RMIT 

Classification: Trusted 
 
Case study – TRAPHACO pharma

Traphaco Pharma (TRA) has grown and affirmed its position as a leading pharmaceutical manufacturer in
Vietnam. At present, Traphaco's flagship products such as Boganic and Cebraton (Hoat Huyet Duong Nao)
are taking the lion’s share in their respective market1. The distribution side is a major opportunity for the
vibrant pharmaceutical industry. Traphaco has worked hard to build a modern distribution system (DC) that
is now beginning to get contact with big names in pharmaceuticals and hand out their products in Traphaco's
system. Traphaco has also developed a network from more than 6,700 pharmacies in 2014 to over 27,000
pharmacies as today. The company awareness of the importance of fulfilment systems may lead to wastage or
blockade of financial resources, irrational utilization of drugs, shortage, or overage of essential medicines
among many others.

Traphaco operates in an extremely competitive environment. They face intense pressure to deliver Boganic
and Cebraton and new drugs and their profit margins are continually being squeezed. The retailers prefer
smaller and frequent shipments to a large number of DCs. Some competitors already looked at a drop-shipping
strategy, providing direct access to home and individual customers. It would be purpose-built around the needs
of the Vietnam pharmaceutical and healthcare customers. Proper storage conditions for pharmaceutical
products and paramedical supplies are crucial to maintaining their quality, safety, and efficacy. In addition,
order completion rate and customer services intensify pressures to provide premium service to a wide range
of delivery points, including hospitals, wholesalers, nursing homes, retailers and pharmacies, at a competitive
price. The SCM team has various options to consider, such as direct shipping, distributor storage and using
external 3PL services etc.
Option 1: Upgrading the existing DC to handle multiple order types and smaller delivery including individual
purchases. This ambitious plan is to create the most advanced warehouse ever built solely for healthcare
products in Vietnam. TRA started work on creating a 10,000 square-metre warehouse in Hung yen (extended
in 2025 to 25,000 square metres). Along with this strategy, TRA aims to upgrade the new warehouse
management software to enhance order visibility.
Option 2: Expanding Traphaco’s Warehouse Management to manage customers' multiple operating
procedures. The team expect the company's DC can handle 7,000 SKUs and 50,000 orders or 30 million units
per month for more than 65 major clients that distribute to around 30,000 delivery points. With the growing
e-com networks, the company is also considering investing in effective platforms to expand the sales of these
two flagships products.
Option 3: Outsourcing to a third-party fulfilment (3PL) company that can handle increasing and diverse needs
from customers. Several professional services with Warehouse Management solution (WMS) using the IBM
platform can provide automated processes and full visibility. All product movements are controlled by the
WMS solution, supported by radio-frequency (RFID) technology. These 3PL companies can accommodate
the multiple operating procedures, scalability of the growing list of clients using Advance Ship Notices
(ASNs) and importantly the WMS could manage batch control and track expiration dates—critical
functionality in the pharmaceutical industry.