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Supply Chain Management
Supply Chain Management
INTRODUCTION: The increasingly flattening world is constantly evolving and impacting the way, the business is being done. Supply Chains have become complex, global and dynamic. The success of a company in this global era depends on developing innovative supply chain strategies that could help improve profitability while drawing continuous improvements. Supply chain Management enables world leading organizations to re-align their supply chains to the flat world paradigm by providing standard solutions for the organizations needs in supply and demand planning and forecasting, sourcing and procurement, supply chain execution, enterprise asset management. The role of supply chain has changed considerably over the last three decades. The benefits of improving the performance of the supply chain initially included revenue growth and higher profitability through greater market share and price premium. Traditionally the focus has been on the flows within the organization or flows over which the organization has direct control. But the things have changed now. At present, the successful supply chain management requires the recognition that the firm is simply one player in the long chain that starts with suppliers and includes transporters, distributors and customers. Close relationship between suppliers, manufacturers, transporters, distributors and customers are going to be the key to success in the times to come. Now companies are recognizing that supply chain innovations can be not only the driver of cost reduction but importantly a catalyst for revenue growth by achieving greater levels of customer satisfaction. OBJECTIVE: Understanding Supply chain management and how it assists in profitability considering the pharmaceutical industry. Understanding and analyzing the transition of the global pharmaceutical sector from being an imitator to an innovator.
Demandflow strategy
collaboration strategy
Collaborative strategy: Opportunities for collaboration among business partners will vary depending upon the organizations perspective role in the supply chain. Collaboration enables partners to jointly gain a better understanding of future product demand and implement more realistic programs to satisfy demand. The collaborative strategy includes three major types of relationship: Manufacturer/supplier collaboration Manufacturer/customer collaboration Collaboration with third party and fourth party logistics provider Demand Flow Strategy: Traditionally in supply chain management, the key focus has been in managing the flow of materials and goods from suppliers through the manufacturing and distribution chain to the customers. The key in demand management is the continuous flow of demand information from
customer and end users through distribution and manufacturing to suppliers. The shared objective of the chain is fulfilling customer demand. Customer Service Strategy Customer satisfaction level is directly proportional to the service provided by the company. The customer service can be seen as a continuum between dissatisfied and delighted customers. Organizations need to add value to customers time and trouble. Formulating a customer service strategy involves: Customer segmentation Cost to serve Revenue management Information Technology Strategy A number of IT based supply chain information management tools are now available to provide intelligent decision support and execution management. They can be TPS focused on day to day operations or strategic planning tools used to redesign the supply chain infrastructure. Consequently, there is an ever increasing need for fully integrated supply chain information management solutions which incorporate all the functionality of network strategy/ supply chain configuration, demand planning, transportation management and warehouse management. LITERATURE REVIEW As per UPS supply chain solutions, 2005; in order to incorporate supply chain into pharmaceutical sector, the following three practices are mandatory: Rationalized global production networks Change over competence with smaller batch production. A compliant management system. The two trends that dramatically affect the future of pharmaceutical fulfillment are Smaller batch production led by genomics and customer demand
The addition of retailer, provider and consumer direct to manufacturers customer base Both these aspects signify towards an in-evitable shift in pattern from distributing larger pallet quantities to wholesalers, to distributing smaller package to pallet quantities across a large customer base. The benefits associated with drug makers include access to real-time demand and to actual consumers. Most importantly, the cost management based approach in the pharmaceutical sector has laid emphasis on improvements in the supply chain management. This in-turn has led to a new concept of supply chain event management. The current sales model for many drug manufacturers is to release product data and samples to sales forces that struggle to get a two-minute window of time with medical providers. In that window, a sales representative may be introducing several new drugs and/or reinforcing current products. Current sales efforts are becoming less effective and more costly as sales forces are expected to cover more and more products. In the last five years, pharmaceutical sales forces have grown 85 percent. In fact, behind R&D, sales representative costs are the second largest category of expense for drug makers.
Just recently, the Department of Health and Human Services issued new standards to drug manufacturers sales approach, stating that drug makers could not offer incentive payments or other tangible benefits to encourage or reward the prescribing or purchase of particular drugs by doctors, health plans or companies that manage drug benefits for employers and insurers. The government has informed the industry that many of its sales and marketing practices may violate federal fraud and abuse laws.
KEY TRENDS IN THE PHARMACEUTICAL INDUSTRY Recent breakthroughs in genomics and proteomics may be mind-boggling to most. And, although news reports remind us regularly of the strides pharmaceutical companies are making in the fight against disease and pain, little is reported about the increasing struggles pharmaceutical companies face in this fight.
In fact, the pharmaceutical industry is experiencing unparalleled change and challenges. All of the usual suspects that impact business today are at play: globalization, treatment and pricing economics, government controls and technology.However, in an era of continuing consolidation, innovation abounds not only in R&D, but also in business models.
