Pharmaceutical logistics has gradually moved toward opening up, increasing the chances of entry for third-party logistics companies. The courier and express delivery companies that have been killed in the Red Sea have targeted the new business field of medicine.

(1) Pharmaceutical logistics is a large market with a scale of 100 billion yuan. It has a relatively large profit margin and is a new business direction worthy of layout;

(2) The current pharmaceutical logistics market structure has not been fully stabilized, the concentration is still not high, and there is still a large chance for integrated logistics;

(3) The courier and express delivery enterprises that have entered the company are catching up with the logistics of pharmaceutical enterprises in terms of income scale, and there is a possibility of a turbulent pattern.

1. Overview of the pharmaceutical logistics market

1.1 Market size

In addition to the storage and transportation of medicines, pharmaceutical logistics also includes transportation and distribution of high-precision medical instruments and medical peripheral auxiliary equipment. It is a relatively professional logistics market segment. Limited to the high standards required in the qualification and storage and transportation process, the pharmaceutical logistics market has been in a semi-closed state. Basically, the vertical logistics enterprises directly under the pharmaceutical companies control most of the high-quality logistics business in this field, while the ordinary logistics enterprises generally do not. Will actively deploy this segment.

According to the circulation properties of medicines and related instruments, the transportation cost is higher than that of ordinary goods. Therefore, pharmaceutical logistics has a considerable scale of logistics market. The data shows that the ex-factory logistics cost of medicine is about 0.5% of the sales revenue of the production enterprise. Therefore, the main cost of pharmaceutical logistics is in the end sales distribution and storage.

The domestic pharmaceutical market has a scale of over 2 trillion yuan, while pharmaceutical logistics costs account for about 10% of pharmaceutical sales. Therefore, the domestic pharmaceutical logistics market has a scale of more than 100 billion yuan. For the LTL express business, the pharmaceutical logistics industry with low concentration and considerable scale and profit margin is a business direction worth exploring and arranging.

 

The scale of the pharmaceutical circulation market in 2014-2018
Source: Prospective Institute

1.2 Major participants in pharmaceutical logistics

With the gradual advancement of pharmaceutical logistics, the competition in this field is also becoming increasingly fierce. According to the nature of the enterprise undertaking the pharmaceutical logistics business, the market participants of pharmaceutical logistics can be roughly divided into four categories.

The first category belongs to the logistics subsidiary directly under the large pharmaceutical enterprise. This kind of logistics enterprise is the logistics department of the previous production enterprise. After independence, it still has unique resource advantages. It relies on traffic export, and most of it is the background of state-owned assets. It is the earliest third-party logistics enterprise that undertakes pharmaceutical logistics business in China. : Sinopharm Pharmaceutical Logistics Co., Ltd. (hereinafter referred to as "National Drug Flow"), Jiuzhou Tong Pharmaceutical Group Logistics Co., Ltd. (hereinafter referred to as "Kyushutong Logistics").

The second category belongs to professional logistics companies that are perpendicular to the pharmaceutical industry. This kind of logistics company mainly provides pharmaceutical enterprises with logistics distribution in raw material storage and finished product sales, including cold chain constant temperature and general medicine, equipment storage and transportation services, but the overall scale is small and dispersive, such as: Beijing Huaxin Logistics Ltd., Shanghai Kangzhan Logistics Co., Ltd., etc.

The third category belongs to traditional integrated logistics enterprises. These enterprises mainly serve the traditional general logistics transportation business. In order to expand the diversity of business, realize differentiated competition and coverage of all categories, improve the competitiveness of the industry, and begin to lay out the pharmaceutical logistics market. Utilizing the advantages of the network, it provides pharmaceutical companies with warehousing and distribution services for pharmaceuticals, medical devices and other goods throughout the network, such as SF Express and China Post.

The fourth category belongs to the logistics enterprises directly under the e-commerce platform. The advantages of this type of enterprise are mainly reflected in the terminal distribution. With the continuous growth of the sales volume of pharmaceutical e-commerce, E-commerce and pharmaceutical logistics will gradually increase the proportion of pharmaceutical logistics in the future, and become the main force of terminal pharmaceutical distribution, such as Jingdong Logistics. .

