How can you successfully run three different businesses under one roof, with one operations team and a single set of standard operating procedures that caters for the requirements of three businesses that each have their own specific service and delivery requirements? This was the question facing Imperial Health Sciences when it decided to integrate Imperial’s pharmaceutical wholesaling business Pharmed, as well as some services offered by Imperial Retail Logistics, into the Imperial Health Sciences’ operation in Cape Town.
The Problem
Imperial Health Sciences’ “three-in-one” project arose due to two developments. The first of these was Pharmed’s strategy to expand its footprint and grow its customer base in the Western Cape. The second was the addition of three new principals focused on consumer health and complementary medicine to Imperial Retail Logistics’ client base. These new products in the Imperial Retail Logistics basket required specific handling and storage, as defined by the various regulatory authorities. Imperial Health Sciences was perfectly placed to meet these requirements.
Challenges that the company needed to rise to, however, included, on the Pharmed side, different daily order cut-off, delivery and reverse logistics turnaround times, as well as Phasmid’s predominantly single unit, multiple line order receipts and customer order picks.
Incorporating the Imperial Retail Logistics’ business into its Cape Town operation posed its own set of difficulties, since there was also a need for integration with Imperial Retail Logistics’ Cape Town operations. Only the order picking process had to function independently from existing Imperial Retail Logistics sites in Cape Town. The order input and final consolidation; data capture; management of the order intake process; and the release of orders from Imperial Health Sciences’ warehouse would still be handled by Imperial Retail Logistics’ sites. Unlike Pharmed, this business is predominantly full pallet receipts and case/pallet customer orders.There are also differences in the FMCG environment in which Imperial Retail Logistics operates and the pharmaceutical sector served by Imperial Health Sciences and Pharmed.
Further considerations and requirements in this integration project included infrastructure, functional areas and storage media to suit all three businesses, as well as suitable transportation, resources and staffing. Product master data was a testing part of the integration as Imperial Health Sciences needed to list an additional 20 000 stock keeping units (SKUs). Amending operational processes was onerous as it was critical to still adhere to legal and client requirements for the three different businesses.
The Solution
IT
In terms of IT, SAP provided Imperial Health Sciences with the solution needed to manage all operational processes. SAP configuration and development for Imperial Retail Logistics required mainly the setup of FMCG warehouse processes and the interface with the Imperial Retail Logistics programme used to plan and consolidate various orders from different sites for a particular customer order to one delivery point. The development catered for Imperial Retail Logistics to maintain the order processing and order release process on its SAP system. The system developed for Pharmed means that, in addition to the inbound and outbound functionality, Pharmed can also procure stock directly from Imperial Health Sciences and Imperial Retail Logistics for supply to the Pharmed customer.
Master data, orders, service levels and priorities
Imperial Health Sciences rose to the master data challenge. In Cape Town, the company initially had 3500 active SKUs. In preparation for the integration of Pharmed and the Imperial Retail Logistics’ principals, 21 000 new SKUs were created and listed in SAP.
A unified solution for orders, service levels and priorities includes receiving all orders from Imperial Retail Logistics and Pharmed via electronic data interface directly into SAP. New service level requirements, KPIs and priorities were added to Imperial Health Sciences’ current operational structure based on Imperial Retail Logistics and Pharmed’s requirements, as well those of couriers.
Order processing and handover for delivery are managed with different priority codes loaded in SAP against a specific customer and channel, to ensure that customer expectations are met based on the channel they order through.
Distribution
Different couriers are used by Imperial Health Sciences and Pharmed, but they are fully integrated with Imperial Health Sciences, allowing for full traceability of deliveries from handover to the delivery of orders. In addition, system development caters for switching between different couriers at any time before handover, should the need arise, and was developed specifically in line with contingency planning.
The Imperial Health Sciences conveyor system is equipped with scanners that capture images of dispatched cartons, weights, and volumes. The data is stored for potential future inquiries. Based on the information and priorities, orders are directed and loaded and scanned to correct courier for distribution. Imperial Retail Logistics manages its own distribution for all orders.
Customer care
A high level client care agent is allocated to Pharmed and Imperial Retail Logistics, to assist with any service related query. Currently, queries are resolved on average within one hour. There is a pro-active service drive. Client care agents run service level reports daily; they pro-actively identify deliveries that will not make on time delivery and arrange with different areas of the business to expedite and improve service levels.
CRM (Incident Management System)
The CRM system is a fully integrated online platform accessible to all operational teams as well as clients. The system has 935 active users across all departments and clients. CRM is designed to provide on demand, full visibility on operational issues and tasks, and to streamline communications across departments, for maximum efficiency, performance management and continuous improvement.
Staff
The Imperial Health Sciences Cape Town staff complement grew by almost 290% in the first year of “go live” of this three-in-one project. There is a single management structure, and dedicated resources are allocated to specific processes.
The Outcome
Within the first year of go live, Pharmed grew its customer base by 284.4%. Total service level conformance for March 2016 was 98.28%.
An overall decrease in operational expenditure was achieved through the utilisation of the existing facility and regulatory approvals (Medicines Control Counsel Licence, Department of Health licence, Pharmacy Council registration, ISO 9001:2008 certification); by leveraging the capacity, capability and expertise of the existing management structure and support functions such as customer care, quality and regulatory services, human resources and risk; by using one warehouse management system/IT infrastructure, and thereby not incurring additional expenses such user licences and IT equipment; and using the current services from critical service providers such IT, cleaning, waste management, security and facility maintenance.
Imperial’s innovative approach effectively maximized sales versus inventory, to yield significant benefits for clients. It minimized costs versus revenue, for Imperial’s benefit.
Over and above the financial benefit, sustainability was also an element of this project, and Imperial was committed to ensuring that the initiative yielded environmental benefits, and did not increase the environmental impact of the overall operation. This was achieved through the consolidation of its operations at a single site, with resulting power consumption savings. The electricity demand for cold room storage has actually been reduced due to the increase in inventory and ultimately total thermal mass, resulting in less cooling and defrosting cycles and thus an overall decrease in power consumption. With an existing product range and with the system development that allows Pharmed to procure directly from the Imperial Health Sciences’ product basket, total operational input has been reduced, with a particularly significant reduction in transportation compared to procurement of product from external suppliers.
The strategic location of the Imperial Health Sciences site, in close proximity of the international airport and within a one kilometer from one of the main suppliers, provides for an effective inbound booking schedule and the consolidation of inbound deliveries, which translates into reduced transport requirements and resulting environmental benefits.
With an existing customer base and delivery network shared by Imperial and Pharmed, minor changes could be made to the courier delivery handover requirement in order to consolidate deliveries to the same customers in a specific route. This is resulting in further transport reductions and is helping Imperial to reduce its carbon footprint.