Your right to play in this market requires a degree of sophistication, automation

Blue Star Engineering & Electronics recently announced a partnership with Gebhardt Intralogistics Group of Germany, for warehouse automation solutions. In a freewheeling conversation, Viveka Roychowdhury asks Prem Kalliath, CEO, Blue Star Engineering & Electronics and Volker Nicolai, Chief Revenue Officer, Gebhardt Intralogistics Group GmbH why this is the right time to consider such warehouse automation solutions, and why pharma companies need to move from a product centric to a solution centric approach. Edited excerpts from the interaction

Mr Kalliath, what are the business drivers for such warehouse automation solutions for pharma companies in India?

Prem Kalliath: The pharma industry in India has many components in its value chain, from the large API to formulation to specialty manufacturers, etc. All of them require automation, but different kinds of automation, depending on the kind of load they need to deal with, in terms of tonnage, number of SKUs and the number of destinations between all of them. These three factors will have implications in the way you store, pack and distribute your packages.

One of the specific requirements we thought we should approach Gebhardt to work with us, is the need to have a whole basket of solutions relevant for different players and for the same player at different points in time. That’s where we believe this partnership is unique.

We have something which works well for the API maker, we have something which works well for the formulation manufacturer, and also for the specialty manufacturer, which are across the chain. All the people who are getting into more direct to retailer, direct to consumer will have requirements for things like automating their fulfillment centers, automating their distribution centers, etc.

Thus, this partnership is unique because it gives us a whole range of industry relevant solutions, while being compliant with all pharma requirements of regulation, traceability, etc. And in partnership with us, we can provide solutions which meet the requirements and also do it in a responsive, implementable and cost-effective manner.

Mr Nicolai, can you share your experience of using such warehouse automation solutions globally in the pharma sector?

Volker Nicolai: Of course, we’ve had different global projects for our warehouse automation solutions in the pharma sector. Distribution and traceability are one of the main drivers for customers.

If you have an end-of-line packaging, full cartons can be traced to the palletising unit. It is then automatically taken by a robot, for example, and while the robot picks it up, it passes a barcode reader just to make sure that it is placed on the right pallet. Thus, traceability was one of the main drivers in the production area.

The second driver was on the distribution side. So, one is of course quality, traceability and then the other is volume. We have many online pharmacies in Europe, where you can buy even prescription medicine online. It is much more non prescription or healthcare/beauty products, where e-commerce gets more essential and creates volumes. You cannot do it anymore with manual procedures. With volumes, the effectiveness of such solutions comes in.

India is considered a price sensitive market and the pharma industry is price controlled, so they cannot pass on too much of the price of implementing these technologies to their customers. How expensive are they compared to what they’re using now or if they’re not automating it? What is the return on investment (RoI) and how fast can the client see RoI?

Nicolai: Usually I think, in Europe, it’s sometimes an ROI of two to four years.

And in the India context?

Kalliath: I think in the Indian context, too it will be similar. But I want to put it differently, I think one is in terms of a return on investment.

Secondly, in terms of (warehousing automation solutions being) a necessity for the supply chain. I think almost everyone believes in the extent of change that e-commerce with e-pharmacies is bringing in.

And of course, many companies also want to experiment. For companies to meet their ambition to stay in touch with their consumers, to stay as close as possible with their retailers, it then becomes a necessity for doing it.

So, while the economics of it (implementing automation warehousing solutions) will be attractive, I think what’s more important is that your right to play in this market requires you to have a degree of sophistication and automation.

In addition, the whole regulatory framework requires you to have this. If you look at it, from a business ROI point of view, rather than a pure financial ROI perspective, I think the returns will be very attractive.

What about the data that a pharma company or an e-pharmacy might gather from these automated solutions? Does Gebhardt or Blue Star have solutions which help pharma companies and their customers gain insights from this data?

Kalliath: Within any automated solution that you have, we will get data on which products were how frequently purchased, by which customer. In fact, most of this is available with companies even now.

Companies can today even trace back to where it came from, especially from a quality standpoint. But these solutions allow you to do it with the ease and speed at which you want to be able to do it.

And secondly, when you have all of these solutions, it will require an integration with a warehouse management or warehouse control, and finally, a distribution system as well. The end-to-end availability of information can help companies plan their supply chain networks much better, know what plan to service, which market, etc. All of this information will be available. And I’m sure many companies have already started doing it. It just enables the process and expedites a way in which they can move in that direction.

So, like you said, many pharma companies are already on this path. What is the USP of the Blue Star and Gebhardt partnership? And what does each one bring to the table, in comparison to what is already available?

Kalliath: While forging this partnership, that was something which was uppermost in our minds. I think, with very few exceptions, most people come to the market with a product focused approach. Whereas we come with a pure solution focused approach.

So whichever company you may be, large, medium or small, we will have a solution which is tailored to the requirements. And that is, I think what we Blue Star and Gebhardt, together bring to the table: our ability to change or choose the right solution, depending on the requirement of the customer. Rather than being predisposed to what is available with a specific manufacturer or product supplier.

I think that is the biggest difference that we bring to the table. And both of us have the same mindset. Because I think the advantage that we have and the reason why we work with Gebhardt is the kind of range of product offerings that they have, and the expertise across industry, including pharma. I think that’s where we collectively believe we have something which is working well and can be used to differentiate in the market. We are in early conversations with a few companies. I’m sure we will gain traction over the next few months.

So, Mr Nicolai, when you look at the India pharma market and the global pharma markets that you’re already serving, where do you think your solution will need to really be customised for India conditions?

We have to see what is the right level of automation. The level of automation in Europe might be higher than in India. And then the second thing is the software processes, which need to be adapted.

We don’t know about regulations here in India, besides FDA and GMP. But of course, Blue Star will be able to find this out, if they don’t know it already.

And the next thing is, of course, the entire implementation of the project. Project management in Europe is different. And of course, this cannot be a European company. For every successful project, you have to have an essential project management team, which runs the project in an effective way, communicates with partners and therefore we are pretty much sure that our partnership with Blue Star is ideal.

What do you estimate will be the project implementation time because implementing any new systems does take time, training, etc.?

Kalliath: Absolutely. Based on our experience, any of these projects will take anywhere between 12 to 18 months to implement. And that’s the normal timeframe. From when you sign up for an order, to actually having a system implemented and delivering the results that you expect, the entire cycle can take anywhere between 12 to 18 months, and sometimes even longer. I think that’s where the project management capability, which Nicolai was referring to, becomes very critical and important.

And in addition to the project management, I think what we are also doing is trying to see which part of the systems can be localised and indigenised. That will be a very important part that we play as we go forward and help customers to realise better ROI, if that’s the way they want to be looking at it.

There is good engineering capability in India, there is a developing ecosystem, and with our knowledge of the engineering of the product and the available supply chain, I think together, we can come up with a solution which meets all the expectations, as well as global standards and becomes cost effective in the Indian context. That’s really what we’re looking at.

I think the pharma industry is particularly well poised to benefit from the automation solutions that are on offer. They are an adopter of automation solutions, but the way they have adopted it typically tends to be a little more product centric rather than solution centric. And that’s not really what we bring to the table.

Because we have a knowledge of the market, we have a whole range of solutions that we can offer. And I think we have the openness to consider various models in which it can work which meets the requirements from all dimensions: cost, quality, implementation timeframe and flexibility. I think that’s really what a partnership between Blue Star and Gebhardt collectively brings to the table.

Blue StarE-commerceE-pharmaciesGebhardtpharma warehousingwarehouse automationwarehouse management
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