The ability to keep pace with change is essential in any business but probably nowhere more so than in the fast moving world of healthcare distribution. Growing demand from an ageing population, medical advances and structural changes to the industry have all played their part in creating challenges in the supply chain. In 2004 pharmaceutical wholesaler UniChem, the winner of the Own-Account Operator of the Year trophy at the Motor Transport Awards, undertook an in-depth look at its distribution network as part of a wider review of changes in the marketplace. As a result it introduced efficiencies that resulted in a 7.3% reduction in cost-per-delivery but at the same time increased customer satisfaction by 2%.
The company believes that the key to its success has been what it calls its All-Angle Approach, as UniChem's general manager for national distribution, Richard Slater, explains. "It was a method of change management more than anything else. If you've done the same things for many years 
people work in their individual silos. This was a way of analysing the need to change, defining how we were going to approach it, who would be involved and painting a vision of what life would be like on the other side," he says. One of the biggest challenges was to update UniChem's pattern of fixed-route deliveries which had so far managed to keep up with increases to the customer base but which were becoming sub-optimal.
A 12-month project radically altered the company's 1,200 routes, resulting in a 6.25% saving in distribution costs. During this period UniChem reduced its fleet of 466 by 17 vehicles and saved 1.8 million miles travelled per year. The number of pharmaceutical routes was reduced using TruckStops' routing and scheduling software to achieve the savings and at the same time to introduce customer service improvements - overall 80% of the existing routes were affected by the initiative. Each pharmacy receives two deliveries a day and for the first time UniChem was able to provide customers with 
specific delivery time expectations.
"We were able to conduct a strategic analysis looking at what the effect would be if, for example, we moved to earlier delivery windows or re-organised nationally the routes the vans would take. We have been able to use the same software to schedule on a dynamic basis if we don't have full demand and don't need such regular deliveries," Slater says. Getting routing calculations correct is vital in the pharmaceutical industry because of the important nature of the products.
"If someone goes to a pharmacy and they can't immediately fulfil a prescription they will, for example, be told it will be ready at 4pm or the next morning by which time the next delivery will have been made. The service we provide has to take into account the dependency of the customer base on a consistent, accurate and rapid distribution solution," Slater comments. In addition, UniChem has been able to increase efficiency by working with sister companies to create distribution synergies, initially within the Alliance UniChem group and now, since its merger with Boots this summer, within Alliance Boots. This includes working with the Alliance chain of pharmacies and collecting products from suppliers for Boots, under a Boots back-hauling initiative called Boots Collect.
Even before the merger UniChem was Boots the Chemists' preferred wholesaler delivering 10,000 product lines into its stores. Now, where it creates efficiencies, UniChem will in addition transport some of the 1,400 pharmaceuticals provided by Boots directly. UniChem has taken up several opportunities to raise revenue through back-hauling and third-party work. Its trunking fleet carries products for a number of organisations on return journeys - in 2005 it generated a six-figure revenue working for seven external clients. UniChem also makes deliveries to its pharmacy customers on behalf of United Drug Group, the pre-wholesaler it co-owns - pre-wholesalers consolidate consignments on behalf of drug companies before delivering to hospitals, distribution centres and directly to some pharmacies.
As well as being financially advantageous to UniChem, Slater says that better utilisation has social benefits. "By operating more efficiently can translate cost savings into added-value initiatives for our customers and meet environmental targets," he says. Some work involves acting purely as a third-party logistics provider and this is the case with a new sole distribution contract it has signed with Pfizer covering all pharmaceutical products supplied in the UK from next month. UniChem will use a special fleet, 80% of which will be made up of dedicated vehicles, to make the deliveries. It will distribute to all the UK's 15,500 pharmacies rather than just its 6,000 regular customers.
"We will deliver to the new customer base only around 60% of the time which means we will be moving much more into the world of dynamic scheduling," Slater explains. UniChem expects to undertake further third-party work early in 2007 and in January it began making home deliveries on behalf of an NHS Trust in the Birmingham area. Transport is considered a core part of the business by UniChem, hence its decision to keep distribution in-house. However, it does consider outsourcing from time to time but so far the arguments have not stacked up, partly because of the nature of the products and delivery points. "The interaction our drivers have with the customer base is crucial to our business. We believe it would be difficult for a traditional parcels carrier to adapt to that," he says.
The importance of drivers to the business has been recognised through a number of initiatives that helped to reduce driver turnover from 26% in January 2005 to 15% in January 2006. These included a Work/Life Balance initiative that allowed drivers more choice on hours and routes worked. Being own-account makes it very important for UniChem to benchmark itself against industry standards, to avoid becoming too internally-focused and it judges its performance in a number of ways. These include looking at the efficiency of its scheduling with the aid of its routing package, through analysis of its own and competitors' costs and through examination of industry wage rates compared to other wholesalers and the transport industry as a whole. It also gets feedback about standards and its cost-per-drop when tendering for third-party business and can use its vehicle suppliers to gauge driving standards.
"Winning the Motor Transport Award the first time we entered was also a good way of benchmarking!" Slater adds. Despite bringing in efficiencies and cost-savings, Slater believes that one of the most important things UniChem's distribution operation has achieved since introducing the All-Angle Approach is to alter its attitude. "Rather than being a one-off initiative it has helped us to get used to change and that has allowed us to develop the new channels of distribution for the future of our business," he says.
- A good example of re-appraisal of market needs and responding with a good blend of innovation and technology.
- Good all-round company with good results in a difficult market.
- A great achievement in reducing costs, improving service and investing in technology and staff training. A worthy winner.
- Major changes in improving customer service and operation costs.
The fleet
UniChem has become more efficient in terms of vehicle purchasing over the past two years after appointing a full-time fleet and procurement manager. This has helped it to secure better deals on its vehicles, leading to a 12% reduction in purchase price between October 2004 and January 2006. However, it looks at other aspects of the deal in making an assessment of overall value-for-money. "We don't just look at the purchase price. We also consider whole life costs and residual values," Slater explains.
UniChem has widened its supplier base and now uses Renaults and some Mercedes in addition to the Ford vehicles that have traditionally made up the vast majority of the fleet. But whatever the make of vehicle, it looks at whether the dealer treats the company as a key account in terms of providing good warranty terms and advice and training for drivers. In addition, all the vehicles it chooses must be the appropriate size for their required task.
"We want the right vehicle for the right job to maximise mpg. We want to make sure we are not transporting fresh air but at the same time want to retain the capacity to be able to cope with peaks," Slater says. As well concentrating on the vehicles themselves, UniChem has introduced improved technology to help run the fleet. It now uses vehicle tracking throughout and has brought in a telematics package capable of providing electronic proof of delivery on 300 of its vehicles.