Pharma Goedert

Pharma Goedert is a pharmaceutical distribution company, located in Redange, Luxemburg. The company was founded in 1975 as a co-operative wholesaler for pharmacists, and delivers today to 540 of the more than 4500 independent pharmacists[i] in Belgium and Luxemburg.

Pharma Goedert is recognized by the Luxembourg authorities as a wholesaler-distributor complying with European directives of good distribution practice.

The company currently employs 70 people. This team takes care of warehouse operations and distribution activities, and all other functions, including sales, accounting, purchasing and HR. Some aggregate financial figures can be found below.

The pharmaceutical distribution industry in Belgium is heavily regulated: both purchase prices from manufacturers as selling prices to pharmacists are set by law. The margins left for the distributors are used for covering operational expenses, overhead and other expenses, customer reductions, and profit. The only way to make decent profits is generating high revenues, and/or to optimize expenses and reductions.

Pharma Goedert’s value proposition to their customers is low cost for the customer by granting the largest reductions on the list prices.

For the customer, this means that the granted price reduction is directly and unconditionally on the invoice. Competition also grants reductions, but only on some products, in most cases of a lower value, and often subject to conditions, e.g. a minimal yearly turnover, or the reductions are cumulated at the end of the year as a credit note. Pharma Goedert grants reductions on all products up to 10%, directly on the invoice.

This strategy comes at a price:

Pharma Goedert cannot offer frequent deliveries.

Pharma Goedert delivers 3 times a week. The delivery vans carry goods, fit in the trunk in a Tetris-like way, with a value of about 50.000€. Routings to the customers are calculated to obtain maximum transport efficiency. Competitors often deliver multiple times a day, but with less-than-full truckloads of 5.000€ or less, and with more transport distance per delivered euro. Pharma Goedert’s delivery method imposes adaptations on the customers: ordering should be planned on beforehand, and receiving and storing the goods, often a large quantity, takes more time.

Pharma Goedert cannot supply all products from its stock.

Pharma Goedert’s offer to the customers counts 8.500 SKUs[ii], which cover 90% of the demand (a competitor holds more than 40.000 SKUs!). This low number causes less obsolete or perished products, which is important because suppliers don’t take back unsold products. The SKU list is updated monthly, based on sales and forecast. Stock rotation time is about 3 weeks.

In this context Pharma Goedert is working on an automation and robotization phase.

Pharmacists use Pharma Goedert to supply their basic needs in large quantities. Rush orders and specialties are ordered at the competition. When a pharmacy orders 50% of its needs at Pharma Goedert, this can result in yearly savings of about 25.000€ for a large pharmacy.

Pharmacists are, generally speaking, not very business-minded. The sales force’s main task is to convince customers to increase their orders, or to start ordering, at Pharma Goedert to obtain these savings.

The only way to achieve this value proposition in a profitable way, is by organizational and operational efficiency, try to obtain ‘the perfect organization’.

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