Pharmaceutical manufacturers are turning their attentions to their supply chains to reduce their carbon footprints, says Paul Kavanagh, md - operations at NYK Logistics (UK)
In the context of their wider corporate social responsibility policies, pharmaceutical manufacturers are working closely with their logistics service providers to optimise the efficiency of their distribution networks.
Global climate change, depletion of resources and population growth are affecting the way companies in all sectors do business. They are now under pressure from legislation, customers and NGOs such as Greenpeace to reduce their carbon footprints.
To achieve compliance and demonstrate good corporate citizenship major pharmaceutical manufacturers are therefore introducing initiatives designed to minimise the impact of their activities on the environment by improving energy efficiency, for example by participating in emission trading schemes, using energy from renewable sources, improving material efficiency and reducing waste.
Another area in which this is being achieved is in the re-engineering of their supply chains, with initiatives delivering both environmental and efficiency improvements. In the context of increasing supply chain complexity and the need to focus on core r&d, manufacturing and marketing activities, pharmaceutical manufacturers are increasingly outsourcing the management of these supply chains to strategic partners with the expertise and resources to deliver these improvements.
In some cases, however, the means by which these efficiencies can be achieved - while well proven in other sectors - represent a major leap of faith by pharmaceutical manufacturers.
Emissions from transport have an impact on climate change, acidification and photochemical smog. For example, one NYK customer's products travelled a total of 227 million kilometres in 2006 - 81% by airfreight, resulting in 87,000 tonnes of CO2, while ocean and road transport accounted for an additional 11,000 tonnes of CO2.
Working with logistics service providers (LSPs) like NYK, pharmaceutical manufacturers are exploring and exploiting a variety of ways to reduce CO2 emissions from their transport operations. Many pharmaceutical manufacturers already include environmental criteria in selecting transport providers; at AstraZeneca, for example, priority is given to companies who have formal Environmental Health and Safety (EHS) policies, modern vehicles with efficient engines and drivers trained in eco- and safety driving.
In addition to the development and adoption of greener technologies and methodologies associated with the provision and management of transport operations, logistics service providers are working with their customers at a more strategic level, increasingly linking into manufacturers" demand forecasting and production planning functions to optimise resource utilisation.
Since 1995, CO2 emissions from heavy goods vehicles have remained stable, despite sustained economic growth and thanks to technical progress, today's trucks are increasingly efficient, clean, quiet and safe.
In addition to vehicle emissions, the pharmaceutical supply chain places an additional burden on the environment through the extensive use of refrigeration equipment to maintain product integrity in transit. Companies such as NYK also take this into consideration and are committed to the introduction of new fridge engines that run on liquid CO2 instead of diesel, eliminating all harmful refrigerant emissions and making 95% less noise than traditional units. The use of dual temperature trailers is also enabling products with different temperature ranges to be combined on the same vehicle, thereby improving load fill factors.
While green technologies are contributing to improved environmental performance, more impressive improvements relate to initiatives designed to reduce the number of miles and vehicle movements involved in getting product from A to B and delivering the flexibility and reliability required to enable the most environmentally friendly modes of transport to be used.
With multiple manufacturing plants in geographically diverse locations, the ability of major manufacturers to take a more holistic view of their supply chains on a pan-European (and ultimately global) basis is essential in improving the environmental performance of their transport operations.
Despite all supplying the same European distribution network, manufacturers" individual plants have historically been responsible for making their own transport arrangements. This has typically meant relatively small loads from individual factories being delivered to market warehouses and vehicles returning empty to their place of origin.
In many cases, due to the small volumes involved, this has also meant sub-optimal delivery frequency, with each plant delivering only once a fortnight or even once a month into smaller market warehouse. Ironically, the result of this is the excessive use of air freight to meet the needs of smaller or emerging markets.
Working with logistics service providers such as NYK, however, manufacturers are increasingly adopting more centralised management and planning systems to enable synergies to be identified at a pan-European level and using strategically located hubs to enable outbound volumes from mul-tiple locations to be consolidated prior to onward distribution.
This approach, with a "central control tower" combined with a dedicated contract team, gives the customer the benefits of a single point of contact, a consistent approach and good communication. From the operational perspective vehicle utilisation, cost and environmental benefits can be optimised.
Visibility is achieved by the manufacturing sites providing advanced notice of orders through standard planning templates. Information from sites can be provided well in advance, allowing the planning team to:
Analyse traffic flows and shipment volumes
Optimise and consolidate loads (both on collection and delivery) on the basis of route geography
Generate round trips
Build 'milk runs'
Measure pre-plan against actual performance
Produce consolidated management reports
Increased volumes are facilitating additional benefits although in some cases, the ability to take advantage of these relies on changes in the way product is packaged or presented.
For example, NYK has worked closely with its customers to achieve reduced pallet heights to allow the use of double deck trailers and to introduce protective packaging to enable pallets to be double-stacked; both measures effectively allow two vehicle movements to be replaced by one.
In addition to substantially improved vehicle utilisation, another major benefit of consolidating product is in enabling delivery frequency to be increased, service levels to be improved and the use of costly (and environmentally unfriendly) air freight to be significantly reduced.
But now for that leap of faith, which is witnessing competing manufacturers beginning to talk to each other about opportunities to co-load their products on an identical basis, delivering exactly the same benefits but on a much larger scale.
With synergies in the locations of their manufacturing sites and market warehouses, the benefits of sharing are compelling; however, while the principles and benefits of pan-European multi-user networks are well established in sectors such as automotive, the heavily regulated and highly competitive pharmaceutical sector has resisted such collaboration for fear of compromising either product integrity or competitive advantage.
But with an established pharmaceutical network, specialist expertise in the handling and tracking of pharmaceutical products and a track record of managing complex multi-user operations on a pan-European basis, NYK is breaking new ground in this area, offering existing and prospective customers in the pharmaceutical sector massive economies of scale and associated environmental benefits.
The logical next step is in this process is in the consolidation of inbound volumes from suppliers of packaging, components and raw materials.
While this level of collaboration between com-peting companies is still in its infancy, manufacturers are already seeing the benefits of treating their LSP as a partner and not just a supplier.