Why JP's distribution giant 'Suzuken' pushes dual innovation

Suzuken faces low operating profit margins…pushing both hardware and software innovation

Established 'smart logistics'…integrating manufacturing, logistics, and wholesale, beyond automation of logistics

Saved ¥5.7 billion through the 'Cubixx' system…seeking data-based growth through building the healthcare professional platform

The challenges facing Suzuken, the Japanese pharmaceutical distribution giant with annual sales of ¥2.4 trillion (approximately KRW 21 trillion), are similar to those facing the South Korean pharmaceutical distribution industry.

Despite the Japanese market being dominated by four major companies, including Suzuken, which controls 80% of the market, these firms face structural difficulties: low operating profit margins coupled with soaring labor and logistics costs.

Suzuken's chosen solution is 'Dual Innovation'. The company is aiming for a fundamental change in the industry's structure by combining hardware innovation, such as smart logistics and the Cubixx system, with software innovation, focused on building the COLLABO Portal for healthcare professionals.

The distribution giant's experiment to overcome low margins

Headquartered in Nagoya, Suzuken is one of Japan's 'Four Giants' of pharmaceutical distribution, alongside Medipal, Alfresa, and Toho Yakuhin. They all commonly suffer from chronic low distribution margins, despite their massive size and market dominance. Recently, companies are facing increased labor and logistics costs due to inflation in Japan and the 'Logistics 2024 problem,' which is a regulation limiting working hours for transport workers.

Suzuken's sales structure (2024): pharmaceutical wholesale (82.7%), specialty pharmaceutical distribution consignment (10.5%), regional medical·nursing support (3.4%), and healthcare product development (1.9%).

As of last year, 82.7% of Suzuken's revenue was pharmaceutical wholesale. However, the company is continuously expanding into areas such as specialty drug distribution consignment (10.5%) and regional medical·nursing support (3.4%), interpreted as efforts to diversify its business.

Takafumi Ogawa, Chief Operating Officer of Suzuken's Management Planning Department, explained, "The goal of pharmaceutical distribution is stable supply, but the challenge for sustained growth is overcoming the low operating profit margin," and added, "Suzuken is emplying a dual innovation strategy, by upgrading the core pharmaceutical distribution business through 'Smart Logistics' as well as by installing a new growth engine through 'Digital Healthcare.'

'Smart Logistics': hardware innovation through integrating manufacturing, logistics, and wholesale

The first pillar of Suzuken's innovation is the construction of 'Smart Logistics.' This strategy goes beyond simple automation to tie the entire Supply Chain Management (SCM) by integrating manufacturing, logistics, and wholesale into a single flow, thereby maximizing cost efficiency.

The 'Metropolitan Integrated Logistics Center,' becoming operational in April of last year, is a result of this hardware revolution. It is the first facility in Japan to house pharmaceutical contract manufacturing facilities alongside pharmaceutical logistics and wholesale logistics facilities in one location. This integration drastically reduces unnecessary transportation steps between the pharmaceutical company's manufacturing·shipping and the distributor's receiving·delivery process, simultaneously shortening lead times, shipping costs, and time.

Suzuken's 'Metropolitan Integrated Logistics Center,' becoming operational in April of last year

Suzuken utilizes advanced robotics and image recognition technology to automate processes such as slip entry, inventory organization, and intra-facility delivery. This design enables stable operation with fewer personnel, serving as a practical countermeasure against soaring delivery costs and intensifying labor shortages exacerbated by Japanese limits on driving work hours.

Furthermore, the company actively uses the 'Cubixx' system, adopted from U.S.-based Cencora, to enhance inventory management for high-value pharmaceuticals. This system enables data-driven tracking, monitoring, and the recovery·resale of unused 'Inactive Inventory.' Suzuken reported saving ¥5.7 billion (approximately KRW 53 billion) in pharmaceutical disposal costs last year alone through the Cubixx system.

Suzuken's automated logistics system using robots

From distribution margin to data margin…software evolution through 'COLLABO Portal'

The second pillar of Suzuken's innovation is its 'Digital Healthcare' business, whose key strategy is to convert the data secured through its distribution network into value for clinical practice. At the center of this strategy is the dedicated platform for healthcare professionals, the 'COLLABO Portal.'

The portal has 380,000 registered healthcare professionals. Suzuken has been digitally reconstructed to include individual doctors and pharmacists utilizing its existing hospital and pharmacy network. The portal acts as a 'data hub,' structuring and delivering necessary information to healthcare institutions and practitioners based on data uniquely secured by the distribution company, moving beyond simple information provision.

Through this platform, the initial response time for call center inquiries (e.g., scheduled delivery times) previously handled by phone, fax, and email has been reduced from an average of 30 minutes to 5 minutes. This frees field sales representatives from repetitive tasks, allowing them to dedicate time and capabilities to high-value solution proposals. The role of the sales agents is thus shifting from a 'order taker' to a 'digitally-enabled consultant.'

Suzuken's 'COLLABO Portal,' a platform specifically designed for healthcare professionals.

The platform is also beneficial to pharmaceutical companies. The COLLABO Portal serves as a channel for drug manufacturers to provide information and digital marketing outreach to medical institutions and practitioners. Suzuken expects this strategy, aiming to generate 'information margin' over 'distribution margin', to be a key component in overcoming its low-margin structure.

Suzuken's case is gaining attention for its approach, which reduces cost burdens through automation-based supply chain innovation and establishes new value through a digital platform. This strategy of integrating manufacturing, logistics, and wholesale, along with data utilization, aims to mitigate the inherent limitations of the low-margin distribution industry. Given that the South Korean pharmaceutical distribution sector faces similar structural challenges, including low margins and rising labor·logistics costs, Suzuken's dual innovation strategy is considered a valuable case study for gauging the direction of future industry change.