 

Pharmaceutical logistics classification
 

1.3 Market competition pattern

With the entry of traditional logistics companies, the competition in the pharmaceutical logistics market is rapidly increasing. Judging from the current competitive landscape of the pharmaceutical logistics market, the pharmaceutical company's logistics subsidiary, which has the advantages of resources and flow entry, still dominates. The pharmaceutical logistics market is similar to the traditional logistics market, and it is also a segment that is relatively fragmented and has low market concentration. Although the logistics subsidiary of the pharmaceutical company took advantage of the seller's market advantage position, it dominated the pharmaceutical logistics market, but it did not reach an absolute advantage in terms of market share.

The data shows that the four pharmaceutical logistics companies, such as China Drug Flow, China Resources Pharmaceutical Logistics, Shanghai Pharmaceutical Logistics and Kyushutong Logistics, are the leading representatives in this field, occupying only about 30% of the pharmaceutical logistics market share, and do not occupy a full proportion of advantages. The remaining market share is occupied by professional pharmaceutical logistics, third-party integrated network logistics enterprises, and even regional networks and some high-quality private line enterprises.

With the gradual opening up of the pharmaceutical logistics market, market competition will continue to intensify, especially in the field of medical devices and medical peripheral products. From the current trend, pharmaceutical logistics with resource advantages and network-wide logistics with network and operational capabilities, as well as e-commerce logistics with flow advantages will play a leading role in the future pharmaceutical logistics landscape.

2. Why does express delivery enter medical logistics?

2.1 Traditional market saturation

At present, the giant players of domestic logistics are mainly concentrated in the field of express delivery and less-than-truck. It is also one of the few listed companies in the logistics circle. The competition in these two market segments has reached a stage of white-hot. Especially in the express delivery market, the market concentration has been continuously improved, and the head players gradually eroded the remaining market share, and entered the LTL express, and developed towards a comprehensive logistics direction.

There are many participants in the LTL express market. Although there is no high concentration in the express delivery market, the competition is fierce. The entry threshold is gradually rising, and it tends to be saturated and stock integrated. Pharmaceutical logistics has extremely high requirements for storage and transportation, and it has strong barriers. Therefore, it is a business direction that is very suitable for the layout of head players with express delivery and less-than-truck.

 

2014-2018 express brand concentration CR8
Source: National Post Office

2.2 Transportation qualifications are released

Since the pharmaceutical logistics business requires the corresponding transportation qualifications issued by the SFDA, and the requirements for logistics storage and transportation are high, most logistics enterprises do not have the qualification for medical logistics transportation and fail to enter this high-quality business field. With the implementation of the "two-vote" policy, the state has eliminated the in-depth promotion of the third-party drug logistics business approval policy, and encouraged third-party logistics companies that meet the national quality requirements to enter the field and improve the efficiency of pharmaceutical logistics.

At the same time, non-cold chain logistics accounts for more than 90% of the pharmaceutical logistics business, and most of the logistics forms are land transportation, which provides a property advantage for traditional integrated express logistics enterprises to enter the pharmaceutical logistics field. However, the cancellation of the administrative approval of pharmaceutical logistics does not mean that the quality requirements are abandoned. Third-party logistics will still be included in the existing quality system certification, rather than being open unconditionally. Therefore, not all third-party logistics companies can carry medicine. Logistics business.

2.3 Quality business areas

Among the logistics storage and transportation goods categories, medicines, medical instruments and other medical-related goods are similar to electronic products, and have the characteristics of high value, regular shape, and appropriate proportion of heavy foam. They are very high-quality types of goods in logistics and cargo categories.

Compared with ordinary goods, pharmaceutical logistics is a high-end business scenario in the logistics business, with higher profit margin and stability, and stable market demand, is a very good business field.

In order to ensure the safety of goods, the use of third-party logistics generally selects enterprises with high transportation quality and large brands. Therefore, the unit price of transportation is also high, and at the same time, the corresponding value-added service fees such as insured prices can be earned. The net profit margin of carrying ordinary goods is below 5%, while the pharmaceutical logistics can be maintained at 8%. It is a fairly high-quality market segment. At the same time, the pharmaceutical logistics market has great potential and is worthy of express and express enterprise layout.

