Cover Story: Bring it on!

This article first appeared in The Edge Malaysia Weekly, on November 9, 2015 - November 15, 2015.

I decided that I wanted to get into the business of transporting medication from the manufacturers to the end users in a manner that meets or exceeds the MoH’s guidelines. So last year, I formed Utama Multimodal Logistics. > Nizam

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When UML Sdn Bhd set up shop to focus on transporting only pharmaceuticals and vaccines, the other logistics companies laughed at them and thought they were mad. Nobody was specialising in the transport of pharmaceuticals because the market was thought to be too small. Today, it is UML that is laughing all the way to the bank.

Nizam Ariff was in his mid-thirties when he decided to branch out on his own. He was working at Northport Malaysia Bhd at the time, and had been in the logistics business since he entered the workforce.

He had not evinced any interest in logistics or supply chain management, but that was the job available to him when he returned from Australia after deciding not to pursue a master’s degree in finance.

“Before I returned, I already had a job waiting for me. I started working at Evergreen Marine Corp. It was just by default as my dad’s friend, Datuk Kenny Ong, was looking for sales and marketing staff in Penang,” says Nizam.

“I think he heard I was coming back because I wasn’t happy where I was. He said, ‘Okay, come and join me and see what you can do. Learn the ropes.’

“So I did. I spent one year with them in Kuala Lumpur, where I was at Glenmarie doing operations in Westport. And the following year, I went back to Penang and worked there for six years.”

In 2006, Nizam left the company without a backup plan because he was a bit bored of sales and marketing. A year later, he joined Northport. Again, he was in the commercial department, doing marketing.

“From 2007 to last year, I met a lot of people and learnt a lot about the logistics industry — shipping, transport, warehousing — you name it. The experience I gained in logistics and supply chain management became my strong point,” he says.

Nizam was comfortable in his job and this was what scared him. He had seen employee after employee join and stay until they retired, and after retirement, try to extend their contracts.

“I had to leave because I wanted to do something for myself. I was 36 at the time and thought I wanted to do something on my own. It didn’t matter if I didn’t make it because I was still young,” he says.

Most of the friends he talked to advised him not to leave. After all, he had a good job and a comfortable life. Few could understand his drive to create something for himself. It all seemed like too much work.

Then, Nizam spoke to some friends in the pharmaceutical industry who not only encouraged him but pointed him in the right direction. “They told me there was a gap in the pharmaceutical industry’s supply chain,” he says.

Pharmaceuticals and vaccines have to be transported in a carefully controlled climate, he explains. “If you don’t control the temperature when they are transported from the warehouse to the pharmacies or hospitals, they lose some of their potency.”

Pharmaceuticals have to be kept below 25°C, while vaccines have to be kept at between 2°C and 8°C. Any “excursions” from these temperatures and the pharmaceuticals or vaccines suffer as a consequence.

Nizam did some research and found that the National Pharmaceutical Control Bureau would be imposing stricter regulations and guidelines on the transport of pharmaceuticals and vaccines, in line with the requirements of the Ministry of Health (MoH) and World Health Organisation.

Pharmaceutical manufacturers transport their products to hospitals and pharmacies across the country. Although there are global standards for the shipment of these products, they were not being adhered to.

Nizam found that many of the pharmaceuticals were not stored at the right temperature and humidity in transit. Also, many transporters would use the same vehicles to transport meat and other goods because they did not want to limit themselves to the pharmaceutical industry. This gave rise to the risk of contamination.

Even the transporters who had probes in their vehicles could only tell you after the fact whether the products had been shipped within the required conditions. There are consequences to these “excursions” because a vaccine that has lost some of its potency could lead to side effects.

With his background in logistics and supply chain management, Nizam clearly identified the problem. Then, he focused on coming up with a solution.

“I decided that I wanted to get into the business of transporting medication from the manufacturers to the end users in a manner that meets or exceeds the MoH’s guidelines. So last year, I formed Utama Multimodal Logistics (UML),” he says.

When Nizam decided to strike out on his own, he knew he would need support. A chat over Facebook with a former classmate Ahmad Fahmi Hamid, who happened to be in the same line and was working at DHL at the time, provided this.

