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Virtual Distribution – Contracting Services

Contracting  Services is now becoming a popular mechanism for new entrants.

The new Good Practice Guidelines EU 2013/C  43/01 are a step in the right direction to ensure product quality and ultimately patients are safeguarded through improvement of standards across the supply chain.

However the requirements have significantly increased the cost to the industry, making it financially prohibitive for new entrants enter the market.

Contracting Services – Warehouse, Admin Office, RP

The key elements necessary for setting up wholesale distribution business include a storage site, admin office, RP and logistics. Many new start-ups adopting a model where these are contracted out, i.e. relying on contract warehouse, contract admin office, contract RP and outsourced logistics.

This virtual distribution business built on contracting services out is not a concept but has been slowing gaining momentum in the UK and Pharma Experts has seen a rise in the number of queries from European businesses who wishing to break into the UK market.

In a recent case study we evaluated and compared costs between the traditional model against the virtual distribution concept using contracting services such as Contract Warehousing, Contract Admin Office , Contract RP and third party logistics (3PL) as a service.

Lean v Traditional  Virtual Distribution – Contracting Out

The many costs involved in the setting up a traditional distribution business include rent, rates, heating, ventilation, security, pest control etc. The annual cost of a small sized operation can mount up to and over £100,000 per annum. Lest not forget all the HR issues and lost working days due to illness etc.

Traditionally warehouse workers are known for their high turnover which can be a burden on a new operation. HR issues can be proportionally higher to a small business when you take into account with e HR issues and lost working days due to illness etc.

A lean virtual operation relying on Contract Warehouse, Admin Office, Contract RP can be set up from around £25,000 per annum. This includes all the above mentioned without the worry of the impact of HR issues.

We still have clients who prefer to be in control but we are sure you will agree the later is a much more attractive option.

The flexibility of lean approach is attractive and fairly easy to setup.

Which model would you prefer and why?

Pharma Experts Limited is a boutique consultancy specialising in GDP regulatory support to SMEs. Part of our service includes provision of contact RP’s, contract warehouse’s and administration site.

About the Author:

Zul Mamon
Zul is a Senior Consultant, Pharmacist, ISO 9001 Lead Auditor and GDP Trainer. He has extensive experience in the pharmaceutical sector, having worked for both the independent and national multisite organisations.

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