00:42

Yves Meier: Sure. It's a pleasure. Thanks for having me. As you said, my name is Yves. I'm a Swiss citizen, living for 20 years in the Lausanne area. I'm multilingual: I speak German, French, Russian, English, and Swiss German, of course, because I'm originally from the Swiss German part. I'm a passionate supply chain professional. For more than 20 years I've held different positions in supply chain, from customer service to supply chain management and planning, and now in third-party logistics (3PL) management at Bavarian Nordic. I'm also a lover of sport, reading, and, as you just heard, languages.

01:26

Mohammed Nouh: Pretty cool. You've been in the pharmaceutical space for a long time and worked in different companies with different roles. Can you explain to the audience how those roles differ, and how you experienced them?

01:49

Yves Meier: Sure. I worked in big pharma, at a small company in generics, and now in a vaccine company. What I've learned in the last year and a half at Bavarian Nordic is that the vaccine business sits at an intersection of pharma, but it's not like big pharma. The urgencies are different, the cold chain challenges are different, and the demand patterns are different. Even if I look back at the generics business, the decisions you take are different. You try to optimize your margins. In a generic company, the decision isn't always about the capability of your partners. The cost of your partners is what matters. So depending on where you are, whether big pharma, small pharma, generics, or vaccines, your partner selection, your partner decisions, and your collaboration with your partners differ.

02:52

Mohammed Nouh: Very interesting. One thing we'll probably talk about a lot today is how different this is, not only in working with partners but also in planning your network. Based on our chats before the podcast, I really learned from you how the vaccine business differs from other businesses in demand planning and supply chain management. So let's dig deeper into how you choose your 3PL partners, your connected logistics partners. What do you look at first?

03:34

Yves Meier: As a little context, I manage seven 3PL partners around Europe, and the network might grow, because it's important to stay agile and to screen your network all the time. But how do you select the partners? The important thing, as I mentioned before, is to understand what capabilities you need for a vaccine business. Vaccines are +2°C to +8°C products, so cold chain products. You cannot just go out and look for the cheapest partner, or the partner with the fanciest marketing portfolio. You really need to check that they match the capabilities you have written down. A partner who doesn't have a capability is difficult to change, because 3PLs are standardized and try to optimize their costs. If you have a specific need that isn't met at the beginning, it's very difficult and it costs a lot to bring it into the portfolio of that 3PL or the 3PL network you have. So you start with the capability, and then you go out and look at who in the market could match those needs.

04:57

Mohammed Nouh: Assuming a 3PL partner wants to understand your network, your volumes, and how you would work with them, and with a vaccine business there's a lot of volatility, how do you manage that?

05:25

Yves Meier: You need to be transparent. We learned that with our recent move from one 3PL partner to another, and our current 3PL partner had to learn as well that the vaccine business is different. When we gave them a forecast, and a forecast in general is always wrong, that's the understatement, a forecast in the vaccine business can be absolutely wrong. You can have a spike of three times more than you originally forecast. That's a tough story, especially for a 3PL that organizes itself for you based on those numbers. That's why you need to plan that flexibility into the contract at the beginning, with clear, transparent communication, and update the forecasts as much as you can with the picture you have. But vaccines are about outbreaks. If you have an outbreak today, you cannot plan it in [unclear] 18 months before. So you need flexibility, and also redundancy. That's why we talk about the network. A single central warehouse for all your countries might be difficult. You need to be agile and have smaller hubs in different places, to be sure you can react and be close to the market you want to serve. Again, it's important that the discussion is transparent from the beginning that the vaccine business is not big pharma, because many 3PLs think they understand it. Then sometimes there's a hard lesson, and you need to react.

07:18

Mohammed Nouh: I can only imagine. We work in the pharma space, and forecasts are usually very difficult to get right, but in the vaccine business a forecast mostly does not really exist. How do you manage that on your side? Do you build a forecast to start with, and then it's either lower or higher? And how do you expect your partners to react to something like this? Going back to the original question, is that something you say from day one, or something they learn with you over time?

