Pharmaceutical logistics is gradually opening up, increasing entry opportunities for third-party logistics companies. Express and express companies fighting in the Red Sea have targeted the new business field of medicine.

(1) Pharmaceutical logistics is a large market with a scale of hundreds of billions, and the relative profit margin is larger. It is a new business direction worthy of deployment;

(2) The current pharmaceutical logistics market structure is not yet completely stable, the concentration is still not high, and there is still a greater opportunity for integrated logistics;

(3) Express and express companies that have entered the market have caught up with the logistics of pharmaceutical companies in terms of income, and there is a possibility of leveraging the pattern.

1. Overview of the pharmaceutical logistics market

1.1 Market size

In addition to the storage and transportation of medicines, medical logistics also includes the transportation and distribution of sophisticated medical instruments and medical peripheral auxiliary equipment. It is a relatively professional logistics market segment. Limited to the qualifications and high standards in the process of storage and transportation, the pharmaceutical logistics market has always been in a semi-closed state. It is basically the vertical logistics companies directly under pharmaceutical companies that control most of the high-quality logistics businesses in this field, while ordinary logistics companies generally do not Will actively lay out this market segment.

According to the circulation attributes of medicine and related equipment, the transportation cost is higher than that of ordinary goods. Therefore, medicine logistics has a considerable logistics market. The data shows that the logistics cost of medicine is about 0.5% of the sales revenue of the production enterprise. Therefore, the main cost of medicine logistics is in the end sales, distribution and warehousing.

The scale of the domestic pharmaceutical market exceeds 2 trillion yuan, and the cost of pharmaceutical logistics accounts for about 10% of pharmaceutical sales. Therefore, the domestic pharmaceutical logistics market has a scale of more than 100 billion yuan. For LTL companies, the pharmaceutical logistics industry, which is not highly concentrated, has a considerable scale and profit margin, is a business direction worth exploring and deploying.

 

2014-2018 pharmaceutical circulation market scale
Data source: Foresight Institute

1.2 Major participants in pharmaceutical logistics

With the gradual advancement of marketization in pharmaceutical logistics, competition in this field has also become increasingly fierce. According to the nature of the enterprise that undertakes pharmaceutical logistics business, market participants in pharmaceutical logistics can be roughly divided into four categories.

The first category belongs to logistics subsidiaries directly under the control of large pharmaceutical companies. These logistics companies are the logistics departments of previous manufacturing companies. After independence, they still have unique resource advantages. They are backed by flow exports. Most of them are state-owned. They are the first batch of third-party logistics companies to undertake pharmaceutical logistics business in China. : Sinopharm Group Pharmaceutical Logistics Co., Ltd. (hereinafter referred to as "Sinopharmaceutical Logistics"), Jointown Pharmaceutical Group Logistics Co., Ltd. (hereinafter referred to as "Joyuzhoutong Logistics"), etc.

The second category belongs to professional logistics companies that are perpendicular to the pharmaceutical industry. This type of logistics company mainly provides logistics and distribution in the storage of raw materials and sales of finished products for pharmaceutical companies, including cold-chain constant temperature and warehousing and transportation services for ordinary medicines and equipment, but the overall scale is small and highly dispersed, such as: Beijing Huaxin Logistics Co., Ltd., Shanghai Kangzhan Logistics Co., Ltd., etc.

The third category belongs to traditional integrated logistics enterprises. This type of enterprise mainly serves the traditional ordinary logistics and transportation business. In order to expand the diversity of business, achieve differentiated competition and full-category business coverage, improve industry competitiveness, and begin to deploy the pharmaceutical logistics market. Take advantage of the network to provide pharmaceutical companies with the entire network of warehousing and distribution services for medicines and medical equipment, such as SF Express and China Post.

The fourth category belongs to logistics companies directly under the e-commerce platform. The advantages of this type of enterprise are mainly reflected in the terminal distribution. With the continuous growth of the sales scale of medical e-commerce, e-commerce medical logistics will gradually increase in the proportion of medical logistics thereafter, and become the main force of terminal medical distribution, such as JD Logistics. .

