Most who have spent years in the supply chain industry agree that the world of pharmaceutical logistics has very unique challenges and complexities. From managing liability related to high-value products, ensuring temperature control and packaging for sensitive medications, and traceability of products in-transit along with confirmation of delivery, the industry’s demands are numerous and onerous. Amid this challenging landscape, freight audit payment (FAP) companies emerge as pivotal players, supporting logistics service provider (LSP) relationships and capturing key data to empower efficiency and optimize operations within the pharmaceutical supply chain.

For all of these reasons, choosing the right LSP and maintaining a “trust but verify” approach to managing the relationship is paramount to a best-in-class supply chain. Measurement of success is important and typically requires a comprehensive scorecard approach, combining service performance, risk management, scalability and coverage, cost, data governance and sustainability. FAP partners rise to the occasion by verifying that carriers and LSPs meet stringent performance standards and other KPIs associated with attainment of a balanced scorecard approach. FAP companies support the evaluation of LSPs based on data governance, billing accuracy, service and execution, and providing specific cost detail to better understand total cost to serve.

Let’s face it – it is all about the data and data insights captured by a robust freight audit and payment solution supports optimal execution as well as the necessary information needed to maintain a good partnership. As service typically trumps other KPIs using a weighted strategy, decisions do not always involve the lowest cost option. That said, not all products require premium services. Therefore, implementing a “what’s in the box” informational strategy can be a key component in supporting an effective cost reduction methodology. The result of good data at the proper level of granularity results in making the right decision situationally – mastering this concept is key to meeting high quality at a lower cost strategy while maintaining a low carbon footprint. 

FAP companies support the pharma industry by capturing the cost and providing analytics with insight into alternative cost-saving measures in transportation. Knowing the contents of the shipments is a key component when finding a balance between cost, time restrictions, and carrier choice for moving your time-sensitive freight. FAP vendors clear hurdles that others can’t, helping mitigate risks when shipping pharmaceuticals. Knowing the product, family type, and materials allows pharma companies to analyze freight spend through different angles and adjust shipping strategies accordingly. For instance, accessorial cost in the pharma supply chain could be as high as 20 percent, or even more. In order to control shipping costs, you have to know and analyze shipment data on a granular level. FAP providers, such as Trax, help accomplish this through quality and proper normalization of transportation data. 

Understanding the total cost to serve is a key aspect of transportation logistics within pharmaceutical logistics. Due to the high value of products and their unique temperate control requirements, premium service options and surcharges make up a large portion of the cost per unit weight. Having access to the charge level detail along with service supports strategies to mitigate avoidable charges without compromising the service itself. This awareness is only a first step and is typically followed by improved contract negotiation and execution changes, including shipping policies. In addition, when accompanied by event management, more real-time intervention can occur by stakeholders involved in the day-to-day decisions at the warehouse. For instance, demurrage or detention charges could be avoided by awareness and intervention at the right time during execution. 

Unit-level serialized product data for each pharmaceutical shipment is another crucial aspect managed by FAP companies. The ability to differentiate products or product families supports the proper service/cost balance when developing optimization strategies. By leveraging advanced data management systems and technologies, FAP partners provide insights into service, cost KPIs, and assist procurement and operations in making intelligent decisions based on data that is segregated and normalized into different service-related supply chains.  

Network optimization also plays a significant role in guaranteeing the availability and accessibility of essential medications whenever needed. FAP partners contribute in the efficient planning and distribution to healthcare facilities and pharmacies, even during high-demand or emergency situations, by providing service and cost historical data for modeling optimization strategies. Utilization of data analytics and modeling techniques enables the optimization of demand patterns, geographic coverage, transportation routes, inventory levels, and reduced miles, all achieved through the analysis of detailed data. 

FAP companies lead the way in data standardization and data quality governance, ensuring reliable data for the efficiency of logistics in the pharmaceutical industry. However, challenges such as data silos and diverse data sources hinder the achievement of data standardization across the industry. To overcome these obstacles, emerging technologies like artificial intelligence (AI) and machine learning algorithms are being adopted, transforming data into more normalized outcomes. This improves decision-making and optimizes supply chain operations in an efficient manner. This stands to only improve in the future as AI and machine learning algorithms continue to evolve. 

The role of freight audit payment companies in empowering efficiency in pharmaceutical logistics cannot be understated. Having data to support the complexity of transporting pharmaceuticals enables companies to perform at their best and maintain an industry-leading supply chain. This ultimately reduces risk and creates a sustainable, measurable supply chain operation that enables quality service and exceeds customer expectations.  

 

Steve Beda is the Executive Vice President for Customer Success in Global Program Management at Trax Technologies, the global leader in Transportation Spend Management (TSM) solutions. Trax elevates traditional Freight Audit and Payment (FAP) with a combination of industry-leading cloud-based technology solutions and expert services to help enterprises with the world’s more complex supply chains better manage and control their global transportation costs and drive enterprise-wide efficiency and value. For more information, visit www.traxtech.com. 

Steve can be reached at [email protected] .