08:08

Yves Meier: I think it's both. Based on our current experience, we update the forecast every quarter, because every month is difficult. Also, Bavarian Nordic is a young company, so we are still learning as a company to be more mature in our processes. A regular forecast update can help. It cannot absorb everything, but it can help. Second, yes, partners are learning as well. There are also points that can be planned, depending on which vaccines you have, because you have a certain seasonality. We are in travel vaccines, so seasonality means when people are traveling. You know that December to February is probably lower volume, but in summer everything can happen. That's where the partner needs to be staffed as well. If it's holiday period on their side, they also need to be ready to add extra people, maybe temporarily. They need that flexibility. In our case it's not an issue of space, because we are not storing that much. It's about operational throughput. There are many orders, many small orders, because vaccine companies don't want to hold too much stock. They want supply just in time. So it's important that the partner is aware of the seasonality you can forecast up front, whether it's then one or two times more. The surge needs to be discussed and also contracted before the relationship starts.

10:04

Mohammed Nouh: Very interesting. We talked about the relationship between the manufacturer, here a vaccine manufacturer, and a 3PL. But I'm curious about the commercial side. I know this may not come directly from your experience, but you've been exposed to it for quite a while now. If there is volatility with the 3PL, there must be volatility with your customers as well. How do you translate that from customers to 3PLs, with you sitting in between?

10:47

Yves Meier: It's a tricky thing. A recent example: there was a communication about an outbreak of a certain disease, where we have a vaccine, and the reaction is very quick. The signal comes from the media. The media covers the topic, patients go to pharmacies, pharmacies go to the sales team, and then it starts. Then you have a certain pattern you can plan up front. You can have your action list. As we said before, 3PLs need to learn that as well, because many of them are used to big pharma. They have the time and the reactivity there, and that's why the selection of a partner is key to factoring that in. How flexible are they? We are in a GDP (good distribution practice) environment, a regulated environment, but where possible you need safe shortcuts, and they need to be clear. That's the whole chain, from the signal of an outbreak or a potential outbreak, or a panic like we had in Covid times, when people reacted very quickly to the media and bought toilet paper and all that. It's the same with vaccines. When people hear about rabies, because we have a rabies vaccine, they react, and the signal comes from the market directly. That's why it's difficult to anticipate that kind of forecast. But the pattern, so that you can react in an automatic way whether it's three times or two times more demand, is something you learn, and you build the muscles once you have that experience. We realized that with our partners. We had an issue, we talked it through, and next time, whether it's two or three times, it will be better. Not perfect, but better. It's a learning curve. That's also why it's difficult to explain to big pharma people, who may say you can use systems and so on. Sure, but at the end of the day, people are transporting and packing the goods, and you need those people. Of course you can optimize, and we are planning automation with our 3PL partner, an auto-storage system, all of that. But that's part of a journey. It's not done overnight.

13:33

Mohammed Nouh: That makes me think about what makes a really strong long-term partnership with a 3PL, beyond price and capacity. Can you explain that?

13:50

Yves Meier: Sure. For me personally, it's important that the partner is willing to listen to our needs. If they say they know everything and not to worry, that's always dangerous, because the devil is in the detail. Transparency is key for me, and also the flexibility I mentioned before. That flexibility is difficult to find out before you collaborate with a 3PL partner, because everybody is perfect. But there are simple questions: how do you set up your system, is this part of the standard? Talk them through it, so they are challenged to answer specific questions about your needs. If that is met, you have a good start. Afterwards, the crises show whether a relationship is strong, and with vaccines you have stock-outs for sure. It's a word nobody likes to hear in pharma. Stock-out is the big bad word, and in vaccines we have it, unfortunately, and so do all our competitors, and they are not smaller than us. In those crisis moments it's important that people talk to each other, work with each other, and find solutions, and the partnership gets stronger and stronger. If there is an issue with transparency, or finger-pointing, because it's easy to say it's not our fault and we don't want to pay for that, then it's not a good base for a long-term partnership. We had these kinds of issues, where partners were hiding and not seeing their responsibility in the whole story. A 3PL is also a company. They want to earn money, and you are one partner in a network of probably 20, 30, 40 partners. Your goal as a 3PL customer is to standardize as much as possible, but the goal of a partner is to be unique, a customized partner for them. So it's a balance in the middle. You need to find the balance between standardization and customization.

16:20

Mohammed Nouh: If you would summarize a strong long-term partnership with a 3PL in three words, what would they be?

16:28

Yves Meier: Trust. Transparency. And interest in development, in the development of products, packaging, systems, and also needs. You're not only reacting. You're proactively asking, what do you need, what can we do for you?