 

Pharmaceutical logistics classification
 

1.3 Market competition pattern

With the entry of traditional logistics companies, competition in the pharmaceutical logistics market is rapidly intensifying. Judging from the current state of competition in the pharmaceutical logistics market, pharmaceutical logistics subsidiaries that have advantages in resources and flow entrances still occupy the dominant advantage. The pharmaceutical logistics market is similar to the traditional logistics market, and it is also a relatively fragmented field with low market concentration. Although the logistics subsidiaries of pharmaceutical companies take advantage of the parent company¡¯s dominant position in the seller¡¯s market to dominate the pharmaceutical logistics market, they have not yet reached an absolute dominant ratio in terms of market share.

The data shows that the four pharmaceutical logistics companies of China National Pharmaceutical Logistics, China Resources Pharmaceutical Logistics, Shanghai Pharmaceutical Logistics and Jointown Logistics are the leading representatives in this field, occupying only about 30% of the pharmaceutical logistics market share, and do not occupy a complete proportion of advantages. The remaining market share is occupied by professional pharmaceutical logistics, third-party comprehensive logistics companies, and even regional networks and some high-quality private line companies.

With the gradual opening of the pharmaceutical logistics market, market competition will continue to intensify, especially in the field of medical equipment and medical peripheral products. From the current trend, pharmaceutical logistics with resource advantages, network-wide logistics with network and operational capabilities, and e-commerce logistics with traffic advantages will play a leading role in the future pharmaceutical logistics landscape.

2. Why does express express enter the pharmaceutical logistics?

2.1 Traditional market saturation

At present, the giant players in domestic logistics are mainly concentrated in the express delivery and less-than-carload fields. They are also one of the few listed companies in the logistics circle. The competition in these two market segments has reached a fierce stage. Especially in the express delivery market, the market concentration has continued to increase, and the top players have gradually eroded the remaining market share, and entered the LTL Express, moving towards a comprehensive logistics direction.

There are many participants in the LTL express market. Although it is not as highly concentrated in the express delivery market, the competition is also very fierce. The barriers to entry have gradually increased, tending to be saturated and stock integrated. Pharmaceutical logistics has extremely high requirements for storage and transportation, and has strong barriers. Therefore, it is a business direction that is very consistent with the layout of the top players of express and LTL.

 

2014-2018 express brand concentration CR8
Data source: State Post Bureau

2.2 Liberalization of transportation qualifications

Since the transportation of pharmaceutical logistics business requires the China Food and Drug Administration to issue corresponding transportation qualifications, and the requirements for logistics storage and transportation are relatively high, most logistics companies do not have the qualifications for pharmaceutical logistics transportation and fail to enter this high-quality business field. With the implementation of the "two-invoice system" policy, the state has cancelled the in-depth promotion of the third-party drug logistics business approval policy, and encouraged third-party logistics companies that meet the national quality requirements to enter the field to improve the efficiency of pharmaceutical logistics.

At the same time, non-cold chain logistics accounts for more than 90% of the pharmaceutical logistics business, and most of the logistics forms are land transportation, which provides an attribute advantage for traditional integrated express logistics companies to enter the field of pharmaceutical logistics. However, the cancellation of medical logistics administrative approval does not mean abandoning quality requirements. Third-party logistics will still be included in the scope of the existing quality system certification, rather than unconditionally fully open. Therefore, not all third-party logistics companies can carry medicines. Logistics business.

2.3 High-quality business areas

In the logistics storage and transportation goods category, medicines, medical equipment and other medical-related goods are similar to electronic products. They all have the characteristics of high value, regular appearance, and appropriate refoaming ratio. They are very high-quality goods in the logistics carrier category.

Compared with ordinary goods, pharmaceutical logistics is a high-end business scenario in the logistics business, with higher profit margins and stability, stable market demand, and a very good business field.

In order to ensure the safety of goods, third-party logistics will generally select companies with high transportation quality and large brands for medical-related products. Therefore, the unit price of transportation is also higher, and corresponding value-added service fees such as insured prices can be earned. The net profit margin of general cargo transportation is below 5%, while the pharmaceutical logistics can be maintained at 8%, which is a very high-quality market segment. At the same time, the pharmaceutical logistics market has great potential and is worthy of express delivery and express delivery enterprises.

