We have often heard that the pharmaceutical industry is not always a great fit for network design because the margins are so high. The argument is that the transportation and logistics costs are so small relative to the cost of the product that they don’t matter.
I recently came across a nice case study written by consultants at McKinsey that runs counter to this argument. The article discusses the network design process in the context of the pharma industry. And the savings they quote are consistent to what we’ve seen in other industries:
As a result of this kind of analysis, one pharma company reduced its network of 25 separate country warehouses across Europe to eight facilities serving multiple countries. The resulting increases in warehouse efficiency and consolidation of product flows helped the company to reduce its overall logistics costs by 15 percent. In another example the reduction in warehouses was from 30 to 15 and cost reduction was 20%.
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