Analysis of ruptures in the pharmaceutical chain

This year, ILOS carried out an extensive survey, in partnership and sponsored by Aché, ABRAFARMA, BD, Fidelize and Plannera, on the management of the drug supply chain in Brazil. One of the most interesting analyzes was about the level of disruption along the chain.

The diagnosis of the lack of products in the different links was carried out in three different ways:

• First, a survey of executives from different links evaluated their perception of the percentage of stockouts existing in their company, which allowed capturing a first comprehensive view of the lack of products in the chain;
• Afterwards, 1.245 purchase simulations of a list of high and low turnover drugs were carried out in establishments in the five regions of the country, which offered a view of the rupture at the end of the chain and how much this may be different from the executives' view;
• Finally, with support from Fidelize and Plannera, it was possible to analyze 3.000.000 orders from pharmacies to distributors to measure how many of them could not be fully met due to lack of products and how much this disruption represents in revenue.

Executives' Perception

In response to the question: “What is the percentage of out-of-stocks in your company?”, pharmaceutical chain executives presented a view that stock-outs increase as the chain approaches the final consumer, reaching 11,5% in the case of pharmacies that are served by distributors. In the case of large pharmacy chains, which have their own DC, the biggest break in the chain is found in the DC, which, in the executives' view, has an average break of 9%. Figure 1 illustrates these results.

Figure 1 - Executives' perception of the rupture in the pharmaceutical chain in Brazil

Source: ILOS

Simulation of Retail Purchases

Our team spent almost two months calling 1.245 pharmacies throughout Brazil to simulate the purchase of a list of 12 drugs, 6 high-volume and 6 low-volume, in order to try to measure retail out-of-stocks. The results point to immense opportunities in the drug chain. The overall stockout rate was 31%, that is, in almost a third of the simulations carried out there was not at least one product on the list, as shown in figure 2.

Figure 2 - Retail stockout analysis by purchase simulation

Source: ILOS

Even when we separate the stockouts into high-turnover and low-turnover products, we find a much worse situation than that perceived by the executives, with 19% of stockouts in high-turnover products and 43% of stockouts in low-turnover products, as shown in figure 3 .

Figure 3 - Retail stockout analysis by product turnover

Source: ILOS

Analysis of 3.000.000 orders from pharmacies

The analysis of more than 3.000.000 orders from pharmacies to distributors showed that 14% of orders had some type of rupture, meaning that 8,2% of the order value was not invoiced, which generates an annual loss in revenue of BRL 2 billion, as shown in figure 4.

Figure 4 - Analysis of orders from pharmacies to pharmaceutical distributors

Source: ILOS

Despite these impressive stockout numbers, when asked “What is your company's average inventory coverage (in days)? chain, as shown in figure 162.

Figure 5 - Average stock coverage (in days) of the pharmaceutical chain

Source: ILOS

The results of this study point to the enormous opportunities that exist from better management of stocks in the chain, especially when we look at low-volume drugs and the interior of the country, a market that will grow at a more intense pace in the coming years. It also indicates that the problem seems to be bigger than what is perceived by the sector's executives, who must be attentive to these opportunities.

References

ILOS 2015 survey on drug supply chain management in Brazil