GSK turns to K+N for supplier logistics

Once an afterthought, supply chain costs are now getting full attention from drugmakers looking for ways to cut costs that stem from moving supplies around the world to plants and products to customers. Toward that end, GlaxoSmithKline ($GSK) has inked a 5-year contract, which global logistics company Kuehne + Nagel says will be transformational for both "in its scale and ambition."

K+N CEO Detlef Trefzger

K+N will oversee the transportation of products from raw materials suppliers to trade customers for GSK. Terms of the deal were not disclosed

"Our integrated logistics approach, comprising air, sea, overland services and Logistics Control Centers in four regional hubs will enable GSK's global supply chains to move to the next level of performance," Kuehne + Nagel CEO Detlef Trefzger said in a statement.

GSK has been working for some years to shave costs from its supply chain. Several years ago, it cut out some of the 2,800 suppliers it once bought from and only uses those that monitor key performance indicators. The result of its efforts was a reduction in lead times to within 48 hours on average and improvements in on-time delivery in full to 90% from 40%.

GSK is far from the only company looking to make their supplier networks and supply chain more efficient. When Jeremy Levin, former CEO of Teva Pharmaceutical Industries ($TEVA), laid out his $2 billion cost-cutting plan before his departure in late 2013, he said he expected supply chain and purchasing changes to deliver $400 million to $700 million of the anticipated savings. Current CEO Erez Vigodman has adhered to some of Levin's cost-cutting program.

Pfizer ($PFE) has used an "external partner management" process, giving a small number of suppliers certain privileges to make sourcing and replenishment decisions and access to some of Pfizer's data to do that. AstraZeneca ($AZN) is looking at modes of transportation, moving ahead with plans to shift the vast majority of its global shipments to sea freight from air freight.

- here's the release