INR 150 crores working capital unlocked through improved distribution efficiency

High inventory holding time and damages

The company, one of the leading manufacturers of pharmaceutical products, engaged in pharma ingredients, branded and generic drugs. It was operating through six manufacturing facilities, each specializing in different kind of products and aggregating at five large warehouses spread across various parts of the country. It was distributing its products through 30 self-owned depots in different states and its network of over 300 distributors across the country. The company was working with multiple localized logistics partners to supply material from its factories to its warehouses and depots through a combination of full and part truck loads movements. The consignments were picked up by multiple local logistics partners at various distribution points and delivered through a combination of direct and subcontracted delivery partners across India. Due to this complex network of logistics partners, the company was operating with as high as 70 days' inventory. This high inventory holding was severely impacting the financial performance for the company as working capital worth INR 150 crores was blocked in safety stocks at warehouses and depots. This layered distribution had various challenges, specifically

Challenges - Story 12 - Alkem

Opportunity

Logistics partner with a national footprint, technology integration and express delivery

The company, with its experience of working with a logistics partner having faster delivery time, reliable service, lowest damages, highest reach of over 29000 pin codes and easy customer integration solution, decided to reimagine its supply chain by fundamentally questioning the need for holding high level of inventory at company warehouses and depots.

It also saw an opportunity to reduce its working capital requirement and damages by lowering inventory levels at each warehouse and rationalizing the count of depots in its network

Infographic - Story 12 - Alkem

Solution

Consolidate to a single reliable logistics partner with faster TAT and lower defect rates

The company decided to structurally solve its working capital problem by reimaging its distribution and supply chain model by consolidating its logistics requirement with a single logistics partner and integrated its inventory management system. A single logistics partner ensured all full truckload (FTL) line-haul movements between factory-warehouse-depots were delivered within three days anywhere in the country. It also enabled secondary movement between warehouse-depo-distributor through a combination of full and part truckloads through its capability to deliver to over 29000 pin codes in the country. It provided full technology integration for generating automatic pickup request, consignment note, tracking, proof of delivery and billing. It enabled the company to have full control over the movement of its products and led to the closing of one-third of its short-haul depots. The company started direct deliveries from the warehouse to distributors through part load movements.

The partner's robust process of faster delivery time, reliable service, lowest damages, highest reach helped company to lower the inventory holding norms at warehouse and depots from 70 to 30 days, reduce its number of depots from 30 to 20 and led to increased channel satisfaction.

Lasting business impact

The company, with its agile thinking, was able to make the most of the opportunity presented by capabilities of its logistics partner. It is now fully in control of its inventory, working capital and is looking to expand its distribution network and reduce its depots to less than 10. The business impact brought by this partnership was,

Impact - Story 12 - Alkem

The company, by embracing the modern-day supply chain best practices, has positioned itself well for fast growth by unlocking its working capital requirement. Today it delivers seamless service experience to millions of its customers across the country.