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FMCG vs Pharmaceutical Logistics

FMCG vs Pharmaceutical Logistics

There is an interesting question when we talk and discuss about Logistics and 3PL, namely "Why is it still rare for 3PL for pharmaceutical goods?".

Let's see for example DHL, TNT, Exel, Davids or Linfox, where there are international 3PLs or local 3PLs in Indonesia such as Gotrans, SCL and the like.

The majority of these 3PLs are still focused on the distribution channel of Fast Moving Consumer Goods (FMCG) such as Soap, Shampoo, Milk or Cooking Oil. 

The question then is why pharmaceutical goods are still not their focus? Even if there is, the percentage is also very small and has not been widely published. How could this happen?

What is the real difference in handling between FMCG and pharmaceutical goods?

The Price of Goods is not a Barrier

People who are in the world of logistics are usually the wisest. They do not discriminate between the handling of item X and item Y just because of the price difference. 

For them, the price is something that is “taboo” to be public consumption. Whatever the type of goods, service to consumers is number one. That's their working principle.

What I said above has to do with the opinion of some people who say that many 3PLs are not interested in dealing with pharmaceutical goods because the prices of these goods are very expensive.

With an opinion like this, the theory of high prices falls. This means that there are no restrictions that make pharmaceutical goods 'haram' because they are treated the same as FMCG goods. 

Next, let's discuss comparatively between FMCG and pharmacy in the following description.

1. Comparative in Volume

The FMCG industry plays a huge role in volume. In Indonesia, we can see examples such as Hero, Makro, Carrefour or Giant where almost 99% of the goods are FMCG goods. 

A question, is there a retail store that sells pharmaceutical goods as big as them? How big is the biggest pharmacy in Indonesia that sells health products? There's definitely nothing like the coverage that FMCG stuff requires.

Unfortunately, however, the volume required for handling FMCG goods is not commensurate with the amount of inventory that must be carried. 

Let's compare the price of one carton of instant noodles which is 40 cm x 50 cm x 50 cm (1000 cm3) and has a maximum value of Rp. 40,000 with a growth hormone drug that only requires a size of 4 cm x 5 cm x 5 cm (100 cm3) has an inventory value of Rp. 4,000,000. 

Remarkable ! with a volume that is only 1/10 of FMCG goods, but pharmacy has an inventory value of 100 times.

2. Comparative in handling goods

FMCG goods are everyday goods which are generally handled in a very simple way as we handle these goods at home. 

Imagine how you handle shampoo or toothpaste, definitely not as difficult as when you handle a medicine to prevent diarrhea that must be stored in a refrigerated and tight cabinet with a short expiration time and must be sensitive to changes in the color of the liquid in it.

The expiration date may still be considered as important between FMCG goods and pharmaceuticals, but if it is continued with the production code (batch number) and the temperature of the goods handling, FMCG goods are not so strict. 

Pharmacy requires the handling of goods to the level of production codes and very strict temperature handling regulations. 

In general, pharmaceutical goods have 4 levels of handling temperature, namely room temperature (25-30 degrees Celsius), cold temperature (15-23 degrees Celsius), chiller temperature (2-8 degrees Celsius) and freezing temperature (-20 degrees Celsius). 

The largest range is between cold temperatures and chiller temperatures where the number of these types of goods is around 60-80% of the average total goods handled.

The specificity of handling pharmaceutical goods is not only required in the warehouse, but has started at the time of receipt of goods to delivery of goods to consumers. 

In transportation, the handling of pharmaceutical goods still requires special moves that should not be reduced. Ice packs, dry ice and styrofoam boxes are the most commonly recognized enhancements in the pharmaceutical industry besides pallets, racks, forklifts and shrinking plastics which are commonly used in FMCG.

3. Comparative nature of consumer types

In simple terms, the type of consumer for pharmaceutical goods is definitely different from the type of consumer for FMCG goods. Look at the milk trucks queuing up at Carrefour or Hero, they queue for hours and it takes hours to unload their cargo. 

Transporters queue up waiting for the customer's schedule, which handles dozens of principals every day. 

Now, let's look at the transporters queuing up at the Bhakti Farma Pharmacy, for example, there are almost no similar queues. Or we can see at the biggest hospital in your city, are there trucks queuing there more than 5 units every time?.

Consumers of pharmaceutical goods are very different from consumers of FMCG goods in the pattern of their demand for goods. It is very rare for pharmacies or hospitals to store items as part of their inventory.

The reason is very simple, namely because the price is expensive and the types of goods are diverse and have become part of the public service that every time they need a principal who must immediately send it within 3-4 hours. 

This service is often called Cito. Cito is the most prestigious part of any principal or distributor of pharmaceutical goods where the shorter the time it takes to deliver the goods, the more "great" he is in the world of pharmaceutical goods logistics.

In terms of the number of consumers, it is clear that there are more FMCG goods than pharmaceutical goods. Even for certain types of pharmacies, for example IVF development drugs which are not available in every big city and can be counted in one country.

In general, we can say that FMCG goods transporters wait in queues in the parking area, whereas consumers wait for pharmaceutical goods transporters.

3PL Pharmacy 

By comparing the volume, handling of goods and the type of consumer, it is actually possible to answer how typical of inventory that must underlie business in this industry.

Small volumes, high prices, complex handling and the type of waiting customers are key in pharmaceutical inventory management. 

These four keys require that inventory at the pharmacy must be lean but complete and well-coordinated but flexible. 

The role of the analysis and the system used must be able to provide a sense of security for the inventory team to ensure that the goods ordered and stored have fulfilled the 4 main keys.

So what about the 3PL? The 3PL business must explore the existing inventory patterns in this industry in accordance with the 3PL goal, which is to provide speed and optimization of inventory at the lowest possible cost. 

It is better for 3PL to think about warehouse conditions which must be at least 3 times cleaner and better than FMCG goods but with an area that can only be twice. 

The number of employees is the same, it doesn't need to be as many as FMCG goods but with better quality and quality for understanding the handling of the goods. 

The difficult part is the transportation problem, because the volume is small and the number of outlets is also not many, the handling of pharmaceutical transportation requires higher innovation. 

The condition of the vehicle cannot be the same as the condition of the vehicle used by FMCG goods in general and the behavior of the driver is also not the same as the type of driver who usually serves FMCG goods.

This is where the pharmacy 3PL ace card is actually, how to handle transportation so that the costs incurred will be as low as possible.

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