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VOL. 10 | NO. 22 | Saturday, May 27, 2017

FedEx Supply Chain Ramps Up New Medical Distribution Warehouse

By Michael Waddell

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FedEx Supply Chain, formerly known as Genco, is ramping up activity at its 1.1 million-square-foot multitenant distribution warehouse on East Holmes Road. Memphis-based FedEx Corp. acquired Genco, a third-party logistics provider, for $1.4 billion in early 2015 and announced a network expansion last October.

FedEx Supply Chain, formerly known as Genco, is ramping up its multitenant warehouse on East Holmes Road. Its proximity to the FedEx Super Hub facilitates next-day delivery of medical devices, medications and similar products.  (Submitted)

The warehouse at 3955 E. Holmes Road is considered an “end-of-runway” facility due to its proximity to the global FedEx Super Hub.

“In the medical drug and device space, and particularly in the drug space, many times the supply chains of those manufacturers require immediate next-day air shipments,” said Kevin J. McPherson, vice president of Healthcare Logistics for FedEx Supply Chain. “So by being close to the FedEx global hub, we can shuttle product over there very quickly as late as midnight or 1 a.m. and get product delivered the next day,”

The multitenant approach is designed to offer a flexible pricing model for small- and medium-sized customers.

“Legacy Genco has traditionally focused on large manufacturers of drugs and devices with dedicated facilities, so with this new model we’ll be able to provide a shared warehouse environment for these small- and medium-sized companies and bring to them an economic package of supply chain services on an allocated cost basis,” McPherson said.

The facility offers advanced warehouse management system, or WMS, technology integrated with a number of other applications that can be configured.

“We have a leading-edge quality management system, bringing the best technology to our customers who maybe could not afford them on their own or they might be cost-prohibitive,” said McPherson.

The facility also boasts integrated labor management systems and a transportation and freight management system offered within the company’s supply chain group.

FedEx Supply Chain’s tenant list is confidential, but product categories include medical devices and medicines, diagnostics, and biotechnology and biopharmaceutical products. Smaller tenants typically occupy 5,000 to 10,000 square feet, and larger tenants scale up from there.

The facility must meet certain specifications, primarily around environmental controls, in order to store the medical items, so it is engineered to maintain a constant temperature of 15 to 25 degrees Celsius (59 to 77 degrees Fahrenheit). A 40,000-square-foot refrigerated area, meanwhile, maintains a temperature of 2 to 8 degrees Celsius (36 to 46 degrees Fahrenheit).

FedEx Supply Chain’s Healthcare Logistics team offers services that range from distribution and returns – including compliant disposal of products – to packaging, labeling and a full suite of transportation management services.

“This is really a win-win arrangement for both FedEx and the tenants who rent space in the facility,” said Cyril F. Chang, a University of Memphis economics professor and director of the Methodist Le Bonheur Center for Healthcare Economics. “What we have here is an example of a virtually integrated supply chain operation, with FedEx integrating itself into the logistics process of multiple medical device manufacturers in the Memphis area.”

FedEx Supply Chain currently operates in 770,000 square feet of the facility and plans to expand into the remaining space in the near future. The company took the building over from Johnson & Johnson Health Care Systems in April 2016 and re-engineered the interior space.

“When we took over the facility, the employees working there transferred over, so we retained all of those jobs,” McPherson said. “And as we’re building out projects for new customers, we are continuing to add jobs.”

Multiple tenants are already set up in the Memphis facility, as well as in a 400,000-square-foot facility that opened last November in Milton, Ontario, Canada – near the FedEx Express Canada hub at Toronto’s Pearson International Airport.

“We’ve occupied just about a quarter of (the Canadian) facility right now, and we’re building out the pipeline for more customers to go into it,” said McPherson. “The strategy is to be able to provide a manufacturer with a global network of distribution and logistics services that complement each other.”

Medical device companies have been using this type of logistics strategy for years, according to Chang.

“For example, orthopedic device manufacturers have for years integrated themselves into the supply chain and logistic networks of large hospitals,” he said. “It’s the same concept.”

He believes the state of Tennessee’s IMPROVE Act, which cuts business taxes for manufacturers by allowing them to go to a single weighted sales factor, will help to lure more medical device and drug manufacturers to facilities like that of FedEx Supply Chain.

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