Current Issue 52
SA’s Healthcare Supply Partner of Choice
In 2009, UPD upgraded their distribution centres to world-class status. Since this time the pharmaceutical supplier has gone from strength to strength, growing their brand presence in order to reach as many customers and patients as possible
Writer Emily Jarvis
Project Manager Serge Utting
With its roots in wholesaling, and with a significant market share, UPD is South Africa’s foremost specialist wholesaler of pharmaceutical, medical and healthcare products. As such, the company purchases warehouses and re-sells branded, generic and over-the-counter pharmaceutical products of the highest quality and of world-class standard to a national customer base, holding a 62 percent share of the private hospital market.
Founded in 1993, UPD has spent the last 21 years retaining its reputation as one of South Africa’s most dependable and professional suppliers of pharmaceutical products. In 2003, the company became a division of New Clicks South Africa, a whollyowned subsidiary of the Clicks Group Limited.
Today, UPD is the country’s only national full line wholesaler with five distribution centres in South Africa and one in Botswana, and a 25 percent share of the total private pharmaceutical market. UPD owns 26,000m2 of warehousing space, stocks an impressive 11,500 products including 6,500 front shop items; and picks and dispatches 160 million units per annum to customers, sending a total of three million deliveries from their South African warehouses every year. In turn, this comprehensive wholesaling system shows the company’s commitment to meeting customer needs both promptly and efficiently, while providing top quality customer service, products and corresponding information. “Our team travel a staggering 9.8 million kilometres over the course of a year. This means that we have to ensure that procedures are followed to be able to consistently deliver a smooth process every step of the way,” says Mervin Naidoo, Head of Commercial at UPD.
On average, 90% of UPD’s wholesale business is the distribution of ethical scheduled medicines, which includes the preferential supply contracts with large hospital groups and the servicing of other independent private hospitals within South Africa as Naidoo further explains: “These preferential supply contracts in South Africa to outlets, such as to the Clicks Pharmacies, have significantly boosted our growth. By introducing our automatic picking machine, this new technology has allowed us to pick items from our warehouses faster, securing a quicker delivery time with fewer possibilities of human error.”
Regulating the Healthcare Market
Healthcare systems and the chain of supply vary dramatically dependent on your location around the world. Naidoo says that the differences between the South African pharmaceutical markets and the rest of the world are night and day: “The South African healthcare market is very different to the rest of the world. In 2004, a new pricing model - Single Exit price (SEP) - was introduced which regulates the price of medicines in the country. This model controls the price of medicines throughout the supply chain, removing any form of discounting, bonuses and sampling. Further, wholesalers must negotiate a logistics fee with each manufacturer for products that they sell. This fee can vary from 0-15% and is negotiated on a ‘by supplier’ basis; settling normally around a 6% average.” On the one hand, this level of regulation ensures that fair processes are in place for all in the market, but on the other, all are faced with a varying logistics charge that can fluctuate over time.
Moreover, UPD view their suppliers as not just a vendor, but as a business partner. “By this I mean that we each share a common customer: the end dispenser of medicines. Our goals are aligned to ensure that the customer receives the right product at the right time in the right quantity – there has to be an adequate working relationship in place. We engage heavily with suppliers to ensure a consistent supply throughout the supply chain and supply demand, which means that fluctuations are minimised,” emphasises Naidoo.
Growth Opportunities in SA
Due to the SEP regulation, Naidoo says that the current pharmaceuticals market in South Africa has limited growth opportunities. However, he identified a possible opening in the independent retail pharmacy market: “Indeed, this segment makes up over 40 percent of the market and we want to increase our local focus on this in South Africa. With our wide product offering and excellent service delivery, we want to position UPD as their preferred wholesale partner. In order to realise this, we need to further support this channel to realise growth.”
In addition, UPD believe that they are geared to enter the paramedical and allied industries such as veterinary and surgical supplies, diagnostic equipment and consumables. “These markets are currently non-regulated, and will allow us to negotiate on price,” highlights Naidoo. “Looking north, there are growth opportunities in sub-Saharan Africa. As more global pharmaceutical manufacturers look to enter Africa, UPD with its South African and Botswana bases, is well positioned for distribution into neighbouring countries like Zambia, Angola, Namibia and Zimbabwe,” he adds.
Nurturing Employee Skills
In order to provide such a top notch service, staff at UPD have to be educated in the best-practice approach to business. “With a strong permanent staff figure of 459 and 514 temporary workers, we take care to develop and nurture professional relationships with suppliers and customers. UPD realises that people are our competitive advantage, therefore we aim to train and develop our staff in critical areas to ensure that our employees and the business, benefit and feel empowered,” enforces Naidoo. “Our aim is to provide monthly programmes that will assist with critical and rare skills within our industry to assist all staff with career development and also encourage organisational growth. These programmes are continuously adapted to ensure they stay up to date and are to industry standards.” Further, Naidoo added that he hopes this training process will make staff feel more comfortable with sharing their ideas and strategies in order to shape the long term future and sustainability of UPD.
UPD Bulk Distribution
Many people may not be aware that UPD Distribution has been in existence for the past 15 years. “We have achieved a 23% market share in value terms in a short space of time with the support of our distribution partners. In fact we are now the largest distributor of pharmaceuticals in the country by volume,” Naidoo exclaims.
As a growing organisation, in 2012 UPD made a significant investment to expand their distribution facilities in Gauteng. The facility came online this year, providing the company with 50% additional capacity for the growth of our existing partners and taking on new business. “Our agility and responsiveness to our partners is enhanced by the fact that the business decision makers reside within the UPD operating board. Being a fully integrated business, we are able to offer manufacturers a simple supply chain solution to get product to market quickly,” comments Naidoo. “Further to this our fee model is singular in that we do not charge for value added services that assist’s our partners to be effective and successful. And of course we are able to offer a ‘secondary distribution type’ service levels at very competitive rates in our business,” he adds.
Lastly the growing International trend amongst pharmaceutical distributors is to have flexible in-house IT systems to cope with the pressures and changes in the industry. UPD Distribution is ahead of this and have their own validated and flexible IT systems, which enable the company to tailor solutions for their clients.
UPD is the owner of the Link Pharmacy brand, of which there are currently over 200 Link branded pharmacies across Southern Africa. Link Pharmacies have been synonymous with making people feel better for nearly three decades and UPD agree that the brand needs to be updated in order to further grow their presence. We have grown this side of the business from just a handful of pharmacies, to a nationwide establishment. And we want to grow this number further, not just by opening more stores, but by adding tangible value to retail pharmacy and improving customer experience,” Naidoo comments.
In order to do this, UPD will be making various technological platforms available to innovate the ways in which pharmacies can interact with customers and patients. “Independent pharmacies are viewed as being part of the communities, entrenched in people’s lives. We want to build on this by getting more involved in community outreach programmes and finding out exactly what patients need from their local pharmacies,” Naidoo adds and concludes his interview by stating that without people and showing compassion towards the end-user’s needs, UPD would not have become the powerhouse it is today. “Moving boxes is a tough business, but we didn’t get to be the largest pharmaceutical wholesaler in South Africa by accident. We did it by employing and empowering good people. And each year we make sure to recognise these people.”