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How Can Pharmacy Stores Reduce Their Delivery Costs?


In modern times, pharmacy stores have morphed into several new avatars. They not only sell you medicines, but also supply you with the entire gamut of your medical needs including health aids and devices, biomedical products, nutrition products, fitness wearables, nutraceuticals, mobility aids, and myriad other products under the larger health space.

With the advent of e-tailing, online pharmacies have arrived in a big way. Given that they have several advantages with regard to scale and access to a wide customer base, they can afford to stock up in bulk, and also stock expensive drugs and medicines that can be made available via just-in-time inventory management.

Not just e-pharmacies, but even offline pharmacies are seizing the opportunity brought about by the rapidly proliferating “delivery model” – not only do they deliver an ever-increasing number of orders to your doorstep but they have also opened their very own online stores.

In all these evolving business models for pharmacies, the function of Logistics and Delivery is critically important for success. Both, from the perspective of costs as well as efficiency.

Modern pharmacies: leveraging the all-important delivery model.

Online: The advent of online pharmacies has added another dimension to the business of pharmacies. Among other reasons, their rapid growth has been fuelled by the fact that they are (typically) cheaper than offline because they can cut out so many line items of cost (e.g. rent and real-estate, intermediaries, utility bills). However, delivery costs become a major chunk of the cost of operation of an online pharmacy, and these need to be managed properly.  

In some way, these e-pharmacies are now creating a natural segmentation of products and customer services:

  • For example, an online delivery model is all-important for senior citizen patients that may not have the wherewithal to reach a local pharmacy regularly
  • Another segregation at the product-mix level is that e-pharmacies can maintain large inventories of expensive drugs and medicines since they not only have a wider customer base but can also operate a “marketplace model” to manage inventory costs. With the use of delivery partners like 3PL the time taken for delivery has reduced significantly. Gone are the days of “7 days to delivery” or “your package is out for delivery”. Just like the Amazon and Whole Food, e-pharmacies now deliver on the same day or within 24-hrs (etc.)
  • e-pharmacies can also service Tier-II and Tier-III cities since opening physical stores there may not be viable or profitable enough to attract the traditional brick-n-mortar chains

Offline: Not just for e-pharmacies but even for offline retailers, delivery costs have also rapidly become a major cost of operation since customers are increasingly calling-in to have their orders delivered to their homes.

  • Emergency: this is particularly true in cases of emergencies where the e-pharmacy is rendered redundant since the medicines are needed immediately
  • To cash in on the trend of e-pharmacies, even traditional brick-n-mortar chains have opened their online portals from where they can serve customers. Given that they are already experienced players in the industry, they have expertise, brand recognition, and an existing set of loyal customers that can be expanded, this has presented them with a significant growth opportunity

Additionally, the Covid-19 pandemic has driven this model of home-delivery of products to another level altogether.

Logistics and Delivery, the key factor: As seen above, regardless of whether you are an online or offline pharmacy, or run a “hybrid model”, the efficiency and cost of your delivery operations are now critical-to-success for your business. Unless pharmacies can master this element of the business it would become difficult for them to grow – or, even sustain the current level of operations since someone else would promptly seize the opportunity and you would be left behind in the race to win market share and customers.

Top 5 ways for pharmacies to reduce delivery costs:

1) MIS: As mentioned above, the advent of the e-pharmacy has opened up the scale of operations that pharmacies can now operate on. A good analogy would be what Amazon has been able to achieve in the world of B2C commerce (shopping) in general since e-pharmacies can now, theoretically, service the entire country. Additionally, the range and scope of offline stores have also increased.

Naturally, this would need a well-organized Management Information System of managing end-to-end operations – from customer order management, supply chain, inventory, and delivery operations right up to the final delivery of the order.

2) Hybrid Model: While e-pharmacies have become hugely successful, there are still vast sections of customers that find it more comfortable to deal with their known – and, trustworthy – local pharmacies. Therefore, traditional pharmacies are taking advantage of this and opening up their own e-stores as well.  This also allows them to offer combination deals and services. However, this calls for a greater level of coordination with regard to their order fulfillment and delivery logistics. Here is where a last-mile delivery software helps in keeping delivery costs to a minimum while maintaining a high level of efficiency.

3) Inventory Management: the key to managing operating costs is efficient inventory management. With the delivery business becoming an important part of the pharmacy topline, this assumes greater importance. Inefficient stock management would result in frequent stock-outs, drivers-vehicles having to make multiple runs, fetching products from distant warehouses – all this would lead to high delivery costs.

4) Route Optimization: Using route optimization software and linking it to the other MIS (e.g. business management software) would enable dispatch managers to achieve maximum delivery efficiency while maintaining the lowest possible delivery costs.  

5) Customer satisfaction: After all, has been said and done, it always boils down to the one final metric i.e. happy customers. Unless your customers are happy and turning into loyal customers that give you repeat business, you will struggle to stay afloat. Importantly, order fulfillment and delivery have increasingly become critical tools in creating a positive customer experience, and using modern fleet management software is critical to success here. With increasing competition, companies are discovering that acing the delivery function and offering the customer multiple fulfillment options is a surefire way of building customer satisfaction.

Conclusion: A last mile delivery management software is a non-negotiable tool in managing the rapidly increasing complexity of Logistics and Distribution for pharmacies as they evolve via various business models to keep up with changing times and provide customers with a satisfying experience.

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