Optimact offers ADC an effective remedy for large volume orders
In order to handle distribution to its pharmacies, Antverpia created its own logistics division under the name ADC. This division also takes orders from the online pharmacy PharmaMarket. To ensure that the ordering process runs smoothly, the organisation called in Xeleos Consulting. Today, ADC can constantly order the correct quantities thanks to the Optimact software package. Now that the coronavirus crisis has driven online sales soaring, ADC also wants to use the software to keep inventory more under control.
Who is ADC?
The seeds for Antverpia were sowed in 1959 when Jozef Van Genechten opened his first pharmacy. He soon decided to build a quality independent pharmacy chain, which was quite revolutionary at the time. The group now consists of nine pharmacies: in Antwerp, Berchem, Edegem, Hove, Leuven, Mortsel, Mechelen, Merksem and Zelzate. Six years ago, the online pharmacy PharmaMarket was also added.
Meanwhile, Jozef Van Genechten’s four children – all bitten by the pharmacy bug – have taken over. One of them is Geert Van Genechten. “My father was a strong believer in joining forces, also when it comes to procurement,” he says. “After all, purchasing for a number of pharmacies at the same time is more interesting than buying for a single one. He therefore thought it important that we learned to purchase as efficiently as possible. In the early 1980s, he applied for wholesaler-distributor status, of which there are only four in Belgium. This gave us the big advantage that manufacturers are obliged to sell to us, because we have a public function. We also act as a logistics distributor for four product ranges, namely hyaluronic acid for orthopedists, IUDs, food supplements and Sanaspray. This means that Antverpia comprises a pre-wholesaler, a wholesaler, physical pharmacies and an online shop.”
Optimact as a logical next step
Meanwhile, more than 160 people are employed by the group, about sixty of whom work for the logistics division ADC. Of the 32,000 items sold, ADC keeps about 20,000 in stock. They come from some 550 suppliers. It was ADC that decided to bring in Optimact and thus optimise the purchasing process for a large part of those products.Geert Van Genechten: “We already had an ERP solution, to which we have made many adjustments over the years. In terms of procurement, however, the functionality within that software solution is limited. Since we want to purchase as smartly as possible, we wanted to build in more intelligence in our ordering process. The choice of specialised purchasing software as an add-on to our ERP system was therefore a logical step in our evolution.”
Although Optimact was still in the starting blocks at the time of the selection, ADC was quickly convinced of the added value. “There was an immediate click with Xeleos Consulting. As a family business, we find the people behind our partner very important. We also appreciated the hands-on approach. We don’t like companies that want to make money out of thin air”, says Geert Van Genechten.
Under the motto “first things first”, the primary focus was on determining the optimal quantities in the purchasing process. “We worked in a very traditional way, based on the sales lists and sales of the past twelve months. That could be improved. With Optimact we were able to manage the orders much more efficiently”, says Geert Van Genechten.
Package with know-how
ADC uses Optimact as a kind of “black box”. “We send data from our ERP system to Optimact, which then starts working with the data. We then export the results, consisting of the order quantities, prices and suppliers. The results are then further processed in the ERP system. So there is a very strong interaction between Optimact and our ERP system. We record parameters such as the lead time, the periodic order quantity (POQ) and the minimum order quantity (MOQ) in the ERP system and send them to Optimact. With the help of Xeleos Consulting, the interfacing between the two also went very smoothly”, says Geert Van Genechten. “A big advantage of Optimact is that the software easily recognizes seasonal patterns and order profiles. There are also many methodologies in the software to determine, for example, standard deviations. In other words, the software contains a lot of know-how.”
When Optimact makes the proposals, there is still a manual check, but usually no more changes are made. After all, ADC now trusts the software package through and through. “Obviously, we closely follow suppliers we have just started to work with,” says Geert Van Genechten. “Normally, we only keep an item in stock when it has been in demand at least six times in the past six months. If we still want to stock an item earlier, we place the orders manually. At that time, we obviously do not have a history to give to Optimact. We also manually process very small suppliers with very variable sales. After all, the greater the variability, the higher the error rate and the lower the added value of a software package such as Optimact. In other words, the more sales a supplier will generate, the more mature products become for Optimact.”
Making the mass manageable
ADC also systematically orders certain product ranges outside Optimact.G. Van Genechten: “Veterinary products, for example, do not go through Optimact because the diversity of the products is too great. And if we act as a logistics service provider, it is of course our partner who determines the quantities. Let’s say that we entrust eighty percent of our products to Optimact.”
In summary, Optimact has helped ADC in streamlining the purchase of most of its products. “Without the help of the software package, we would have needed at least two extra buyers,” says Geert Van Genechten. “Another advantage of the package is that it is very straightforward, which has more than proven its value. Even though purchasers have received identically the same training, they will always have their own interpretation of the facts.”
Need for greater inventory control
The fact that Optimact is able to process large volumes in a short period of time also proved its worth during the COVID-19 pandemic, when online sales went through the roof. “Since the inception of PharmaMarket, we have seen our online sales grow linearly every year, but during the COVID-19 pandemic they have certainly quadrupled. We suddenly also sold items that would otherwise barely go out, such as yoga mats,” says Geert Van Genechten.
Initially, ADC had its hands full to get the situation under control logistically. At one point, however, the organisation found that not only sales, but also inventory had exploded. “That immediately exposed a weak point in our organisation, because keeping inventory under control was not a parameter in our procurement policy,” says Geert Van Genechten. “It is of course logical that – if we systematically maintain a service level of 95% – our stock will skyrocket in the face of strong growth. If you know that we were already running out of room before the pandemic, then I do not need to tell you how dire the lack of space has been since then.”
To accommodate that extra stock, ADC will start using an extra warehouse in the autumn. This will make the storage space grow from 3,000 to 10,000 square meters. The new warehouse will also be higher, so that goods can be stored more vertically. Moreover, there will be a focus on automation to limit the number of employees.
G. Van Genechten: “With the rise of e-commerce and the new modern warehouse in prospect, we asked Xeleos Consulting to make a screening of how we can use the software package even better in this new context. According to Xeleos Consulting it is important to grow without the stock growing proportionately. And it may not be necessary at all for us to maintain a service level of 95% for all products. As for Optimact, we started with what was most urgent and where we could achieve the greatest profit. But we realise that we can get a lot more out of the package. If we get a better view of its rich functionality, we can enter the next phase and get our inventory under control with the help of Optimact as well.”
“There was an immediate click with Xeleos Consulting. We also appreciated the hands-on approach.”Geert van Genechten, Manager of Antverpia Pharmacies
“Optimact enables us to streamline the purchase of most of the products. Without the software package we would have needed at least two extra buyers.”Geert van Genechten, Manager of Antverpia Pharmacies
“Xeleos Consulting helps us to gain a better understanding of the rich functionality of the package. In this way we can also get our inventory under control with Optimact in the next phase.”Geert van Genechten, Manager of Antverpia Pharmacies