Dadabhoy Institute of Higher Education

Supply Chain
Management Final
Report
Analysis of SCM at Martin Dow
Pharmaceuticals (Pakistan) Ltd.
Saad Durrani | MBA/3-08/013
Submitted to Mr. Ashfaq Vighio, Course
Supervisor - SCM

Fall ‘09
Contents
Topic Pa
ge
Supply Chain Management Defined 4
Supply Chain Management Explained 5
Supply Chain Management Development Reviewed 6
Activities and Functions of Supply Chain Management Explained 9
Under Focus: Supply Chain Management at a local Pharmaceutical Company 12
Problems at Supply Chain Management at Martin Dow Pharmaceuticals 13
Proposed Solutions & Conclusion 14
References 15
Supply Chain Management Defined:
Monezka, Trent, and Handfield stated that SCM is a concept

“whose primary objective is to integrate and manage the sourcing, flow, and
control of materials using a total systems perspective across multiple functions and
multiple tiers of suppliers.”

Leanqad.com explains

“a business strategy to improve shareholder and customer value by

optimizing the flow of products, services and related information from source to
customer. Supply Chain Management encompasses the processes of creating and
fulfilling the market's demand for goods and services and involves a trading partner
community engaged in a common goal of satisfying the end customer.”

Ontario Institute PMAC defines supply

“ the process of strategically managing flows of goods, services and

knowledge, along with relationships within and among organizations, to realize
greater economic value. It involves the integration of core areas of knowledge
(procurement, operations, and logistics) and supporting knowledge areas
(marketing, finance and accounting, human resources, knowledge management).”
Supply Chain Management Explained:
Supply chain management (SCM) is the combination of art and science that goes
into improving the way your company finds the raw components it needs to make a
product or service and deliver it to customers. The following are five basic
components of SCM.

1. Plan – This is the strategic portion of SCM. You need a strategy for managing all
the resources that go toward meeting customer demand for your product or service.
A big piece of planning is developing a set of metrics to monitor the supply chain so
that it is efficient, costs less and delivers high quality and value to customers.

2. Source – Choose the suppliers that will deliver the goods and services you need
to create your product. Develop a set of pricing, delivery and payment processes
with suppliers and create metrics for monitoring and improving the relationships.
And put together processes for managing the inventory of goods and services you
receive from suppliers, including receiving shipments, verifying them, transferring
them to your manufacturing facilities and authorizing supplier payments.

3. Make – This is the manufacturing step. Schedule the activities necessary for
production, testing, packaging, and preparation for delivery. As the most metric-
intensive portion of the supply chain, measure quality levels, production output and
worker productivity.

4. Deliver (Logistics) – This is the part that many insiders refer to as logistics.
Coordinate the receipt of orders from customers, develop a network of warehouses,
pick carriers to get products to customers and set up an invoicing system to receive
payments.

5. Return – The problem part of the supply chain. Create a network for receiving
defective and excess products back from customers and supporting customers who
have problems with delivered products.
Supply Chain Management Development Reviewed:
Six major movements can be observed in the evolution of supply chain
management studies: Creation, Integration, Globalization, Specialization
Phases One and Two and SCM 2.0.

1. Creation Era

The term supply chain management was first coined by an American

industry consultant in the early 1980s. However the concept of supply chain
in management, was of great importance long before in the early 20th
century, especially by the creation of the assembly line. The characteristics
of this era of supply chain management include the need for large scale
changes, reengineering, downsizing driven by cost reduction programs, and
widespread attention to the Japanese practice of management.

2. Integration Era

This era of supply chain management studies was highlighted with the
development of Electronic Data Interchange (EDI) systems in the 1960s and
developed through the 1990s by the introduction of Enterprise Resource
Planning (ERP) systems. This era has continued to develop into the 21st
century with the expansion of internet-based collaborative systems. This era
of SC evolution is characterized by both increasing value-added and cost
reduction through integration.

3. Globalization Era

The third movement of supply chain management development,

globalization era, can be characterized by the attention towards global
systems of supplier relations and the expansion of supply chain over national
boundaries and into other continents. Although the use of global sources in
the supply chain of organizations can be traced back to several decades ago
(e.g. the oil industry), it was not until the late 1980s that a considerable
number of organizations started to integrate global sources into their core
business. This era is characterized by the globalization of supply chain
management in organizations with the goal of increasing competitive
advantage, creating more value-added, and reducing costs through global
sourcing.
4. Specialization Era -- Phase One -- Outsourced Manufacturing and
Distribution

In the 1990s industries began to focus on “core competencies” and adopted

a specialization model. Companies abandoned vertical integration, sold off
non-core operations, and outsourced those functions to other companies.
This changed management requirements by extending the supply chain well
beyond the four walls and distributing management across specialized
supply chain partnerships.