 

Comparison of general goods and pharmaceutical logistics profits
 

3, layout of pharmaceutical express, express enterprises

Express shipping into the pharmaceutical logistics is a long-standing business strategy, a small number of enterprises have been deeply ploughed in this business for many years, and some enterprises do not have direct transportation qualifications, but also in the business also undertake some of the pharmaceutical logistics goods.

3.1 SF layout cold chain medicine storage and transportation

In 2014, SF established the Pharmaceutical Logistics Division separately. After the establishment of the Cold Transport Division, the resources of the pharmaceutical and fresh cold chain were divested. The pharmaceutical business became a key development project of the SF Cold Chain, and gradually with many domestic drugs. Enterprises, and even global pharmaceutical giants have reached a cooperation to establish a pharmaceutical logistics center.

In 2017, SF won the third-party drug and medical device logistics qualification issued by the Guangdong Food and Drug Administration. It is the only third-party logistics company with no background in pharmaceutical companies. Since then, SF has continued to develop the layout of pharmaceutical logistics.

In terms of operations, in 2018, SF Express established a national T+3 pharmaceutical logistics network through multi-sector collaboration + trunk transportation scheduling + air transportation capacity supplement, and optimized the warehouse chain and full chain business model and operation process to improve resource utilization efficiency. And operational quality. In addition, SF's ability to build a customer's overall solution through the acquisition of the DHL supply chain will also help strengthen SF's ability to expand its pharmaceutical cold chain business.

In terms of products, SF currently offers five standardized products such as Anxin Hand, Courier, LTL, Special Car and Warehousing, covering a wide range of goods such as pharmaceuticals, medical devices, diagnostic reagents and samples. At the same time, SF Pharmaceutical Logistics is also targeted to the client. In addition to the peace of mind, the other four products are only for the monthly customers.

In terms of fees, in addition to warehousing, the reference to the traditional courier, logistics first weight + continued weight, price per kilogram, vehicle pricing model, but the cost unit price is higher than ordinary express, logistics.

3.2 Debon and Aneng seize the opportunity of medical equipment transportation

The head players of traditional logistics such as Debon and Aneng have not let go of the fat of medical logistics. They have long seen the value of the high-margin space of pharmaceutical logistics. It is not only a long-term peek, but has actually been involved in this business. The field has been for many years and has achieved a certain scale of business.

Because most traditional logistics companies have not obtained the qualifications for the storage and transportation of medicines and medical devices issued by the Food and Drug Administration, and the products and services for pharmaceutical logistics have not been launched in the products. There is no special operation in the operation and transportation of goods and goods. The operational process.

In terms of business, only ordinary medicines, medical related equipment and peripheral products are collected. Only as a high-quality customer group, there is no specialized medical logistics development team, and there is no deep exploration and provision of higher-level products and services in this field. .

Most of the traditional logistics enterprise's customer groups are individual customers and small B-end customers. Due to qualification issues and operational quality reasons, they have not undertaken the business of large domestic pharmaceutical and medical device companies. Some of the group of FITs are drug dealers in the gray industry. These people are concerned that the transportation quality of large-scale LTL companies and the high security of collection and payment have become the main force in the income of some regional outlets.

3.3 Platform vertical logistics layout end distribution

Since the current e-commerce platform almost adopts the warehouse allocation mode, the front-end warehouse and warehouse transfer are mainly completed by the manufacturers in the form of complete vehicles. Therefore, the e-commerce vertical logistics is mainly reflected in the terminal distribution in the pharmaceutical logistics business. For example, Jingdong Pharmaceutical Logistics adopts the F2C model, directly docking pharmaceutical production enterprises, reaching a direct mining agreement, using the Jingdong e-commerce platform and strong warehousing and distribution capabilities to reduce logistics transit links, especially improving the efficiency of pharmaceutical circulation in cities below the third-tier level.

The advantage of e-commerce vertical logistics is mainly reflected in the sales flow of the platform, mainly doing 2C business, relying on the flow advantage to capture the market share of the end distribution.

