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Optimizing Healthcare logistics

How Kuehne+Nagel’s unique LTL service for Healthcare customers can cut supply chain costs and CO2e emissions amidst an European reshoring trend for medicine manufacturing.

Summary
Results

Medicine shortages, such as paracetamol and certain antibiotics, are increasing in Europe and adversely impact patients. The issue has ignited discussions on how to safeguard access to vital medications in the future.

The root cause is linked to the global value chain, which can be disrupted by transport delays, capacity shortages, trade tensions, or pandemics. This makes the continent vulnerable and reliant on medicine imports from cost-effective manufacturing locations in Asia.

One way pharmaceutical companies attempt to eliminate that vulnerability is by reshoring production units to European facilities. Several of them have announced plans for new API production plants. 

In European markets, pharmaceutical companies' logistics flows can be complex and costly. This is especially true when they rely on Contract Manufacturing Organisations (CMOs), whose logistics flows tend to lack the level of optimisation that dedicated supply chain experts could realise. 

Kuehne+Nagel’s healthcare experts have developed a specialised solution that does exactly that—while providing visibility of CMO flows and adhering to strict quality requirements. 

Read on to learn more about this proven solution.

Gaining trust with a unique solution

The trend of contract manufacturing has long gained a foothold among pharmaceutical companies. This is the outsourcing of drug development and testing to CMOs so the outsourcing company can focus on R&D. The CMO market is estimated to be over 130 billion dollars, and it keeps growing significantly in parallel with the healthcare industry. 

medicine bottles

Developing a resilient strategy

Philippe Gosse, Head of Business Development Healthcare Logistics Road at Kuehne+Nagel’s global headquarters in Switzerland, shares that the biggest names in pharma multinationals will likely rely on several CMOs at once. There are even cases, he adds, where one company’s CMOs are spread out over more than 100 locations within Europe. 

However, managing flows to distribution centres comes with challenges for quality, visibility and cost. Challenges that Kuehne+Nagel has been able to solve through supply chain expertise, GDP-compliant cross-dock and a multi-customer network, connections to CMO and a mature solution for less than truckload (LTL) healthcare shipments.

Meanwhile, the time-tested solution is growing in demand, having gained the trust of many key market players in the healthcare industry.

By letting CMOs plug into Kuehne+Nagel’s online booking system, the customer gained full visibility on their CMO flows and the temperature along the way. And as we started to offer that solution to more and more customers, it benefited from a network effect, gaining efficiency.

Philippe Gosse 

Global Road Logistics Healthcare Business Development Manager

Intrinsic capabilities and a ‘network effect’

“The goods would arrive from the CMO in the distribution centre without data on the GDP-compliancy of the journey, nor upfront visibility on the actual costs of the shipments,” says Philippe Gosse, stating the actual pain points a healthcare company working with CMOs once described them to him. What’s more, it was not the first time that these frustrations had come to his attention.

In fact, Kuehne+Nagel had already answered customers' concerns by managing their CMO flows while acting as a single point of contact.

By letting CMOs plug into Kuehne+Nagel’s online booking system, the customer gained full visibility of their CMO flows and the temperature along the way. From a cost perspective, the customer gained upfront visibility, whereas before, the logistics bill often came as a surprise. 

“And as we started to offer this solution to more and more customers,” Philippe adds, “the solution benefited from a network effect, gaining efficiency. After all, our customers often share CMOs. This means we developed a relational network of CMOs familiar with our systems but also that we could start to consolidate different shipments into one truck, thereby optimizing cost and CO2e footprints.”

This LTL (less-than-truckload) solution also required a mindset shift and a gain of trust, from a previous conviction that FTL is the only truly safe way to transport sensitive healthcare goods.

Philippe Gosse 

Global Road Logistics Healthcare Business Development Manager

“On top of our CMO flow solutions within Europe, such global end-to-end solutions are enabled through our network.”

Philippe Gosse 

Global Road Logistics Healthcare Business Development Manager

This LTL solution also required a mindset shift and a gain of trust, from a previous conviction that FTL is the only truly safe way to transport sensitive healthcare goods.

The fewer additional handling actions or cross-docking activities, the better. However, with the right network, visibility and quality standards in place, there is no need to distrust LTL.

Philippe: “In Europe, we have an extensive GDP-compliant cross-dock network with 8 strategic locations. We have trained supply chain healthcare experts. We have visibility. On top, we have connections to many CMOs and a multi-customer network that enables us to build synergies between all these CMO flows.”

a truck parked while loading in a warehouse

When CMO flows across oceans, Kuehne+Nagel can still act as a control tower, collecting from different suppliers and delivering to different distribution centres. “If a customer wants products shipped from the United States for distribution across Europe, we can provide the solution. On top of our CMO flow solutions within Europe, such global end-to-end solutions are enabled through our network. A real advantage for our healthcare customers.”