Tender ministrations

Mark Wallace, business development manager at NYK Logistics, ponders whether the tender process can add genuine value to pharmaceutical warehousing and distribution operations

The pharmaceutical industry is under increasing pressure to reduce costs throughout the supply chain to meet worldwide government demands for cost-effective, reliable drugs. At the same time there is an increased requirement for security and assurance of supply. Warehousing and distribution are complex and tightly regulated and, while transportation costs represent a relatively small share in an industry dominated by the high cost of r&d, there is still a need to streamline processes, maximise IT capabilities and take cost out.

The starting point for getting maximum value out of the tendering process is to be clear about the objectives. If your existing arrangements are working well for you, but you are obliged to review costs regularly or you wish to benchmark your service, the best option may be to find the least time-consuming formula and stick to it. Suppliers will understand this and will allocate resources accordingly.

If your existing service provider is failing you in some way, or your business is changing, it is worth setting up a dedicated team to carry out a thorough review of the options available to you from different suppliers. This will provide you with 'must-have' information in a readily comparable format to allow suppliers to demonstrate and discuss with you how they could do things differently.

For best results you should encourage innovation and creativity. Take the time to find out about the different service providers' cultures, their values, management retention record, contract renewal rates and training stance so that you can make an informed judgement about whether they could work alongside your company and meet changing demands over time. In the long term this will be a more cost-effective option. There is little to be gained on either side by a request for an 'all-singing, all-dancing proposal' in an unrealistically short timescale, and you may miss out on valuable insights if you keep your tendering process within too narrow confines.

As a pharmaceutical manufacturer, you needn't necessarily limit yourself to specialists in your field when considering which companies to include on the tender list. Experts in logistics may have knowledge and skills from other industries that can be transferred to yours to provide mutual benefit. It is more important that you find a company you can work comfortably with.

Good working relationships and streamlined joint procedures need to be developed over time and there are great benefits to be gained by working in partnership rather than in a culture of 'keeping your service provider on his toes'. Sharing technology, accurate demand forecasting and successful just-in-time delivery, with windows of a few hours rather than a few days, require open channels of communication and a culture of co-operation between organisations. The right 'chemistry' between staff, trust and cultural affinity are important ingredients in achieving the best solutions.

As trade becomes increasingly global, the logistics market is growing at three times the rate of Gross Domestic Product. This is within the constraints of continual downward pressure on costs, industry consolidation (fewer buyers, ever-changing requirements) and a tendency for purchasers to opt for short term contracts. Service providers are looking to add value to your business and avoid becoming over commoditised. Investment in the necessary systems to offer the best solutions for the pharmaceutical industry is best done in partnership with committed end users.

Of course, working in partnership requires buy-in throughout the organisation, not just commitment from the procurement team. There will almost certainly be implications relating to culture, strategies for growth, organisational structure, investment in technology and training requirements. There will be a need to understand the need for change and to embrace it on an ongoing basis on both sides to ensure that the relationship remains valuable to both parties.

Key Performance Indicators should be agreed by both parties and used positively to spot trends and develop the service throughout the life of the contract. Enabling a culture of ongoing change management requires joint responsibility, access to decision-makers on both sides, hands-on style, excellent communication links and a flexible commercial relationship.

If you invest time over cash, people and paper in the process, it is certainly possible to achieve a 'win-win' position and add genuine value to your warehousing and distribution operations through your tender process.