 

Comparison of profits between general cargo and pharmaceutical logistics
 

3. Deploying pharmaceutical express and express companies

Express shipping into pharmaceutical logistics is a long-standing business strategy. A small number of companies have been deeply involved in this business for many years. Although some companies have no direct transportation qualifications, they also undertake part of the pharmaceutical logistics in their business.

3.1 SF Express deploys cold chain medical storage and transportation

SF Express established its pharmaceutical logistics division in 2014. Afterwards, it separated the resources of medicine and fresh cold chain through the establishment of the cold transport division. The pharmaceutical business has become a key development project of SF¡¯s cold chain, and gradually cooperated with many domestic pharmaceuticals. Enterprises and even global pharmaceutical giants have reached cooperation to establish pharmaceutical logistics centers.

In 2017, SF Express won the third-party drug and medical device logistics qualification issued by the Guangdong Food and Drug Administration. It is the only third-party logistics company on the list that does not have a pharmaceutical company background. Since then, SF Express has continued to develop its pharmaceutical logistics layout.

In terms of operations, in 2018, SF Express established a national T+3 pharmaceutical logistics network through multi-warehouse collaboration + trunk line transportation scheduling + air transportation capacity supplementation, and optimized the warehouse-to-dry distribution chain business model and operation process to improve resource utilization efficiency And operational quality. In addition, SF Express's acquisition of the DHL supply chain to build customer overall solution capabilities will also help strengthen SF Express's ability to expand in the pharmaceutical cold chain business.

In terms of products, SF Express currently provides 5 standardized products, including safe delivery, special delivery, less-than-carload, special vehicles, and warehousing, covering a variety of goods such as drugs, medical devices, diagnostic reagents, and samples. At the same time, SF Pharmaceutical Logistics is also targeted for service objects. In addition to the retail customers that Anxin Express can serve, the other four products only provide services for major monthly accounts.

In terms of charges, in addition to warehousing, reference is made to the pricing model of traditional express delivery and logistics including first weight + continued weight, kilogram pricing, and vehicle quotation, but the unit price is higher than ordinary express delivery and logistics.

3.2 Debon and Aneng seize the opportunity of medical equipment transportation

The leading players in traditional logistics such as Debon and Aneng have not let go of the fat meat of pharmaceutical logistics. They have long seen the value of high profit margins of pharmaceutical logistics. Not only have they been watching for a long time, they have actually been involved in this business. In the field for many years, and achieved a certain scale of business.

Because most traditional logistics companies have not obtained the storage and transportation qualifications of medicines and medical devices issued by the China Food and Drug Administration, and the products have not launched products and services specifically for pharmaceutical logistics, and the operations are combined with general cargo transportation operations, and there is no special The operation process.

In terms of business, only general medicines, medical-related equipment and peripheral products are charged, but as a high-quality customer group for customer acquisition, there is no professional pharmaceutical logistics development team, and no in-depth exploration in this field and higher-level product services .

The customer groups of traditional logistics companies are mostly individual customers and small B-end customers. Due to qualification issues and operational quality reasons, they have not undertaken the business of large domestic pharmaceutical and medical device companies. Some of the individual customers are drug dealers in the gray industry. Such people value the transportation quality and the high security of payment collection of large-scale LTL companies, and they have become the main force in the income of some regional outlets.

3.3 Platform vertical logistics layout end distribution

Since almost all e-commerce platforms currently adopt the warehouse distribution model, the front-end warehousing and inter-warehouse allocation are mainly completed by manufacturers in the form of complete vehicles. Therefore, the vertical logistics of e-commerce is mainly reflected in the end distribution in the medical logistics business. For example, JD Pharmaceutical Logistics adopts the F2C model, directly docking with pharmaceutical manufacturers, reaching a direct procurement agreement, using JD¡¯s e-commerce platform and strong warehousing and distribution capabilities to reduce logistics transfer links, especially to improve the efficiency of pharmaceutical circulation in cities below the third-tier.