16:53

Mohammed Nouh: I like that you mentioned stock-outs, and I know stats from the industry about how vaccines differ from medications or biologics. First, can you explain to our audience what a stock-out is, and then we can talk about it a bit.

17:17

Yves Meier: Stock-out is the bad word, and I get goosebumps when I hear it as a supply chain professional. You don't have the stock anymore for your customers, either in your warehouse or, at the end of the day, at the pharmacies or points of sale. But when we speak about a stock-out, we mean there's no stock in our 3PL anymore. In the market there might still be stock, and doctors might still have doses. But when we speak about a stock-out, it's that the 3PL is empty.

17:50

Mohammed Nouh: And how does a vaccine company manage stock-outs?

17:56

Yves Meier: That's an interesting one, and as I said, we've had quite some success on stock-outs recently. You have alternatives, in the sense that you might move goods from one 3PL to another, across markets. That needs regulatory affairs involved, because you need to get exemptions, for example for a pack from France that you want to sell in Germany. There's also the serialization aspect. All of that needs to be factored in, and then of course change controls in the quality management system need to be covered. What our regional supply chain organization has learned over the last year and a half is to build up these muscles. The first time you do it, it's a panic. But now, with processes and team playing, you manage it as a team. You have a certain understanding of how it works and where the challenges are, including in the collaboration with the 3PL, because it's not easy for them either. Your customer is ordering product A, but you tell them to send product B because you have an exemption, and an automated system blocks it because SAP, or whatever ERP system you want to mention, is not set up for that. So you need to be very close in checking that there are no mistakes, because when you have a mistake, you potentially have penalties. When you have an exemption for 1,000 units, you should not send more. So that's the opportunity you have to manage among the different 3PLs, geographically but also between different products.

19:41

Mohammed Nouh: If you can sum this up in one sentence, as short as possible, how would it be?

19:49

Yves Meier: Manage stock-outs, you mean? Manage the situation together in favor of your patient, without thinking that it's not possible.

20:01

Mohammed Nouh: I like that. We talked about 3PLs, or logistics service providers, and about stock management and how you manage stock-outs. I'd like to dive a bit more into your network, specifically in the vaccine business. It may be obvious, but the vaccine business is a little different from how a biologics, pharma, or generics business would look. How do you plan your network, and how do you choose your partners based on your network?

20:47

Yves Meier: The partner decision and the network decision come together. You cannot start planning your network before you know the partners and their capabilities, so that needs to come together. And there is no single market. The European market is very fragmented. You have the European Union, you have Switzerland, and you have different country regulations. So it's important to understand the volumes per country, and whether it makes sense to build up a local 3PL partner or serve everything from a European distribution center. It's key to understand the different markets and which partners are available to draw your network. Very important, network planning is not a one-time exercise. It needs to be reviewed, and you need to be agile. We do that in our case as well. We have seven 3PL partners now, and we constantly review them via KPIs and capability analysis. In the future we might have more, because we need to be closer to the market. We need a cost structure that might be more interesting for small orders, for example, from a market we serve directly from the country instead of from a central warehouse, especially in cold chain, where the temperature also plays into the equation.

22:24

Mohammed Nouh: Interesting. Taking that network into consideration, what makes a company's distribution network ready for growth? What are the main criteria or signals that tell a company its network is actually ready?

22:52

Yves Meier: We touched on it at the beginning: surge capacity in your network. If you don't factor that into your discussions with the partners, and you only manage to your current forecast, it's difficult. You need flexibility in your network. Today you have a certain market, and tomorrow you might have more markets. So if you choose a partner who has only one warehouse in Europe, it's maybe not the right choice. But if you have a growing partner with warehouses all over Europe, that's an opportunity for us to evaluate whether we might have a new market in the future, with a partner already present there. Then there's the technological aspect. We speak about AI, we have to use the buzzword, and AI is there, of course. But it's also about data transfer and data management, and the visibility of what is going on, because your 3PL is actually the hands and feet of your supply chain. The last mile is managed through your 3PL, and we use order to cash through our 3PL, so we need that visibility at the end of the day. It's also important that the partner is capable and willing to invest there for your future flexibility, growth, and speed. And last but not least, we hear a lot about packaging regulations in the European Union. It's important that 3PL partners invest in innovative packaging solutions and maybe support you in the future with postponement, where they do the last-mile packaging instead of you. You send white-label products to a 3PL and they pack them finally for you. Then you can be even more flexible, shipping from a Spanish warehouse to Portugal, or from Italy to Austria, depending on the final customer needs.

