A highly integrated approach to internal logistics is paying dividends for Pfizer. 

Complexity is a fact of life in pharmaceutical logistics. Every shipment must be tightly controlled to meet stringent quality, security and safety requirements across freight lanes that can span the globe. When your business involves 24,000 separate SKUs and sales of more than $52 billion a year, that complexity becomes difficult to imagine.

But managing complexity on that scale is an everyday challenge for Pfizer, a company that has reached its current size through a combination of organic growth and extensive mergers and acquisitions. In recent years, a key focus for the organization has been the transformation of a supply chain with its roots in more than 30 separate businesses into a single “highly orchestrated supply network.”

“In the past, we were often acting in silos,” explains Danny Hendrikse, Pfizer’s Vice President of Intercompany Operations. “We had a global transportation group that was working hard to optimize our processes internally, while our plants are doing likewise locally. There were little common goals and collaboration. We were not really acting as a network.”

Highly orchestrated supply

In 2014, Pfizer established a new global initiative designed to support our ambitions to become a Highly Orchestrated Supply Network. “It starts with getting the customer demand signal from the market, transmitting this signal to the sites for production, and the same signal captured by the Network Supply Operations team for short term to 36 months production and capacity planning; and our Product Portfolio Management team using the same signal to develop a longer term Product Strategy. This ability to connect all the supply chain nodes resulted in a balanced demand, supply and product delivery network helping us in achieving our segmented customer service targets and optimized inventory levels. All these are also well supported with by Business Technology which provides great end-to-end network visibility. Hendrikse’s Intercompany Operations organization is responsible for all logistics and distribution activities between Pfizer plants and on to its regional or in country distribution hubs. From there, four regional organizations handle in-market distribution of products to the first paying customer.

24,000

The number of air shipments directed yearly across the Intercompany Operations chain

Intercompany Operations is a significant logistics operation in its own right. While some lower-volume products are still shipped directly from Pfizer’s plants to end customers, the vast majority – around 95 percent by revenue – go through the Intercompany Operation’s network. That network involves 2,500 end-to-end freight lanes, 24,000 air shipments, 6,000 containers and 34,000 European surface shipments every year.

Moving as much freight as possible by ocean, rather than air, has been part of Pfizer’s overall logistics strategy for a decade. “Originally the decision to use more ocean freight was driven by cost considerations,” explains Hendrikse. Over time, however, other factors have risen in importance, too. “Today, it is part of our green journey, to improve sustainability and reduce CO2 emissions. Second, and very important, is temperature controlled logistics. Shipping by ocean is more reliable from a temperature control perspective than shipping by air. If you ship by ocean you have a validated temperature controlled container that you load at your plant, you lock it, you seal it, the first time you touch the product again is in the market when you unload the goods.” Today, +40 percent of intercompany volume travels by sea, and Pfizer has a target to raise that fraction to 60 percent by the end of 2018.

Cross-functional collaboration

“Key to the highly orchestrated supply network approach”, says Hendrikse, “is the way the different parts of Pfizer’s supply organization work together. You need to work on end-to-end network reliability with all the actors in the supply chain, and Intercompany Operations is one of those actors.”

In common with other parts of the supply organization, Intercompany Operations has identified 4 Strategic Focus Area’s (SFA’s) where it is driving improvement efforts in order achieve the desired level of network performance and reliability. Continually improving adherence to temperature control requirements is one such work stream. “Product losses through temperature deviations are actually very small,” says Hendrikse. “But we want to minimize the non-value adding work created by issues with temperature control, like the corrective actions and preventative actions you need to do when deviations occur.”

Information flows

Another major work stream involves improving the way information flows through the business. “We’ve always had visibility into the location of our shipments, but what our internal customers need is information on the specific products, batches and expiry dates within those shipments and more importantly when the specific product is expected to arrive,” explains Hendrikse.

To provide that visibility, Intercompany Operations has developed a bespoke app, called TrackIt, that combines SAP data from manufacturing plants, Logistics Centers and markets with the data from logistics service providers to provide up-to-date information on the status and estimated time of arrival of products moving through the network. Getting the system to work hasn’t been easy, he notes, since it relies on accurate, timely information from every supply chain participant. “If a shipment left on Saturday, but your forwarder doesn’t tell you until Tuesday, that information is no good to you.”

The app, which went live in April 2017, isn’t just proving to be a benefit for Hendrikse’s customers, he notes, it is also reducing the non-value added work on the Intercompany Operations customer service colleagues. “Before, our customer service people would get 50 calls and 50 emails every day asking ‘where is my shipment?’,” he says, “With the app, our customers can see that information automatically on their iPhone, iPad or desktop, so there’s no need to make that call anymore.” 

Digital opportunities

Pfizer is exploring a host of other opportunities created by the availability of increasingly accurate, granular data on its logistics processes. “Now we know exactly how long it took a shipment to reach a certain milestone, we can get better at measuring the performance of our network. Before we were very reliant on our logistics providers to create KPIs for us, now we can do it ourselves.”

The more Pfizer pursues the opportunities offered by digitization, the more opportunities it sees. “The next question is can we create visibility inside the plant walls, so our internal customers can see and start tracking the product while it is going through production and quality control?” Ultimately, he says, the aim is to move from the use of data in a reactive way to a predictive one. “That makes data governance and having good master data even more important.”

It isn’t just Pfizer’s processes and systems that are undergoing continual evolution. The company’s network is constantly changing too. Acquisitions, new product introductions and changes in the external market environment all require Intercompany Operations to adjust and re-evaluate its activities. The company is systematic in the way it does this, says Hendrikse, but even so, the outcome can be surprising. “A few years ago, we conducted a center-of-gravity analysis on our network in Europe,” he recalls. “Our ingoing expectation was that we should pursue further centralization in the region, but the analysis showed exactly the opposite. Increasing surface transportation cost was outweighing the benefits of centralizing volume in warehouses. That’s why you need to look from an end-to-end perspective that includes your physical network, your channel strategies and your service levels.”

There’s no indication that the pace of change is likely to slow. Pfizer is already working on “Highly Orchestrated Supply Network 2.0”, an effort involving eight major work streams and more than 50 separate initiatives that meet regularly to ensure all initiatives’ supply chain nodes are connected and orchestrated. For Hendrikse, that continual movement is what makes his role so engaging. “We are a group of passionate supply chain professionals who are thrilled by change and moving ourselves to a better place,” he concludes. “The key to a successful supply chain is that combination of passionate people, a clear strategy, a drive to move forward and willingness to enhance and adapt that strategy as you go.” —  Jonathan Ward

Published: September 2017

Images: Pfizer