INTRODUCTION TO THE PHARMACEUTICAL INDUSTRY Pharmaceutical industry in India is playing a vital role in the healthcare area of the nation. With the implementation of product patent from the year2005, there will be a tough competition for the global market share. Pharmaceutical companies will have to focus more intensively on R&D activity to survive the competition. As we are moving towards globalization, there is a need for strategic planning to meet the challenges posed by the product patent era. In the present context with the available expertise, manpower and skill, the Indian Pharmaceutical Industry will fight successfully for the global market share .here we have reviewed the status of Indian
pharmaceutical industry vis-a-vis Global pharmaceutical industry. The strong opportunities lie within this sector to grow as the condition of Indian health sector is discouraging. Some of the factors signifying the same are: India ranks very low in the global health scenario, both in terms of status and expenditure .Over 50% of young children in the country are malnourished. Only 35% of the countrys population has access to essential drugs. Reason attributed to this is that India invests only 5.@% of its GDP on health .Various reports published by WHO and other health organizations indicated that India has the highest number of Tuberculosis and Hepatitis-B patients in the world. India also accounts for most number of blind patients globally. Mortality in India, due to Malaria, Peaks highest amount all the nations. Health indicators also show that there will be highest number of AIDS patients in the country by 2020. Inspite of sustained efforts by the Government and NGOs, Polio has not been completely eradicated and is still prevalent in certain pockets of the country .Another Startling fact reveals that almost 80%of the countrys medical workforce is employed in the private sector.
A GLIMSE OF THE GLOBAL PHARMACEUTICAL INDUSTRY The Pharmaceutical industry of the Western World is the leading manufacturers of medicines. North America, Europe, Japan and Latin American countries account for 85% of the worldwide pharmaceutical production. These countries control almost 77% of the global pharmaceutical market (Figure1). The US invest 13.7% of its GDP on health .Annual drug expenditure (per capita) for Japan amounts to $ 412, while for India it is a low $ 3(Figure 2).The US and The UK had a combined 62%(46%+16% respectively) share of global pharmaceutical exports in 2005. The US and the UK together sell 2 out of 3 pharmaceutical products in the world. According to WHO survey, US pharmaceutical industry market was$ 512 billion in 2005. Of this, $ 318 billion came from products free from patent protection, Drug prices in Europe are about 60% of the prices in US and yet European firms spend larger share of their revenues on R&D rather than their American counterparts. Data representing Pharmaceutical Drug Production Worldwide (2007): REGION %SHARE OF DRUG % SHARE OF
POPULATION 4
7 2 87
This clearly shows that rest of the world needs to improve on their drug production ability as they have tremendous potential for betterment of the situation. One of the step could be working on the supply chain event management.
INFORMATION TECHNOLOGY IN SUPPLY CHAIN MANAGEMENT-TO REDUCE COST AND SAVE TIME Globally, innovation has been the key factor for the growth of the pharmaceutical industry. There has been a strong support for biotechnology and medical research worldwide and this is being augmented by research and development expenditure of the pharmaceutical industry. This has been one of the reasons for the growth of the pharmaceutical industry in India, as the Indian pharmaceutical industry started more as an imitator taking up outsourced research jobs rather than an innovator. Globally, there is tremendous pressure on pharmaceutical companies to develop new drugs. Carrying out R&D activities on a new drug can cost more than a billion dollars and can take as long as 12-14 years. Hence the pharmaceutical companies worldwide have been putting up efforts to reduce the rising cost in drug discovery. Hence application of Information technology (IT) in the supply chain and the research process of pharmaceutical drug making has become a key to success. IT solutions such as electronic data capture and clinical trials management are likely to streamline the drug development process.
Drugdiscovery
Drug development
Manufacturing
Distribution
Salesand marketing
Insilico research
Electronicdata capture
Warehous management
Business Intelligence/data warehousing/Knowledge management integration/ Data mining Fig: Application of IT (information technology) to speed up the drug research and production process.
ENSURING SECURITY IN THE SUPPLY CHAIN- ESSENTIAL FOR PROFOUND PROFITABILITY The responsibility of the security in the supply chain has to be a collaborative effort from all the players in the pharmaceutical industry. Organizational design and the nature of the relationships among the trading partners are crucial. Three driving forces: globalization, developments in medicine and the growth in the economy of the developing nations like India and china have resulted in the profound changes in the pharmaceutical industry. Also in the other industries globalization, technology and the growth of the developing nations does play a vital role in the bringing about changes in the supply chain system. With the growth in demand and profound development, doing business the traditional way, in the pharmaceutical industry is a disaster. Waste will not be tolerated, and failing to stem the tide of counterfeits is wasteful. The pharmaceutical supply chain system must be more focused on the customer experience: Think Wal-Mart, Procter & Gamble. Three viable solutions can be taken up via the improvements in the supply chain to make a difference in the competitive environment: Close off diversion entry points by minimizing excess inventory at the wholesaler and by requiring wholesalers to source directly from drug manufacturers. Reduce the cost of cheating by implementing new security technologies and by strict licensing and record-keeping requirements. Monitor the supply chain carefully using advanced technologies like track and trace technology and also by having a better grip on the distribution channel. Pharmaceutical wholesalers and manufacturers jointly are beginning to realize that their approach to the supply chain must resemble that of the other FMCG production companies. Three reasons: Inventory levels are too high Asset utilization at the plant level is not good