Pharmaceutical wholesalers live in a world of dichotomies.

• They make lots of revenue, but survive on razor-thin profit margins.
• Delivery speed and accuracy are life and death issues, but distribution networks are works in progress.
• Track and trace mandates are in the offing, but technology standards are still solidifying.
• Drug manufacturers get the glory for developing new products, but wholesalers get the responsibility for securing the supply chain.

As you'll read in this month's cover story on AmerisourceBergen, next-day delivery of life-saving medications is a matter of well-designed and executed materials handling operations. Without these operations and the optimal siting of the distribution centers that house them, patients might as well receive placebos.

That's why it's so important to study companies that can be effective while dealing with the constraints of dichotomies. Transportation will get pharmaceuticals only so far and so fast. Wholesalers must increase the throughput. Effective materials handling not only buys transportation more time to make the drive, but it broadens the wholesaler's market reach.

Three giants dominate the world of pharmaceutical wholesaling. In addition to AmerisourceBergen, there's McKesson and Cardinal Health. As these companies battle each other for dominance, they're facing new competitive forces. Mahender Singh, research associate at the MIT Center for Transportation & Logistics, has researched the changing structure of the drug supply chain. He says the “buy and hold” wholesale model is a thing of the past.

Under new inventory management agreements, manufacturers won't allow intermediaries to hold more than 21 days worth of demand in inventory. In fact, because manufacturers are getting a clearer picture of distribution costs, they're now looking at third-party logistics providers as an alternative to wholesalers for delivering product. Companies like United Parcel Service are responding by developing their own offerings for the pharmaceutical industry. Industry experts predict retailers may even start purchasing pharmaceuticals direct from manufacturers.

The only thing that will save pharma wholesalers from these competitive forces is their ability to deliver products and services on a daily basis while continuing to develop their already solid and secure distribution infrastructure. Those services include contract manufacturing, packaging and inventory management—in other words, materials handling capabilities.

This issue's focus on pharmaceuticals is the first in a series of vertical industry reports. Future issues will cover automotive, retail, food and beverage, and publishing. These industries have all received their fair share of press citing gloomy market forces threatening to destroy them. Modern is covering them because the leaders in those industries are using materials handling logistics not only to survive, but to thrive. To that I can only add: Happy New Year!