Pfizer's prescription for fulfillment

Pfizer's logistics department is staking a claim as the best in handling order fulfillment. After all, it moved more than 9,000 shipments of Viagra to retail outlets in a mere 10 days.

By Jim Thomas -- Logistics Management, 1/1/1999

You undoubtedly have heard of Viagra, but do you know the logistics story behind the much-lauded pill? When Pfizer Inc. launched the male impotence treatment earlier this year, it used its expertise to accelerate the typical approval-to-market cycle time of three to four weeks. Once Pfizer received the final OK from the Food and Drug Administration in late March, the pharmaceutical giant packaged Viagra and shipped it through a distribution network that included manufacturing sites, Pfizer's logistics center, wholesaler DCs, retailer DCs, and ultimately, retail pharmacies in only 10 days.

Even for a logistics department as sophisticated as Pfizer's, that was no small feat. "It required a lot of innovation," says Oscar Perez, Pfizer's manager of national customer service. "We're not talking about moving a couple hundred shipments; it was in excess of 9,000."

To expedite the cycle, Pfizer prepared shipments of Viagra before it ever received the product in its logistics center. Customer service used the company's software system, called R.C.S. (for Revenue Cycle System), to create a template to build orders with weights included. Once the logistics center received this information, it ran the data through FedEx software. The software checked order ZIP codes for accuracy and produced labels. Pfizer then printed labels and gave them to FedEx. FedEx prepared batches and sent the labels back to Pfizer. "Normally, you would not take any of these steps until you had the product in hand," notes Phil Rose, logistics center manager.

Once the distribution group received the Viagra, it packaged and prepared the orders. As part of its plan, Pfizer shipped the orders directly to the FedEx Memphis facility earlier than the normal night shift, which minimized the burden on the carrier's distribution infrastructure.

In recognition of this overall distribution achievement, the National Wholesale Druggists' Association presented Pfizer with the DIANA award for the best new-product introduction. Yet that kind of recognition is the exception, not the rule, for Pfizer's logistics operations. "We're like a lot of other companies," says J. Don Witherspoon, director of logistics. "When you think about Pfizer, logistics is not the first thing that comes to mind."

Perez agrees. "Pfizer is recognized as a leader because our R&D and marketing departments are second to none," he says. "But in the absence of a quality logistics operation, the best R&D and marketing still can't deliver the goods. Our mission is to fully complement and support our other core competencies, while leveraging our network to its fullest capabilities."

The Challenge of Success

That logistics mission has become more challenging than ever in recent years. Pfizer has launched 12 major new pharmaceutical products in the past decade, and the company's portfolio includes 60 drugs in the development pipeline.

In addition, Pfizer recently partnered with Warner-Lambert to launch the cholesterol-lowering medicine Lipitor, which broke industry records for first-year sales. The company also established partnerships with G.D. Searle and Japan's Eisai.

On top of this, Chairman and CEO William C. Steere Jr. recently announced that he envisioned Pfizer becoming the world's premier pharmaceutical company. That means the primary challenge for Pfizer's logistics operation is to stay a step ahead of some of the industry's rosiest forecasts, says Richard E. Nelson, vice president, distribution and transportation services division.

"We have to identify the infrastructure that will support unprecedented growth," Nelson says. "It's a network that differs in concept from the one we had in place several years ago." In 1995, he explains, Pfizer's strategy called for improving efficiency through consolidation. The company combined its Atlanta, Chicago, and Dallas operations into a 280,000 square-foot site in Memphis, Tenn., a site efficient enough to double productivity in less than half the space of the facilities it replaced.

Today, with a focus on growth, Pfizer is expanding its Memphis site to encompass 53,000 square feet of office space and 400,000 square feet of physical distribution space. The Memphis site also houses the headquarters of Pfizer's distribution and transportation division, national customer-service operations for pharmaceuticals and consumer health care, and "backroom functions" such as accounts payable, general ledger, and the accounting and control groups.

The Memphis logistics center now moves products for Pfizer's pharmaceutical and consumer health divisions. "In the three years since we opened Memphis, the total dollar value of goods moving through the facility has grown from $2.4 billion to $4.2 billion a year," says Nelson. "Product literature has gone from 800,000 lines to three million. Without our distribution infrastructure, I doubt that we could have handled such an increase in business. If we couldn't handle the increases while improving the level of service, we wouldn't have been doing our job."

Built for Speed

To ensure high product throughput, the Memphis site features two three-level order-fulfillment mezzanines, Nelson says. "The mezzanines are critical because we focus on physical distribution, not storage," he notes. "Storage is not a value-added activity, order fulfillment is."

The mezzanine system takes advantage of the facility's 40-foot-high ceilings, says Nelson. Each floor of the mezzanines measures about 20,400 square feet and operates with a variety of materials-handling equipment, including high-tech carousels, radio-frequency terminals, pick-to-light and pick-to-label stations, and weigh-in-motion scales. "The variety of equipment is necessary because we have quite an assortment of products, all of which require different levels of security and types of handling," says Rose.

For example, Pfizer uses pick-to-light technology for its pharmaceutical products, where 100-percent accuracy is required. The pick-to-light system uses a 16-digit display, double the standard display, to accommodate a product's entire lot number. In the case of product literature, where the goal is to maximize throughput, products pass over weigh-in-motion scales. Pfizer traditionally affixed two labels to literature shipments--one label with shipper information and another with carrier information. Pfizer streamlined the literature-fulfillment process by combining its label information with United Parcel Service's label information to produce only one.

Pfizer gains further efficiencies because orders from each mezzanine travel to a single merge system, rather than to separate systems. Rose says the company is so pleased with the Memphis operations that it plans to build two additional centers--one in Parsippany, N.J., and another to serve the West Coast. The company also is building a third mezzanine in the Memphis logistics center.

High-Tech Applications

Pfizer uses the latest logistics technology in its transportation operation as well. The company has automated its freight-payment system completely, so that once an order is shipped, a file is transmitted to accounts payable. "There is no freight bill; we just cut a check," says Witherspoon. "Because we rate and pay through our system, we do the audits. The process is transparent to our vendors."

Pfizer also has reduced paper on the customer side. "We are the first, and I believe only, pharmaceutical company that uses EDI (electronic data interchange) for 100 percent of its orders," says Nelson. "We even have set up Internet EDI capabilities for our smaller customers."

Pfizer uses EDI to become proactive with customer shipment information. The company's R.C.S. order-management system receives carriers' shipment-status messages, says Witherspoon. "It automatically announces any service exceptions to the customer," he reports, "so we don't have customers calling and asking, 'Where is my shipment?'"

Pfizer continually measures its order-fulfillment process in terms of the perfect order, one that meets high standards in fill rate, cycle time, and accuracy. The company measures these components from the customer perspective, says Perez. "A split order is not a perfect order," he explains. "We get dinged on that, even if the order arrives on time, because the customer has to compare two shipments against a single purchase order."

Ready for Anything

The Pfizer logistics team has built an operation that meets the pharmaceutical industry's standard for three- to four-day order-fulfillment cycles. But those are today's standards, says Nelson, and they may not be applicable in the future. "Today most products are shipped to wholesalers, but we don't know where our customer base might come from tomorrow, nor what the marketplace dynamics may be in terms of service requirements," he says. "Conceivably, we could ship to retailers or even directly to customers."

That uncertainty may be the prescription for Pfizer's success. "We continue to examine how to improve our product velocity," says Nelson. "We always keep an eye on new technology. And we position ourselves as the best in handling order fulfillment, because we know that will make us flexible enough to handle the needs of the marketplace. Without these improvements, customer service could not be one of our premier strategies."