“To do this alone is not easy. I knew I would need a partner. We had studied at Uplands International School in Penang. Then, he flew off to Dubai where his father was working, and we lost contact until 2013,” says Nizam.

“We reconnected on Facebook and found that we were both living in Setia Alam. I asked him what he was doing and bounced some ideas off him. I told him I wanted to leave my job and that I had this idea, and asked whether he would like to join me, as I needed someone in the industry who had more or less the same background as me.

“At first, he wasn’t interested. Then, I got a phone call from him. And by the end of 2013, I said, ‘Let’s do it’, and he said, ‘Okay, fine’.”

The plan was to have Ahmad Fahmi work on the operations while Nizam focused on the commercial side of the business as he had been doing this all along. But there was no business model for them to emulate in Malaysia because nobody was doing exactly what they wanted to do.

So, the duo got hold of technical journals and pharmaceutical reports from overseas to find out what the most advanced companies in the world were doing and what was considered state-of-the-art in terms of transporting pharmaceuticals. The business would involve buying Grade A containers and installing pricey made-in-Germany probes and data loggers.

Also, Nizam didn’t want to have a report at the end of the transport journey telling him whether there had been any excursions in temperature. He wanted a real-time monitoring system and equipment that could be linked to the cloud so he or his partner could keep an eye on it. If need be, they could ask the driver to intervene (if temperatures were too high or too low) so that the products would not be compromised.

Naturally, all this takes money. And despite being the  son of a rich man (his father is Datuk Seri Nazir Ariff, a prominent businessman in Penang who was involved with Datuk Keramat Smelting and helped develop Penang Times Square, and is now involved in the IKEA/Ikano development in Penang through his company Aspen Holdings), he only had the normal savings of someone his age and a house in Setia Alam.

He knocked on the doors of many banks to get a loan, but they all told him the same thing. He would need to show three years of profit and be able to provide some collateral.

“You read about all these grants available to SMEs and think it will be so easy because the government is giving out billions to the industry to give to all these entrepreneurs. And then you go to the banks and they want collateral, and they want to see that you have been making money for the past three years,” says Nizam.

“So I said, ‘What do you mean making money for the past three years? I am one year into the business. I am trying to achieve something and I have this brilliant idea to introduce to the industry’.

“They expected me to already make money from the first year, and it doesn’t make sense. Last year, I lost money because of the investment required. Every month, I had to pump in RM50,000 — once, it was RM100,000. Up to now, the investment has probably reached RM400,000.

“It is not easy because I have a wife and two kids, and my wife is a homemaker. But I had to be brave enough to do it. If not now, when?”

Nizam concedes that he is lucky because if anything happened, he could fall back on his father. But he would not ask his father for money to start the business. “At this age? But he was totally supportive. He told me to go for it.”

He eventually used his savings and took out an overdraft facility on his house. This gave him RM500,000 to invest in the business. The money was used to buy Grade A containers, which were refurbished with probes and data loggers.

“You can actually read the temperature and humidity from six points in the container. And it’s all live,” says Nizam.

There were already companies providing cold chain transport. But Nizam noticed that in addition to transporting pharmaceuticals, they also used their trucks for meat, vegetables, wine — basically, anything that needed refrigeration during transport.

“I realised that they didn’t have a niche because they were doing pharma as well as all these other things. We went through the MoH guidelines and they explicitly stated that there has to be no cross-contamination of any kind. That’s why I set up the company to transport only pharmaceuticals,” he says.

“I spent RM100,000 to set up the company and rent a place, and bought our first container for RM40,000. It was all on a very tight budget; we had no money to waste. I had to get the first container to show the pharmaceutical companies that I have a solution, and it’s a pretty cool solution, to transport their products from Point A to Point B as per the MoH guidelines.”

It was a very expensive marketing process. But the company got its first break when it managed to get a meeting with the National Pharmaceutical Control Bureau.

“We had been trying to get an appointment to showcase our container and solution. Unlike the other transporters, we have live readings from our office or from the compartment of the driver, so they can actually read the temperature,” says Nizam.

“So, if you are transporting vaccines and the temperature is 6°C or 7.5°C, there are certain standard operating procedures (SOPs) put in place to reduce the temperature. It all depends on the ambient temperature, and when it is hot outside, the temperature inside tends to climb as well. So for a long journey, we have our SOPs to address these contingencies,” he adds.

