DHL, the Middle East's leading logistics and courier company, is expanding its pharmaceutical logistics operations to tap into the increasing demand for healthcare products and services in the region. With the current Dh16 billion pharmaceutical market in the Middle East expected to grow to Dh43.5bn by 2015, DHL sees enormous potential in the pharmaceutical logistics sector.
In an interview with Emirates Business, Dave Harris, General Manager for Contract Logistics, and Parim Patel, Life Sciences and Healthcare Manager at DHL-owned Danza's International; along with Steve Kay of DHL Global Customer Solutions for Emerging Markets, and DHL Express's Akin Sawyerr, who are in charge of Business Development for Life Sciences, outlined how the company intends to capture the regional pharmaceutical logistics market.
How long have you been in the regional pharmaceutical logistics market?
Dave Harris (DH) We have been active in the regional pharmaceutical logistics industry for five years now and we were the first international company to enter this market in the region. We began our operations from the Dubai Airport Free Zone and recently started a small operation in the Jebel Ali Free Zone on 1,500 square metres.
What prompted you to enter the pharmaceutical logistics market?
(DH) We noticed that there was a great demand for healthcare products and services. Pharmaceutical manufacturers were seeing a 10 per cent to 20 per cent rise in demand for pharmaceutical products in the region. Dubai was also in the initial stages of positioning itself as a health tourism hub through the Healthcare City and we foresaw unprecedented demand for healthcare services in the UAE as more people come to the country for treatment.
The development of the Jebel Ali Free Zone as a regional and international logistics hub, as well as the announcement of Dubai World Central, helped to raise the profile of the Middle East as a major gateway for consumer products. Pharmaceutical companies were increasingly looking at the Middle East as a preferred hub to provide the linkages needed with their wider markets globally.
How do you compare the current demand for pharmaceutical products to what it was five years ago?
Steve Kay (SK) The demand has increased five-fold and is still growing. The sector itself has been growing by 10 per cent. The Middle East is experiencing double-digit growth, not witnessed anywhere in Europe. There is high potential for sustained growth of the pharmaceutical logistics sector. Markets such as China, India and North Africa, where economies are booming, are continuing to rely on the Middle East as a viable logistics hub.
What are DHL's current facilities in the pharmaceutical logistics business in the region?
(DH) We are finalising construction of a 54,000 sq m facility in Jebel Ali, which will be opened in September. We have dedicated 5,000 sq m of this to life sciences and health care. However, due to the increasing demand we are witnessing in the market, we are looking to expand the facility by another 20,000 sq m. But in life sciences, what matters is not just putting up the structures, because anyone can do that. The biggest test is the kind of quality controls, standards and process controls one puts in place. All our facilities are air-conditioned, with a [suitable] temperature range for vaccines plus colder if required. All facilities have biometric access control for security, Tapa-compliant, with full-time physical security. We have trained and experienced personnel acquired from our group's operations elsewhere.
(SK) We also have special facilities for transporting pharmaceutical products both by sea and air and also during distribution on land.
What is your current share of the regional pharmaceutical market?
(SK) It is very difficult to tell you our exact market share, since it is a very fragmented market. However, according to recent estimates, DHL Express Logistics commands 60 per cent of the entire logistics market in the Middle East. Also, statistics from Dubai Cargo Village indicate that DHL is the largest air importer into the UAE. Currently, Saudi Arabia, the UAE and Egypt represent our biggest markets in the region.
Do you foresee competition as more players enter the sector? How are you ready to cope with it?
(DH) Of course, like any other lucrative business, we expect more players to enter the pharmaceutical logistics business as it continues to grow. However, there will be barriers to entry based on the kind of quality and process controls required, the costs involved, the standards demanded by the international and multinational pharmaceutical companies and the human capital required for sustaining the business.
Parim Patel (PP) Our main competitive advantage is that we have the financial resources, trained personnel and a department dedicated to innovations to keep us ahead of the others. We can leverage the group's resources in terms of human capital to strengthen our position in the region.
What is the size of your international pharmaceutical logistics operations?
(SK) The group generates revenues of $1.8 billion (Dh6.6bn) annually from pharmaceutical logistics alone. We are working with the top 21 pharmaceutical industries in the world. We are also working with pharmaceutical firms based in the Middle East.
How do you manage to balance the regulatory controls between your operations in the region and your operations elsewhere?
Akin Sawyerr (AS) We work in various countries that have different standard requirements and different regulations. We have to adhere to the regulatory and standard controls of every country. Every country has a duty and responsibility to make their own legislations to protect their people. You cannot argue that just because one drug is allowed elsewhere, it should be allowed in another country. We adhere to the legislations of every country we operate in.
What is your current distribution model? Do you see this changing?
(PP) Currently, pharmacists do not order from us; they contact manufacturers for orders and manufacturers give us the orders to deliver. That part of the supply chain is not changing. We are more like a local stock holding facility for the manufacturer.
(AS) Our pharmaceutical logistics operations elsewhere allow us to deliver directly to hospitals and when products are used in wards and operating theatres the information is fed back into systems, which allows us to notify the manufacturer that that item has been used and he should order another shipment. The time will come when the health industry in the region will increase exponentially. Clinics cannot afford to have patients lying on beds or operation tables in hospitals without medicine.
As world-class logistics providers, we will gradually get there. We are looking at the first steps of holding stock as a major investment. There have to be more hospitals and more beds. The next steps will follow naturally since we have the expertise and infrastructural resources. There are always changes in any distribution model; one cannot operate with a rigid supply chain. Demands are driven by specific attributes of the commodities one moves.
What are some of your future expansion plans and investments in this sector in the UAE?
(DH) DHL currently operates 120,000 sq mt of warehouses at the Jebel Ali Free Zone, Dubai Investment Park and the airport free zone. We have a current built-up areas of 54,000 sq mt and are just finalising the concept design of the next building of 50,000 sq mt at Dubai Logistics City. These are all planned for the next two years and will cost anywhere between $65 million to $70m.