Let’s all agree that track & trace regulations, like those that apply to prescription medications in many countries, are for real. There’s no getting away from manufacturers’ need to serialize various layers of packaging. Ok…so…let’s get it done and stop complaining about the high cost of compliance. Let’s move on.
But to help you recover some of your implementation investment, serialization can lead you to an interesting and even lucrative destination at the very end of the supply chain–at the return goods process.
It is estimated that about 3% of all prescription drug units of sale are returned annually to either a distributor or the manufacturer. We have evolved as an industry by implementing liberal returns policies to ensure patient safety, and we don’t resell returned drugs. The Healthcare Distribution Management Association estimates these goods to be worth between $4-5 Billion in credits given out by manufacturers each year. That’s a lot of product swimming upstream, only to be destroyed and removed from further distribution.
Now how about when the inventory and financial accounting of these returns result in processing errors? And what happens when key tasks of authenticating returned goods, and assigning accurate payments for the verifiable (good) goods, are performed manually?
Let’s do some quick math. There are about 10 drugs that generated over $4 billion in U.S. sales last year. If one of them is yours, and the aforementioned 3% return rate applies, then you will likely pay out over $120,000,000 in credits annually–for one drug! (Please check my calculations while I get up off the floor).
Wait, there’s more. Let’s say your return goods department or 3rd party processor uses manual methods to count boxes, authenticate packaging, verify inbound documents, assign credits, and complete paperwork. Because of the repetitiveness and the opportunity for errors in that process (frequently caused by fatigue), recurring mistakes of paying credits for expired or fake goods is the unwanted outcome. Plus, you may be over-paying some customers more than their acquisition price.
All totaled, your company may be generously over-crediting your customer returns by $60,000 annually even with a respectable accuracy rate of 95%. For one drug!
With Covectra’s “plug and play” serialization solution, combined with customized authentication marks, your return goods operation is easily upgraded to a best-in-class automated function. Besides improving accuracy of credit distributions, the Covectra return goods system checks for fakes, compares payouts to Wholesale Acquisition Cost (WAC), and records serial numbers from each event for more effective and efficient management reporting.
Covectra, Inc. is dedicated to the study of supply chain integrity and the deployment of proven counter-measures to help achieve brand protection and enhance supply chain intelligence. Email us to request a call back so we can tell you more about employing serialization for “Many Happy Returns.”