Indies Pharma switches supply track for inventory control
With the timely availability of medical drugs and supplies often a matter of life or death, the choreography between inventory orders and availability has been testing distribution companies, but so far Indies Pharma Jamaica says it’s been getting the formula right.
A global logistics chain beset by war and the pandemic often sees shipments from overseas being delayed. But Indies Pharma CEO Guna Muppuri said the company has kept the lid on its cost of sales and its gross margin elevated in the past six months by paying special attention to inventory management.
For the pharmaceutical industry, stock has to be ordered in time and in sufficient quantities to prevent stock-outs of drugs and preparations that are sometimes vital to life.
“It is the way you manage inventory so that you don’t have goods expiring. We had to move away from having stock in hand to meet demand, because in that process we were always beaten up, so to speak, by the event of expired goods,” Muppuri said.
The approach called for more careful planning, he said, noting that a 200 per cent increase in airfreight costs meant a switch to sea freight as a better option for Indies Pharma, and that the 15-year-old company leaned on relationships built up over time that allowed for planning shipments further ahead.
In the past two quarters, inventory levels have dipped a bit at the company but remains in the $210 million to $220 million range.
“We looked at the historical performance, and some of the stocks we held off on ordering, to lower the spoilage. That way, we managed to save as much as $27 million,” he said.
Over six months ending April, while sales at Indies Pharma climbed by nine per cent, from $424 million to $463 million, the company saw a much larger spike in gross profit, up 30 per cent, from $258 million to $335 million, due to a contraction in the cost of doing business over the half-year.
Some of the gain was erased by higher operating costs for the company’s fleet of 15 vehicles, due to rising petrol prices, plus other expenses to run the business.
“The gas prices are astronomically high. Added to that the cost of parts and maintenance and even increased tolls for traversing the highways, are really hurting us at this time,” he said.
Still, Indies Pharma wrapped up the half-year with $114 million in net profit, a 68 per cent increase relative to the previous year. Second-quarter profit accounted for less than half the out-turn, although earnings in the period tripled from $20 million to $64 million.
“We are striving for stability and consistency in our turnover and profits to satisfy our shareholders. If we can do that and produce growth of, say, 20 to 25 per cent, then the future will be assured,” Muppuri said.