“When they finally gave us a meeting, I was in the UK with my family. My partner had to go and present to the bureau on his own. They asked him a lot of questions, which he answered well, and they were excited that there was now a company in Malaysia doing this. It was our first break, and it spread by word of mouth.

“The pharmaceutical companies got to know about us, but they were still afraid to trust us because we are a two-man company. We got another break in October last year when Royce Pharmaceuticals Manufacturing in Nilai, which manufactures generics, gave us our first contract.”

The pharmaceutical scene in Malaysia is unique as all the manufacturers have to transport their pharmaceuticals to Pharmaniaga Logistics Sdn Bhd which, in turn, transports them to hospitals, clinics and pharmacies across the country.

“We started in November and it was very slow with 15-odd trips per month from the manufacturing facility to the warehouse. Previously, the company that was transporting the pharmaceuticals for Royce didn’t even have refrigerated transport. Temperatures weren’t controlled along the journey so they had to do it at night to ensure that it was not too hot. So, when we provided the service, we could do it at any time of the day because the temperature was controlled on the inside and not dependent on ambient temperatures,” says Nizam.

The two partners also figured out ways to save energy. The containers were insulated, and the duo found that if they were cooled down to, say, 18°C before the journey, the temperature could be kept within  range, only going up 1.5°C an hour, which meant that it was fine for a two-hour journey.

“If it is a hot day, that’s different. But if it is below 35°C on the outside, insulated containers can control the temperature, so it’s also good for the environment. We are always thinking of new ways to stay ahead of our competitors. In fact, we don’t call them competitors because they are doing everything else, not just pharmaceuticals,” Nizam points out.

The company’s cash flow remained tight. “With our first customer, we were still losing money. I could not cover the overheads until we got our second customer — Pharmaniaga. We started with them in August, and that was our biggest break. Now, we can cover our expenses every month, even with a few more staff on board,” he says.

“This year will be a good one for us. We will not be in the red like we were last year. By December, we will be cash positive. And by next year, we will be making serious money,” he adds.

Nizam says the company will break even this year with sales of RM1 million and a profit of RM55,000. But next year, this will shoot up to sales of RM3 million and a profit of considerably more.

What kept him going when the company was not making any money and doors remained closed? “I had no choice. The money had already been invested and we had to keep going. Then again, it was the hunger,” he says.

“I guess it was a calculated risk. We had specialisation and focus. There was no other company in Malaysia like us, a supply chain company just for pharmaceuticals. Other people thought we were crazy to do it. They asked how we could limit ourselves to just pharmaceuticals. I told them that pharmaceuticals is the way to go now. It is an underserved industry where the supply chain is broken. So, if you can address that, you can make a good living.”

Nizam was also lucky to have a partner in Ahmad Fahmi, who may have showed some initial reluctance. But once he was on board, he was totally committed and passionate.

“I just had to say, ‘This is a new thing’, and his ideas started coming. He has really good ideas. I take care of the commercial side and he takes care of operations. Together, we make a good team,” says Nizam.

UML is on the verge of signing its third major customer. To take on a new customer, it will have to increase its capacity because Pharmaniaga has already stretched its resources to the limit.

“With my first customer, I had 15 trips per month. And with Pharmaniaga, it is more than 200 trips per month. Our third big customer will be Chemical Company of Malaysia, but I can’t give them my commitment right now because I am still getting the trucks. We currently have to rent the trailers to carry our containers, but we will be getting two of our own trucks this month,” says Nizam.

He says the company can get more capacity by renting trucks from other companies. “Our solutions are the containers. We have four 40-foot containers at the moment and going forward, we will probably add another four. So, in total, we will have eight.

“We also have smaller trucks, the 10-tonners. And we have emergency vehicles if, say, Pharmaniaga needs to move things like vaccines around in smaller packages, on a bike.”

Now that the concept has started to take off, is Nizam afraid of competition? “Bring it on,” he says. “You want to compete, let’s compete. To get the Pharmaniaga business, for instance, we had to go through a tender process. We competed against local and international companies that have been doing this for 30 to 40 years. We won not because of our size but because of our ideas. And we know we can do it — our solution meets and exceeds the MoH guidelines.”

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