The logistical analysis of PharmaPac

Abstract

PharmaPac is a plastic manufacturing company producing plastic containers, for the pharmaceutical industry, in Durban South-Africa. PharmaPac’s identification of an opportunity to improve their logistics strategy initiated this project. The project aim is established as the identification of the optimal logistics strategy for the company. The objectives include decreased logistical cost and increased system flexibility. The current logistic system is dependent on the logistical network of PharmaPac’s sister company PailPac. This results in a rigid network with high logistical costs. Literature on logistics, warehousing and transportation is reviewed to establish a base of knowledge on methods, tools and techniques that could be implemented in a logistical analysis. In evaluation with the criteria set by management the cost centre method of logistical analysis is identified to be the appropriate method to implement. The method requires the construction of a model to simulate the cost centers and determine the total cost involved for a logistics strategy. Prior to model construction, the data requirements is established and collected. As the demand data is deemed too sensitive to be made public the method is adapted to use random demand data. The model is built in Microsoft Excel and is used to compute the total cost of a logistics strategy. It is run for 10 iterations to ensure the result is accurate, as the demand is random. Six logistical strategies or scenarios, including the current strategy, are identified in collaboration with management. These scenarios are investigated through the model. Scenario 3 proved to give the most cost effective logistical strategy with an average of 64% decline in the T.M.L.C. This scenario will also increase the flexibility and reliability of the current system significantly. The model is based on a wide range of demand levels which indicates that this scenario will remain feasible for an extended period. Scenario 5 proved to be the second most feasible strategy with an average of 34% decline in the T.M.L.C. Through a break-even analysis it is established that a decrease of R120.34 per pallet in transportation cost is required from PailPac to make this scenario optimal on a purely cost based analyses. Further Analysis proved a much larger amount was required to make scenario 5 optimal.