This is a market research conducted formulating a strategy for the expansion in the cold logistics sector. It includes avenues of corporate tieups(partner evaluation framework), financial model based upon the sector research.

1. Last Mile
Pharmaceutical
Distribution
Harsh Shukla
Ankit Saxena
NMIMS, Mumbai

2. Current Trends:
 Consolidation has become an important characteristic of
the Indian pharmaceutical market as the industry is
highly fragmented.
 Due to increased competition, companies try to
differentiate on the basis of speed-to-market, cost
competitiveness, quality, customer orientation and
distribution reach in domestic markets.
Industry Overview
Indian pharma industry, expected to grow at over
11.3 % p.a. between 2011 and 2020, will outperform
the global pharma industry growth of 5 %. The
market is expected to grow to US$ 55 billion by 2020.
India accounts for 20 % of global exports in generics
India’s pharmaceutical exports stood at US$ 16.64
billion in 2016-17 and are expected to reach US$ 20
billion by 2020.
Key industry concerns:
 High logistics cost ranging from 4.72 to 6.22% of sales as
against 0.5% in the US and 2% in Europe.
 Ineffective control over channel inventory: 46 days for a
pharmaceutical company as against 26 days for an FMCG
company.
 Sub-optimal penetration of the rural market
 Inadequate access to secondary and tertiary sales
information critical to planning processes
 Inadequate infrastructure to support compliance to CGMP in
the distribution chain.
Cold chain concerns:
 Organized players contribute only ~8%–10% of the cold
chain industry market
 Most equipment in use are outdated and single
commodity based
 Majority of the refrigerated vehicles (~80%) are utilized
for milk and milk products transportation Total healthcare spending has increased at a
CAGR of 12.70 per cent to US$ 133 billion in 2016.
The cold chain market in APAC is expected to grow
at an annual rate of 16.67 % in five years till 2021 to
reach $87.21 bn which will contribute 40.71 % to the
world’s forecast.

3. Key Market features:
 ~5,381 number of total cold chain
storages in India with 95% of total
storage capacity under private players
 ~36% of these cold storages have
capacity below 1,000 MT
 India has about 250 reefer transport
operators (mostly small & non integrated
firms) with >30,000 refrigerated vehicles.Cold storage capacity is expected to grow at ~13% per annum on a sustained basis
over the next 4 years, with the organized market growing at a faster pace of ~20%
The temperature controlled vehicles have grown at an annual rate of 20.20 %
over four years to 51,800.
Growing annually at 28% the total value of cold chain
industry in India has reached ~USD 13 billion in 2017
through increased investments, modernization of
existing facilities.
Key Trends:
 Increased provision of end to end
integrated services
 Integration of GPs and temperature
monitoring systems
 Focus on energy efficient practices
 Implementation of advanced technology in
refrigerated cargo
Key challenges:
 High cost of fuel and maintenance
 Increased spoilage costs
 Increased environment concerns
Healthcare contributes about 8.40 % to the Market
share by application, 2016
Cold Chain Logistics Market

4. ShockWaveMedxpert
0
200
400
600
800
1000
1200
0 1 2 3 4 5
Medical Representative
0
200
400
600
800
1000
2017 201X
Cities Catered
Cities
ShockWave : Craving niche through Strategic Expansion
 Since such a large scale
expansion from 85 cities to 650
cities and finally to 950 cities
would require huge sums of
money without the assurance of
demand from additional
branches, it makes more sense to
opt for strategic partnership to
build its partner network to cater
to the MedXpert’s demand.
 A partnership evaluation
framework is to be followed prior
to partner selection.
 Based on the business demand,
various criteria are identified for
Partners peer to peer mapping.
Partnership Rationale
1. Increased Revenues
a. Gain access to new markets
b. New value added services
2. Improve core business
a. Gain access to new technology
b. Flexible facility capacity
c. Create additional and backup capacity
3. Reduced Costs
a. Reduce developmental costs
b. Conversion of fixed to variable costs
c. Meet downsizing requirements
Technology Solutions
1. Providing a customer visibility portal
2. Updates on delivery
3. IOT enabled smart refrigeration systems
4. SaaS based cloud computing solutions
5. Supply chain analytics solutions
6. Platform integration with innovations in mobile
technology

