Outsourcing strategies and distribution models in Italian Pharma Supply Chain

Abstract

In the pharmaceutical supply chain, all players have to ensure the highest level of service while containing costs, because of the ethical issues concerning drugs. The outsourcing of logistics should be recognized as a competitive lever, especially in this complex and highly regulated industry. Based on these premises, the research objective of this study is to investigate the relationship between the outsourcing strategies of manufacturers and the logistics services offered by Third-Party Logistics Service providers (3PLs). To achieve this objective, a multiple case study was designed to analyse the different physical distribution models adopted by pharmaceutical companies. We collected qualitative data and the subjective perceptions of several logistics directors, conducting structured interviews with 11 pharmaceutical companies and six 3PLs. We have identified three physical distribution models, on the basis of the number and location of the warehouses used (single warehouse, dual warehouse and multi-warehouse models). We discovered that there is a strict relationship between the physical distribution model adopted by pharmaceutical companies and their features (i.e. the main distribution channel, product portfolio, target service level, transport and warehousing costs and other company related issues). Our research also offers an empirical insight into the key logistic services that 3PLs should offer within the pharma industry. In conclusion, the study draws a roadmap to guide pharmaceutical companies in their strategic logistics decisions in Italy, while also considering possible future trends deriving from changes to European regulations.