Unlocking the network effect for healthcare companies’ CMO flows

‘Europe is running out of medicine’ is one headline among others with similar disconcerting messages that appeared in the media over the past months. Medicines affected are paracetamol and certain antibiotics. The issue ignited discussions on how to safeguard Europe’s access to medicine for patients in the future.

The root cause is linked to the global value chain, which can be disrupted by factors like transport delays, capacity shortages, trade tensions or pandemics. This makes a continent reliant on medicine imports from cost-effective manufacturing locations in Asia vulnerable.

One way in which pharmaceutical companies attempt to eliminate that vulnerability is by reshoring production units to European facilities. Several of them have announced plans for new API production plants in Europe. 

However, on a European level, the logistics flows of pharmaceutical companies can be complex and costly. Especially when they rely on Contract Manufacturing Organisations (CMOs) whose logistics flows tend to lack the level of optimisation that dedicated supply chain experts could realise. 

At Kuehne+Nagel, our healthcare experts have developed a specialised solution that does exactly that. All the while providing visibility of CMO flows and adhering to strict quality requirements. 

Read on to learn more about this proven solution.

Gaining trust with a unique solution

The trend of contract manufacturing has long gained a foothold among pharmaceutical companies. This is the outsourcing of drug development and testing to CMOs so that the outsourcing company can focus on R&D. The CMO market has an estimated size of over 130 billion dollars, and it keeps growing significantly in parallel with the healthcare industry. 

Philippe Gosse, who works at Kuehne+Nagel’s global headquarters in Switzerland as Head of Business Development Healthcare Logistics Road, shares that the biggest names among the world’s pharma multinationals will likely rely on several CMOs at once. There are even cases, he adds, where one company’s CMOs are spread out over more than 100 locations within Europe. 

However, managing CMO flows to distribution centres comes with supply chain challenges in terms of quality, visibility, and costs. Challenges that Kuehne+Nagel has been able to solve through a unique solution enabled by healthcare supply chain expertise, an extensive GDP-compliant cross-dock and multi-customer network, connections to CMO and a mature solution for Less-Than-Truckload (LTL) healthcare shipments. 

Meanwhile, the time-tested solution is growing in demand, having gained the trust of many key market players in the healthcare industry.

Intrinsic capabilities and a ‘network effect’

“The goods would arrive from the CMO in the distribution centre without data on the GDP-compliancy of the journey, nor upfront visibility on the actual costs of the shipments,” says Philippe Gosse, sharing the actual pain points as a healthcare company working with CMOs once described them to him. What’s more, it was not the first time that these frustrations had come to his attention.

In fact, Kuehne+Nagel had already answered those concerns for customers, by managing their CMO flows while acting as a single point of contact. What’s more, by letting CMOs plug into Kuehne+Nagel’s online booking system, the customer gained full visibility of their CMO flows and the temperature along the way. Also from a cost perspective, the customer gained upfront visibility whereas before the logistics bill often came as a surprise. 

“And as we started to offer this solution to more and more customers,” Philippe adds, “the solution benefited from a network effect, gaining efficiency. After all, our customers often share CMOs. This means we developed a relational network of CMOs familiar with our systems but also that we could start to consolidate different shipments into one truck, thereby optimizing cost and CO2e footprints.”

This LTL (less-than-truckload) solution also required a mindset shift and a gain of trust, from a previous conviction that FTL is the only truly safe way to transport sensitive healthcare goods. The fewer additional handling actions or cross-docking activities, the better. However, with the right network, visibility and quality standards in place, there is no need to distrust LTL. 

Philippe: “In Europe, we have an extensive GDP-compliant cross-dock network with 8 strategic locations. We have trained supply chain healthcare experts. We have visibility. On top, we have connections to many CMOs and a multi-customer network that enables us to build synergies between all these CMO flows.”

And, when CMO flows across oceans, Kuehne+Nagel can still act as a ‘control tower’ that collects from different suppliers and delivers to different distribution centres–activating the Sea Logistics and Air Logistics teams. “If a customer wants products shipped from the United States for distribution across Europe, we can provide the solution. On top of our CMO flow solutions within Europe, such global end-to-end solutions are enabled through our network. A real advantage for our healthcare customers.”

Want to learn more about our solutions? Reach out to us here.