5. Model framework Key Metrics Considerations
Governance: How the firm makes
decisions in the Market
1. Objectives prioritization
2. Respond to market trends and policy
1. Stakeholders involved in
investment decisions in the organization?
2. Any external regulations that may
influence the decision-making process?
Financial Model: How a firm raises capital for expansion 1. Revenues and Costs of Services
2. Required margins
3. Sources and cost of Funding
Any major factors that influence changes in revenues or
costs?
Assets & Infrastructure: How the firm invests and brands
itself in order to operate
1. Fixed assets
2. Inventory
3. Brand value
Importance of non-physical assets (e.g., brand to the
success of the business?
Service Offering: What services the firm markets and
sells
1. Range of service offerings and their alignment to its
strengths
2. Required margins on an average service offering
3. Level of demand in market
The strategic partnership help the organization expand its
service offerings or control its costs?
Customer: Who all are firm’s target market and how it
reaches them
1. Marketing and lead generation efforts
2. Customer demographics
3. Key partnerships
A strategic partnership help capture
a larger share of the market?
Alignment of Cultures 1. How receptive are people to changing policies
2. Quality of service delivered
Conflict management mechanisms in high performing
partnerships?
Parameters Weightage
Financial stability 15 %
Assets & Infrastructure 20 %
Expansion Model 5 %
Technology Innovation 8 %
Industry References 10 %
Culture Alignment 30 %
Service Offerings 12 %
Partnership evaluation framework and ranking criteria to identify areas of collaboration
 The partners for strategic alliance are evaluated using the above model based
on six different framework parameters: Governance, Financial model, Assets &
Infrastructure, Service offerings, Customers and, Cross cultural synergy
 Based on the above parameters the qualified partners are mapped relative to
each other based on a set of identified factors.
 The factors identified are critical to the operations of the Partner organization
and are piece wise compared to one another to arrive at a weightage based on
Analytic hierarchy process (AHP).
Partnership Evaluation Framework

6. Perspective Goal
Weight
(x of 10)
Performance
(%)
Target
Values
Quality Metrics 3 82.31%
Frequency of damage 6 20% 3%
Time spent picking back orders or
stock-outs 4 10% 5%
Total Performance in group 82.31%
Warehouse Utilization 2 63.17%
Storage utilization 4 60% 90%
Fill rate 2 70% 100%
Rate of stock-outs 4 30% 10%
Total Performance in group 63.17%
Financial perspective 2 59.00%
Cost per order 5 80 50
Dollar value per order 3 100 300
Return on investment 1 40% 80%
Distribution cost efficiency 1 40% 20%
Total Performance in group 59.00%
Customer perspective 1 76.59%
Rate of customer returns 6 15% 5%
Rate of on-time delivery 4 75% 100%
Total Performance in group 76.59%
Process management 1 34.32%
Orders picked per hour 6 15% 40%
Units processed per hour 3 25% 60%
Back orders 1 15% 5%
Total Performance in group 34.32%
Asset management 1 45.50%
Equipment downtime 6 15% 0%
Inventory turns 4 10% 30%
Total Performance in group 45.50%
Total Performance in
Transportation
Balanced
Scorecard
64.77%
Year 1
Diversify Expand
Don’t Expand Watch & Learn
SizeofWallet
HIGH
LOW HIGH
Outsource
Investment
Ambiguous
Partnership
Growth rate
The strategy adopted by shockwave over the first year
must be recalibrated as per the market demand and
revenue earning capability after the first year as follows:
a. High Demand-High Earnings: Shockwave must
invest to build its capabilities
b. High Demand-Low earnings: Shockwave must
Watch & Learn and therefore should continue with
the partnership model
c. Low Demand-High earnings: Shockwave must
invest to build its capability gradually while following
the Partnership model.
d. Low Demand-Low earnings: Shockwave must
outsource the market.
Performance of each partner organization is evaluated
using a balanced scorecard as shown.
Performance Scorecard
Expansion Strategy

