Global pharmaceutical company Cipla manufactures more than 1,500 products, with its South African subsidiary one of the country’s market leaders in terms of value and volume.
To ensure the efficient delivery of its medicines to clients around the country, it moved to a new state-of-the-art warehouse in Bellville, with long-time partner Cquential providing the intelligent warehouse system that makes its business goals possible.
In the world of large-scale pharmaceutical distribution, pinpoint accuracy is essential.
From a regulatory perspective, medical products must be traceable down to the item – i.e. from the point of receiving through to sampling, positive release, all the way through to invoice.
There are two reasons for this – firstly to trace a batch should it be illegally sold and secondly in case of a recall, or an enquiry from regulatory bodies requesting a re-test. Additionally, legislation dictates that samples from each batch must be retained for prescribed periods.
Hundreds of orders processed daily
Assembling the orders – known as picking in the industry – is difficult because 98% of the distribution is a combination of both case, plus fine picking. This makes picking orders very inefficient unless a system is in place, so it is vital that the warehouse is correctly set up to support operational efficiency.
It is important to understand that hundreds of orders are coming in daily – on each order there are many individual lines making the consolidation of efficient picking very complex. For example, if one additional minute per item is introduced to a situation where thousands of items are being picked per day – costs escalate significantly.
The warehouse can be extremely busy with more than 7,000 lines a day that must be picked, checked and dispatched. This painstaking attention to detail must, of course, be combined with the business need for efficiency and speed.
The legal constraints around getting the right product to the right place at the right time are even more crucial in the pharmaceutical industry where we are dealing with expiry dates, scheduled medicines and quarantined medicines from overseas.
The company had developed a lite scanning system using scanners at despatch, but there was no real integration into its ERP system – Sage Evolution. Crucially, there was no overriding system that would direct the warehouse operations in line with best practice and enforce required processes while integrating seamlessly into Sage.
The final step in the process is the handover of the assembled orders to the courier company responsible for distribution – a very labour intensive manual process.
Large range of stock and massive volumes
Given the sheer volumes of Cipla’s South African operation and the large range of stock items, it was clear that achieving the dual goals of efficiency and accuracy required a flexible yet robust warehouse management system.
Also, the company was determined to be able to offer market-leading turnaround times and customer service even though its Cape Town distribution centre was located far from other population centres.
“We knew we needed a warehouse management system that was flexible enough to meet our specific needs, but robust enough to allow us to meet our targets for accuracy and speed and support a business that was growing rapidly,” said Joseph Ludorf, Supply Chain Executive at Cipla Medpro.
Cquential was chosen because it offered this combination of flexibility and strength, as well as the domain knowledge of its team. An additional point was the fact that, as a locally developed product, access to technical support was extremely quick and direct.
The new warehouse has been designed to provide Cquential with the perfect distribution hub. Its team implemented the Cquential Warehouse Management System over around nine months.
The first step was to conduct business workshops to document Cipla Medpro’s requirements, after which the system was suitably configured. A big part of the job was designing an interface with the Sage Evolution ERP, as well as with the IT system used by the courier company.
Steve Mallaby, CEO at Cquential, said it was challenging to introduce a new system and its allied processes into an environment that had no previous warehouse management system experience.
“The company’s executive taking a hands-on approach was vital to the success of the project,” he said. “A system like Cquential is only effective if the users embrace it and we have to give Joseph and his team full credit for the imaginative and ultimately highly successful change management programme they put together.
“Involvement at executive level is crucial to the success of change management implementation.”
The new warehouse management system was phased in across two sites, beginning with the inbound phase and culminating with the outbound at each one. For the duration of the implementation, Cquential placed its own industrial engineers on site to assist with change and handle queries.
Billing, however, is done using the software-as-a-service model, giving Cipla Medpro the benefits of rapid scalability and cost effective monthly pricing dependent on level of use. The contract is backed up by a service-level agreement, with support offered remotely.
Two of Cipla’s key goals were:
- Compliance with regulatory constraints
- Improve customer service through speed and accuracy
In addition, the implementation delivers 99.98% stock accuracy which was evident in the recent stock-take of a cycle turnover of approximately R600 million. This represents a variance in the order of approximately R3,500 which put another way, represents two small packets of high-end drugs.
This phenomenal accuracy greatly enhances Cipla Medpro’s audit processes and assists it in complying with the various regulations that govern pharmaceutical suppliers.
It also provides the necessary muscle to enable Cipla Medpro to bid for and win large national tenders, such as the R2 billion contract with the Department of Health to supply antiretroviral drugs for the South African government’s HIV/ Aids programme from 2015 to 2017.
Another benefit is that the system now drives the process and represents the intellectual capital relating to warehouse management and distribution, a much less risky alternative to relying on the skills and memory of individuals.
Cipla has been growing strongly since the Cquential system was put in, and the system has proved capable of handling the increased volumes with ease while continuing to yield improved productivity and customer service.
Growth and the move to a new facility
“A robust facility that allows Cipla to meet its targets for accuracy and speed—and support the business that is growing rapidly,” said Ludorf.
The company moved to a new, state-of-the-art warehouse facility in Bellville, and Cquential helped ensure that the operations were transferred seamlessly with minimal downtime.
Mallaby said this required a balanced approach that was cognisant of the need to keep the old warehouse operations and processes going while continuing to service customers but at the same time setting up the new facility, configuring the system to handle new and different processes and moving stock into the new facility.
The fact that Cquential was in both facilities and they had intimate knowledge of the business operations was a significant factor in ensuring the success of the move to the new venue.
“Moreover, in the month of the move, Cipla SA had its best month ever, so one can understand how this increased volume in sales added additional pressure to the move,” added Mallaby.
Collaboration and strategic planning partnership
Cquential was also extensively involved from the early stages of planning, by providing the data which was utilised for the design and layout of the warehouse and racking systems, through to the mapping of the business processes in the new facility Cipla.
“The new warehouse has been carefully designed to provide us with the perfect distribution hub but achieving all those efficiencies depends on the warehouse management systems’ ability to control incoming and outgoing stock with pinpoint accuracy, co-ordinate picking with the orders coming out of the ERP system and ensure the right orders reach the courier,” said Ludorf.
“All of this has to happen in an area that is as large as three rugby fields and with pallet stacks as high as 15.6 metres.”