25:21

Mohammed Nouh: So you don't look at your 3PLs only as logistics partners. You also think of them as packaging partners, or potential partners for growth, as long-term partners who would grow with you vertically, not just horizontally.

25:41

Yves Meier: At the size of our company today, we are not big enough to bring all of that in-house. The make-or-buy decision at this stage is a buy decision. But when I say we work with 3PL partners, it can also be that we bring certain activities in-house, because, as I said before, we need to evaluate what is best for each market. And then there's the partnership. The word partnership is very key. When I talk to my 3PLs, I always say I see you as my partner and not my service provider. That's why I don't like the LSP word. We are partners, but that means you need to listen to me and I listen to you. It's customization versus standardization, the thin line I walk every day when I work with those partners. I have the same conversations, KPIs versus perception. You want as much flexibility as possible to make the stock-outs as short as possible. Your 3PL wants to be as optimized as possible, because they want to earn money.

26:54

Mohammed Nouh: I feel like this conversation could go on for hours, but we're very close to time. I want to close with a question that's close to your heart, because I know you're a sustainability champion. It's a little unplanned. We've been talking about stock-outs and the vaccine business. A stock-out is a problem for a customer, and also a time-to-cash problem for the manufacturer. But there's another side, which is product loss. In vaccines I always hear the numbers are much higher than for regular biologics or generics, because of the outbreaks you mentioned. You need to plan for them before they happen, so you manufacture and store products in different places to be able to react. Because you are a sustainability champion, how do you manage that as part of your 3PL network, and how does it affect the business?

28:36

Yves Meier: Thank you for this question. It's a hard question, because you're right, and this is not very popular to say, but we scrap a lot of product. In the pharma industry in general it's just not a big topic that gets published, because it's not popular. But yes, in vaccines you have scrapping and loss of product stability. It's a vaccine, so it's not easy to reproduce. You have a stability issue at the beginning sometimes, so you already lose yield. And then, as you need to be sure you're there for outbreaks, you produce a certain quantity, and we see a lot of losses. The opportunities are bigger than the losses. All pharmaceutical companies are hiding it somehow, and that's why we are not yet making major progress there. But how we manage it with the 3PL is, first of all, in my role I create visibility. The topic is on the agenda and it's tracked. You see what your costs are today and how you improve, so you create a certain dynamic. And as we touched on before, we move products from one country to another, instead of producing a fresh batch that would only be available in two months, by using a product that sells less in one market. Yes, you may have transfer costs and regulatory costs, but at the end you don't lose the stock. That's an opportunity. You're quicker and you haven't lost anything. It's a win-win. At the end, the key is to create visibility end to end, to improve your forecasts as much as you can, and also to reduce costs, because if the cost of goods is high, the loss is more painful. If you can optimize your end-to-end supply chain and bring down your costs, you might still have losses, but they are less painful from the financial side. They are painful from the resource and nature side, which is unfortunate. But at least you have a trend. You will have waste, I think that's realistic, but you can see an improvement trend, and 3PL partners play a role in that through flexibility, moving the goods, giving that visibility, and reducing errors. If there are errors at a 3PL, wrong shipments, wrong products, or damaged products, that is also scrap, and it's managed by KPIs.

31:31

Mohammed Nouh: If we summarize what you said, specifically about product loss and working with your 3PLs, how would you sum it up?

31:45

Yves Meier: It is only possible together. If I'm alone, or my team is alone, in managing that, we cannot, because we are not storing the product. Our 3PL is. They need to store it correctly, they need to create the visibility for us, and they need to be reactive enough. That's what I said before about customization and standardization. When it's really needed, we have this opportunity to save products. It's a win-win for everybody, because scrapping product is not added value for a 3PL either. They lose space, they need to throw it away, and it's an artificial cost. It's not a nice cost for them either. So only true partnership makes it possible, and partnership is important for the transparency, the speed, and the long-term success of both companies. If we only lose products and don't earn money, nobody will pay the 3PL.

32:49

Mohammed Nouh: That's a really good summary. Thank you very much for your time today. I enjoyed this discussion so much, and I'm looking forward to having more discussions in the near future.

33:02

Yves Meier: Thank you. It was a pleasure for me too.

33:05

Mohammed Nouh: Thanks.