7. Diversify Expand
Don’t Expand Watch & Learn
SizeofWallet
Growth rate
HIGH
LOW HIGH
Outsource
Investment
Ambiguous
Partnership
Phase I
Year City Phase 1 Total coverage
0
1 650 163 78
2 701 175 13
3 757 189 14
4 816 204 15
5 881 220 16
6 950 238 17
Investment Strategy
Year Total city coverage Depots Cumulative Depot MR CAPEX OP-EX ShockWave [70%] MedXpert [30%]
0 12 12.00 450 y
1 78 1.431 13.43 504 x 1.08y 0.7x+0.756y 0.3x+0.324y
2 13 0.237 13.67 513 1.08y 0.756y 0.324y
3 14 0.255 13.92 522 1.08y 0.812y 0.324y
4 15 0.275 14.20 532 x 1.16y 0.7x+0.812y 0.3x+0.324y
5 16 0.297 14.49 544 1.16y 0.812y 0.324y
6 17 0.320 14.82 556 x 1.25y .7x+0.875y .3x+0.375y
Financial Strategy
Potential Expansion
Assumption
1. Top 25% city observed will be marked under High potential for expansion
2. Number of depots are directly proportional to the number of cities
3. MRs are directly proportional to the number of depots
4. CAPEX required per depot assumed to be ‘x’
5. Current OP-EX assumed to be ‘y’, which is directly proportional to number of depots
6. Investment required with partnership of MedXpert is 70:30.
Financial and Expansion model

8. Diversify Expand
Don’t Expand Watch & Learn
SizeofWallet
Growth rate
HIGH
LOW HIGH
Outsource
Investment
Ambiguous
Partnership
Phase II
Investment Strategy
Year Total coverage Depots Cumulative Depot MR CAPEX OP-EX ShockWave [40%] Financial Partner[60%]
0 0
1 197 3.64 3.64 136 3x 3z 1.2x+1.2z 1.8x+.1.8z
2 16 0.29 3.92 147 x 4z 0.4x+1.6z 0.6x+2.4z
3 17 0.31 4.23 159 4z 1.6z 2.4z
4 18 0.33 4.57 171 4z 1.6z 2.4z
5 20 0.36 4.93 185 x 5z 0.4x+2.0z 0.6x+3.0z
6 21 0.39 5.32 199 5z 2.0z 3.0z
Year City Phase II Total coverage
0
1 650 197 197
2 701 213 16
3 757 229 17
4 816 247 18
5 881 267 20
6 950 21
Potential Expansion
Assumption
1. Top 33% city observed will be marked under High potential for partnership
2. Number of depots are directly proportional to the number of cities
3. MRs are directly proportional to the number of depots
4. CAPEX required per depot assumed to be ‘x’
5. Current OP-EX assumed to be ‘z’, which is directly proportional to number of depots
6. Investment required with partnership of Financial partners is 40:60.
Financial Strategy
Partnership Expansion model

9. Cold Chain logistics recommended practices
KPI for Pharma Logistics
1. Customer Service :Best-in-class pharma companies in India operate at a 95 percent service level, which is 3 percentage points lower than the best-in-
class Indian fast-moving consumer goods (FMCG) companies and 4.5 points lower than best-in-class global pharma companies
2. Inventory Level :Fragmentation has resulted in a large number of stocking locations. A comparison of best-in-class pharma in India against best-in-class
FMCG firms globally points to an additional difference of 80 days of inventory, reinforcing the clear need for better planning and inventory
management.
3. Supply chain costs :. Specialized cold chain requirements for vaccines and other complex formulations can significantly increase supply chain cost.
India’s best-in-class pharma is 8 percentage points higher than both the best-in-class global FMCG firms and best-in-class global pharma