In 2021, consumers can have almost anything delivered conveniently to their front door – including prescription medications. With the prescription-based US online pharmacy market growing at 19% and expected to hit $132 billion by 2026, the race is on to determine who can most efficiently and effectively serve customers to become the dominant players in the category.
The convenience and lower costs for consumers are making digital orders the preferred choice for refilling prescriptions. For pharmacies, the challenge is to meet customers’ needs as cost effectively as possible to compete. Our client is a large U.S. pharmacy that offers a prescription mailing program using USPS to mail medication directly to customers. Drugs can be shipped or drop shipped through multiple methods including Priority and PMOD (Priority Mail Open and Distribute), where aggregated groups of prescriptions are first sent from their originating pharmacy to a regional distribution center that is closer to the prescriptions’ final destinations.
The Challenges of Manual Shipping
Packaging pharmacies only have the capacity to ship aggregated prescriptions to a certain number of regional distribution centers – any prescriptions that cannot be initially shipped to a regional distribution center must be shipped directly to their destination address. The cost of shipping a prescription depends on a variety of factors, so it is difficult to manually decide which regional centers to choose for maximal cost savings. This manual selection process is time-consuming and slow to react to changes in rates or demand.
There are several key questions to consider regarding shipping:
- Which regional distribution centers should pharmacies ship drugs to such that cost is minimized?
- How much cost savings would result from reallocating prescriptions between pharmacies such that prescriptions are shipped from a closer pharmacy to its destination address?
- How should we reallocate prescriptions such that we are taking advantage of shorter shipping distances but also balancing prescription quantities between pharmacies?
Fortunately, there is an easier way to ensure a smooth and cost-effective shipping process.
Generating Optimized Shipping Plans
To overcome these challenges, we employed our state-of-the-art planning engine that generates optimized shipping plans within minutes. This allows users to rapidly respond to changes in rates or demand so they can immediately begin to implement cost-effective shipping plans. Users can also conduct What-If analyses with multiple modifiers like shipping cost and drug demand changes to generate optimized shipping plans.
Achieving up to 10% Cost Savings & Future Proofing
Visual8’s planning engine generates shipping plans with 5-10% in cost savings compared to the client’s current plans. Over the course of a year, this can amount to millions of dollars in savings. Our client used this tool to evaluate cost-saving changes to their shipping plan after USPS released their new 2021 rates.
Our web platform is a fast, secure, browser-based application, offering encrypted access to this planning engine making it a simple implementation for our client-based planning team and the CEO/Manager level dashboard KPI reporting reduced the need for reporting and updating resources.
The client will continue to use this tool to help them generate new shipping plans in response to changing factors and help them plan for different types of scenarios, such as:
- Reallocating prescriptions between pharmacies and balancing prescription reallocation
- Adding capacity to individual pharmacies
- Adding new pharmacies
- Partially locking shipping plans by enforcing that a pharmacy must ship demand to one or more regional distribution centers but allowing the planning engine to select the remaining shipping routes
- Creating distinct shipping plans for each day of week to account for weekly seasonality trends
Visual8 is proud to offer solutions that enable companies to optimize their processes, allowing them to quickly adapt to changing market factors and ultimately maximize cost savings.