The advantages of e-commerce vertical logistics are mainly reflected in undertaking platform sales flow, mainly doing 2C business, and relying on flow advantages to seize market share in terminal distribution.

Judging from the current sales scale of pharmaceutical e-commerce, 2C business only accounts for a small proportion of the overall scale of pharmaceutical logistics, and scale effects have not yet formed. At present, JD Logistics is stepping up the deployment of B-end business. For example, it reached a cooperation with Beijing Huahong Co., Ltd. on March 6 to establish an integrated pharmaceutical logistics ecosystem, create a one-stop supply chain solution, and improve the efficiency of the entire pharmaceutical supply chain.

 

2015-2018 pharmaceutical e-commerce sales scale
Data source: Foresight Institute

4. Future opportunities and industry pattern

4.1 Opportunities for express companies to enter the market

With the full implementation of the "two-invoice system" in medicine, not only the prices of medicines have changed, but also the circulation mode of medicines. At the same time, the original medical logistics form has been changed to a large extent, and the multi-layer transaction link in the medical circulation process has been directly eliminated, which also reduces the transit link of logistics. The model from manufacturers to agents to hospitals (pharmacies) actually raises the requirements for medical storage and networked transportation.

At the same time, in view of the current high cost of pharmaceutical logistics and the implementation of the quality accountability system, this will prompt medical companies to strengthen in-depth cooperation with third-party logistics, and a comprehensive supply chain solution from warehousing to transit to end distribution is required. Third-party logistics provides more opportunities to enter this field.

However, from a trend point of view, this window of opportunity should not be too long, and higher industry barriers will be established. Third-party logistics must seize the opportunity to carry out a wide and in-depth layout.

4.2 The dominance of pharmaceutical logistics companies is threatened

From the perspective of the current pharmaceutical market structure, the four leading companies of China National Pharmaceutical Logistics, China Resources Pharmaceutical Logistics, Shanghai Pharmaceuticals and Jointown Logistics, relying on the advantages of the parent company¡¯s seller market, only occupy about 30% of the pharmaceutical logistics market share, and have not achieved a complete advantage. proportion.

With the full implementation of the "two-invoice system", the logistics business of pharmaceutical companies will also be directly affected. How to assist the parent company to do a new pharmaceutical supply chain solution and change the original storage and transportation mode to adapt to the new circulation system? A big subject. At the same time, whether it is necessary to open up, expand business coverage, and gain more market share is still worth exploring.

Although the current pharmaceutical e-commerce sales scale continues to increase, the proportion is still not high. E-commerce logistics mainly relies on the traffic brought by platform consumers. It is mainly engaged in the C-end market end distribution business, and it does not threaten the B2B model of traditional pharmaceutical enterprise logistics. Big.

The expansion of the strength of LTL companies will impact the B2B business of pharmaceutical logistics and have a major shock to the original pharmaceutical logistics market dominated by pharmaceutical logistics.

4.3 Express and express have a firm foothold in the medical field

At present, traditional integrated logistics companies have done the best in the field of pharmaceutical logistics, and the most representative ones are SF Express and Jiaji Express.

Judging from the published data, at present, SF Express and Jiaji¡¯s revenue in pharmaceutical logistics have surpassed that of leading pharmaceutical logistics companies, they have pharmaceutical logistics qualifications in operation, and have established an independent pharmaceutical logistics business department for strategic layout, business development, Quality control and standard operating procedures, etc.

In terms of market share, SF Express and Jiaji have established a foothold in the pharmaceutical field, and the next step will be to compete in deep cold chain warehousing and high-end pharmaceutical logistics businesses. In fact, except for SF Express and Jiaji, general cargo transportation companies such as Debon and Aneng have not low income in terms of pharmaceutical-related goods. They mainly focus on the transportation business of general medicine and medical equipment, but they are included in general cargo and not independent. Business differentiation.

If traditional integrated logistics wants to deeply participate in the competition of pharmaceutical logistics, it must learn from SF Express, start the cold chain, and comprehensively improve the entire process business deployment from warehousing to terminal distribution, especially under the system standards of the manufacturer¡¯s accountability system to improve the quality of operation. In-depth service with independent business is the embodiment of competitiveness.

Author: China was Tong