Pharmaceutical packaging operations are generally labour and capital intensive and often a source of senior management frustration:
- They can be expensive in terms of either labour or capital investment, and sometimes both
- They can often provide non-optimal levels of service, for example long lead times or inappropriate minimum order quantities
- They can be inflexible with poor utilisation
To offset these issues, supply chains are forced to either offer poor service levels or carry excessive stock, with the associated issues of high working capital, ageing stock and high write-offs.
A key underlying issue is balancing the demands of the product portfolio to be packed with the capabilities of the packaging facilities utilised. Portfolio complexity is very necessary for many businesses and there are numerous factors that drive increasing complexity, including different legal requirements, increasing customer service demands and product differentiation.
There are ways to effectively address these challenges:
- Being clear that the product portfolio is appropriate
- Optimising the packaging facility design to deliver optimal service levels at minimum cost
- Ensuring that key attributes of the product packaging enables the most appropriate packaging solutions to be used
In this blog series, we will consider these three topics and look at how you may approach a process of improvement.
Assessing the Portfolio Complexity
Portfolios are becoming increasing complex. Many companies have broad product portfolios sold in multiple markets which can provide significant advantage for that business. We see four main drivers increasing portfolio complexity:
- Maximising value from current assets: launching as many product variants, into as many markets, through as many channels as possible.
- New products for complex conditions with increasingly tailored therapies: these products may be very high value, but the product volume is typically much lower than traditional pharmaceutical products. Moreover, they often have complex dosing regimes, devices or combination products that require specialist and complicated packaging.
- Local Market requirements: you cannot sell the product in a certain market without meeting specific market requirements, whether they be legislative or local preferences.
- Commercial advantage: providing certain features gives an advantage in the market and the incremental impact on cost of goods is outweighed by the commercial benefits obtained.
Beyond the US and big five European markets, sales volumes can drop dramatically for individual SKUs. Even with the large markets, portfolio expansion and specialised products can result in very low individual SKU volumes. The result is an explosion of packaging components of ever decreasing volumes. We have seen companies where more than fifty percent of their SKU portfolio have daily sales volumes of less than 30 packs and minimum order quantities of packaging batches supply years of stock.
In my next post, we will examine two further ways to address the challenges of portfolio complexity, looking at optimising the packaging facility and considerations for product packaging design. We will also consider the consequences of inappropriately managing complexity.
Should you have any questions about this or any of my other blogs, if you would like to discuss the packaging complexities within your company or would simply like to request a copy of my booklets, please don’t hesitate to contact me directly on my email Andrew.firstname.lastname@example.org