Unidrug Distribution Group describes itself as a pre-wholesaling company that distributes pharmaceuticals and over-the-counter (OTC) medicines in the United Kingdom. It is a joint venture owned by Alloga, itself founded in 2000 as an independent joint venture between the Swiss company Galenica and the British firm Alliance Unichem, and United Drug of Ireland. Alloga employs 450 people across Europe and had a turnover of €382.8m in 2002.

UDG is a specialist that takes some vital supply chain activities away from its clients, which are drawn from the largest drug companies operating in the UK, like Pfizer, Bristol-Myers Squibb (BMS) and Novo Nordisk, through healthcare products manufacturers like Smith & Nephew down to a targeted number of smaller companies supplying the hospital, pharmaceutical and general healthcare market. "If a pharmaceutical company says it doesn't want to run its own warehouse any more, and decides to outsource that responsibility, we will step in and manage that element for them it up," says Richard Shore. "But we aim to partner them so closely that it will be just as if they still had an in-house supply chain solution. We act on their behalf."

A standard of management
The market place, he points out, is well defined enough to ensure that anyone considering outsourcing their distribution will be aware of UDG and its track record, which ensures that it will be a party to any bidding process. This is how it has become the market leader, handling goods to the value of £2.3 billion each year. "Our strategy is to focus on pharmaceuticals and healthcare, including consumer OTC medicines, diagnostic and general surgical products that are distributed to wholesalers, grocery multiples and used in hospitals."

To operate in this specialist area UDG is required by the MHRA to hold its own Wholesale Dealers Licence and to adhere to Good Distribution Practice guidelines. The MHRA audits UDG at least every 3 years. To meet these standards UDG has a fully controlled and secure warehouse with the ability to manage all products down to batch level. UDG also handles controlled drugs, and this activity is approved by the Home Office.

Pfizer made the strategic decision to outsource their warehousing and distribution activities in the UK. And they selected UDG as their supply chain and warehousing logistics partner. Whatever they were doing at Sandwich we are now doing on their behalf." Though Pfizer is one of the largest pharma companies in the UK UDG was able relatively painlessly to absorb these volumes into its Derbyshire operation, says Richard Shore. About ten of the top 20 companies have already outsourced their distribution, a good proportion to UDG, which has more than 50 clients. "I don't think any competitor can be supplying more product into the market than we are," Richard Shore states.

UDG operates out of a single site at South Normanton in Derbyshire, on which it has two separate warehouses, each having about 30,000 pallet spaces for ambient product as well as refrigerated storage space for 750 pallets. Physical security is a priority, and controlled drugs are stored within the warehouses in two vaults. "There are at least eleven layers of security on the site, starting with extensive CCTV coverage, but the vaults themselves are separately vetted and approved by the Home Office to high street bank vault level. You couldn't ram-raid the vault."

Tracking the boxes
Medicines have to be identifiable by batch. The industry is looking carefully at RFID to track the progress of items from manufacturing site to retail outlet but it has not yet been able to reliably identify individual boxes within the pallet, and there are issues presented when scanning some water based products too. "Rather than using RFID tags, which can be expensive, mass serialisation is a viable alternative. That's already done in the European market driven not so much by product assurance agendas as by reimbursement issues," says Shore. Through the investment in traffic management systems UDG is able to track all deliveries and the electronic POD is posted to its website within 30 minutes, providing their clients with full visibility of their orders.

Pfizer's enterprise system is Oracle. For its third party logistics clients it was vital that the company's warehouse management system should be able to interface with a variety of different systems, Richard Shore says. "The hospital places its order with Pfizer electronically and that is routed via Oracle into our own WMS. We have created a virtual warehouse so when Pfizer goes on its system to look at stock or orders it is just as if they were looking at their own warehouse. We have created an interface with their Oracle system so they can see stock levels in real time, and all the transactions."

Bristol-Myers Squibb and Smith & Nephew, on the other hand, are on SAP, and UDG has created a similar interface with their ERP system so they get a similar view of their virtual warehouse. "The ability to have multiple clients feeding off our WMS is core to our business," Richard Shore insists. "For those third party logistics clients we can operate with SAP, Great Plains, BPix, Oracle or any bespoke system, thanks to the system that we have chosen and its ability to interface.

Best of breed
The system in question is DLx Dispatcher from Red Prairie. Implemented in 2003, smarter, leaner warehouse processes and real-time control are improving the productivity of warehouse operatives while managing costs. Tasks are now prioritised and scheduled dynamically, with system-directed storage and picking maximising interleaving and minimising forklift movements. Screen menus on the RF terminals direct staff to their next task, which has eliminated paper-based instructions. Intelligent storage analysis means pallets from the same consignment can be stored in different parts of the warehouse and still be instantly traceable.

Smaller clients may decide to outsource their customer services as well as their logistics, Richard Shore continues. "They tell the customers to order through us. In these cases we act as their outsourced customer services, invoicing and cash collection arm as well. For those clients we have a sales ledger of around £600 million a year. That alone would place us among the top ten pharmaceutical companies if that were our own product!"

I asked Richard Shore why the company didn't go for one of the leading ERP solutions in that case, and get a package that included CRM, warehouse management as well as financials and materials tracking. "We chose best of breed because we didn't feel that the big ERP people had a good enough warehouse management system. We bought Siebel CRM at the time to support sales order processing and pricing system. Then over and above that we have integrated a package called DIPS which does all the routing and scheduling for our vehicles and also plans the most appropriate carrier if we are not doing it. We have traffic management centre from Microlise. Now that is a fabulous system! It gives you great visibility of your vehicles, as well as electronic proof of delivery. You know if the vehicle is delayed so that you can proactively contact the customer. You even know if they go off route, or if the vehicle is open when it shouldn't be!

With its own fleet of 40 trucks for pallet deliveries that is important. And though at present UDG relies on its parent company Unichem's delivery network for smaller parcels, augmented by other carriers, the company is planning to set up its own parcel fleet at some time in the future

Finally, UDG is taking the first steps toward brining in six-sigma principles. "In three years it'll be a part of the DNA of the company," says Richard Shore, himself a green belt, "though at present we are starting out by using some of the tools like project identification and DMAIC (define, measure analyse, improve and control) on a project basis. It will be a core tool when we do our business process review." I invited him to sum up how he sees the company's present state: "UDG has invested in state of the art warehousing, leading edge business systems and in a high quality fleet of vehicles. This multi-million pound investment means that UDG can develop specific business-, not systems-led supply chains for each of its clients. The combination of our experienced contract operations management and quality systems means that UDG delivers ÎService Excellence as Standard!'"