Judging from the current sales scale of pharmaceutical e-commerce, 2C business only accounts for a small proportion of the overall scale of pharmaceutical logistics, and has not yet formed a scale effect. At present, Jingdong Logistics is stepping up the layout of B-side business. For example, on March 6th, it has reached a cooperation with Beijing Huahong Co., Ltd., aiming to establish an integrated pharmaceutical logistics ecosystem and create a one-stop supply chain solution to improve the efficiency of the entire pharmaceutical supply chain.

 

2015-2018 pharmaceutical e-commerce sales scale
Source: Prospective Institute

4. Future opportunities and industry landscape

4.1 Opportunity for express delivery companies to enter the market

With the full implementation of the "two-vote system" of medicine, it is not only the price of medicine that has changed, but also directly affects the circulation pattern of medicine. At the same time, it has largely changed the original form of pharmaceutical logistics, directly eliminating the multi-layer transaction link in the process of pharmaceutical circulation, which has reduced the transit link of logistics. The model from the manufacturer to the agent to the hospital (pharmacy) has actually raised the requirements for medical warehousing and networked transportation.

At the same time, in view of the current high cost of pharmaceutical logistics and the implementation of quality accountability, this will encourage medical companies to strengthen their deep cooperation with third-party logistics, and need to supply a full range of supply chain solutions from warehousing to transit. Third-party logistics offers more opportunities to enter the field.

However, from a trend perspective, this window of opportunity should not be too long, and higher industry barriers will be established. Third-party logistics must seize the opportunity to carry out extensive and in-depth layout.

4.2 The dominant position of pharmaceutical companies is threatened

Judging from the current pharmaceutical market structure, the four leading companies in China's drug flow, China Resources Pharmaceutical Logistics, Shanghai Pharmaceutical Logistics and Kyushutong Logistics rely on the advantages of the parent company's seller market, occupying only about 30% of the pharmaceutical logistics market share, and have not achieved full advantages. proportion.

With the full implementation of the "two-vote system", the business of pharmaceutical enterprises will also be directly affected. How to assist the parent company to make a new pharmaceutical supply chain solution, and to change the original warehousing and transportation mode to adapt to the new circulation system. A big topic. At the same time, whether it is necessary to go open, expand business coverage, and gain more market share is still worth exploring.

Although the sales scale of pharmaceutical e-commerce continues to rise, the proportion is still not high. E-commerce logistics mainly relies on the traffic brought by platform consumers. It is the main business of terminal distribution in the C-end market, and it does not threaten the B2B model of traditional pharmaceutical logistics. Big.

The expansion of the strength of LTL Express enterprises will impact the B2B business of pharmaceutical enterprises logistics, which will have a big shock to the pharmaceutical logistics market pattern dominated by the original pharmaceutical enterprises.

4.3 Express and express delivery stand firm in the medical field

At present, traditional integrated logistics companies have done the best in the field of pharmaceutical logistics, the most representative of which are SF Express and Jiaji Express.

Judging from the published data, at present, SF and Jiaji’s revenues in pharmaceutical logistics have surpassed the head enterprises of pharmaceutical enterprises logistics, and they have pharmaceutical logistics qualifications in operation, and set up an independent pharmaceutical logistics business department to do strategic layout and business development. Quality control and standard operating procedures.

From the market share, SF and Jiaji have already stood still in the pharmaceutical field, and the next step will be to compete in the deep cold chain warehousing and high-end pharmaceutical logistics business. In fact, in addition to SF, Jiaji, Debon, Aneng and other general cargo transport companies in the pharmaceutical-related goods revenue is not low, the main attack on ordinary medicine and medical equipment transport business, only included in the general cargo did not do independent Business differentiation.

To fully participate in the competition of pharmaceutical logistics, traditional integrated logistics must learn SF, start the cold chain, and comprehensively improve the full-process business deployment from warehousing to terminal distribution, especially under the institutional standards of the manufacturer's accountability system to improve the operation quality. In-depth service with independent business is the embodiment of competitiveness.

Author: China was Tong