have the power and flexibility to seamlessly integrate their WMS with customer’ ERP applications.
- Transparency. Fully integrating a customer’s supply chain requires complete high-level transparency that is built on a foundation of trust. An enhanced view of a customer’s supply chain allows the 3PL provider to accurately monitor demand and proactively monitor supply inventory.
- Expertise. Professional analysis is required in order to isolate trends that impact order volume and inventory levels. With this information, 3PL providers can accurately project demand and manage inventory.
Q: What are some of the barriers and benefits of VMI?
A: Historically, the life sciences and pharmaceuticals industry has been slower to adopt emerging trends mainly due to the sensitive nature and strict biological regulations associated with pharmaceutical product.
An experiences and knowledgeable 3PL provider can help life sciences and pharmaceutical customers adopt VMI as a supply chain management practice. There are several benefits to be recognized as a result of this solution:
- Supply chain visibility: Integrated systems and oversight allows for real-time analysis of inventory levels, allowing 3PLs to quickly and efficiently anticipate needs.
- Reduce unnecessary overstock or stock-out situations: By constantly monitoring order volume and projecting anticipated demand, 3PL providers can mitigate overages and shortages, quickly moving product that will soon outdate.
- Minimizing risk: Precision is key when handling sensitive and expensive pharmaceuticals. Through transparency and analytics, 3PL providers utilizing VMI solutions maximize order precision, preventing unnecessary handling and overstock of these expensive pharmaceuticals.
Source: Inbound Logistics