This transition also refocused the fundamental perspectives of each

respective organization. OEMs became brand owners that needed deep
visibility into their supply base. They had to control the entire supply chain
from above instead of from within. Contract manufacturers had to manage
bills of material with different part numbering schemes from multiple OEMs
and support customer requests for work -in-process visibility and vendor-
managed inventory (VMI).

The specialization model creates manufacturing and distribution networks

composed of multiple, individual supply chains specific to products,
suppliers, and customers who work together to design, manufacture,
distribute, market, sell, and service a product. The set of partners may
change according to a given market, region, or channel, resulting in a
proliferation of trading partner environments, each with its own unique
characteristics and demands.

5. Specialization Era -- Phase Two -- Supply Chain Management as a

Service

Specialization within the supply chain began in the 1980s with the inception
of transportation brokerages, warehouse management, and non asset based
carriers and has matured beyond transportation and logistics into aspects of
supply planning, collaboration, execution and performance management.

At any given moment, market forces could demand changes within suppliers,
logistics providers, locations, customers and any number of these specialized
participants within supply chain networks. This variability has significant
effect on the supply chain infrastructure, from the foundation layers of
establishing and managing the electronic communication between the
trading partners to the more-complex requirements, including the
configuration of the processes and work flows that are essential to the
management of the network itself.
Supply chain specialization enables companies to improve their overall
competencies in the same way that outsourced manufacturing and
distribution has done; it allows them to focus on their core competencies and
assemble networks of best in class domain specific partners to contribute to
the overall value chain itself – thus increasing overall performance and
efficiency. The ability to quickly obtain and deploy this domain specific
supply chain expertise without developing and maintaining an entirely
unique and complex competency in house is the leading reason why supply
chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late
1990s and has taken root in transportation and collaboration categories most
dominantly. This has progressed from the Application Service Provider (ASP)
model from approximately 1998 through 2003 to the On-Demand model
from approximately 2003-2006 to the Software as a Service (SaaS) model we
are currently focused on today.

6. Supply Chain Management 2.0 (SCM 2.0)

Building off of globalization and specialization, SCM 2.0 has been coined to
describe both the changes within the supply chain itself as well as the
evolution of the processes, methods and tools that manage it in this new
"era".

Web 2.0 is defined as a trend in the use of the World Wide Web that is meant
to increase creativity, information sharing, and collaboration among users. At
its core, the common attribute that Web 2.0 brings is it helps us navigate the
vast amount of information available on the web to find what we are looking
for. It is the notion of a usable pathway. SCM 2.0 follows this notion into
supply chain operations. It is the pathway to SCM results – the combination
of the processes, methodologies, tools and delivery options to guide
companies to their results quickly as the complexity and speed of the supply
chain increase due to the effects of global competition, rapid price
fluctuations, surging oil prices, short product life cycles, expanded
specialization, near/far and off shoring, and talent scarcity.

SCM 2.0 leverages proven solutions designed to rapidly deliver results with
the agility to quickly manage future change for continuous flexibility, value
and success. This is delivered through competency networks composed of
best of breed supply chain domain expertise to understand which elements,
both operationally and organizationally, are the critical few that deliver the
results as well as the intimate understanding of how to manage these
elements to achieve desired results, finally the solutions are delivered in a
variety of options as no-touch via business process outsourcing, mid-touch
via managed services and software as a service (SaaS), or high touch in the
traditional software deployment model.
Activities and Functions of Supply Chain
Management Explained:
Supply chain management is a cross-functional approach to manage the
movement of raw materials into an organization, certain aspects of the
internal processing of materials into finished goods, and then the movement
of finished goods out of the organization toward the end-consumer. As
organizations strive to focus on core competencies and becoming more
flexible, they have reduced their ownership of raw materials sources and
distribution channels. These functions are increasingly being outsourced to
other entities that can perform the activities better or more cost effectively.
The effect is to increase the number of organizations involved in satisfying
customer demand, while reducing management control of daily logistics
operations. Less control and more supply chain partners led to the creation
of supply chain management concepts. The purpose of supply chain
management is to improve trust and collaboration among supply chain
partners, thus improving inventory visibility and improving inventory
velocity.

Several models have been proposed for understanding the activities required
to manage material movements across organizational and functional
boundaries. SCOR is a supply chain management model promoted by the
Supply Chain Management Council. Another model is the SCM Model
proposed by the Global Supply Chain Forum (GSCF).
 Functions
of SCM

Strategic Tactical Operational

Strategic

• Strategic network optimization, including the number, location, and size of

warehouses, distribution centers, and facilities.
• Strategic partnership with suppliers, distributors, and customers, creating
communication channels for critical information and operational
improvements such as cross docking, direct shipping, and third-party logistics
• Product lifecycle management, so that new and existing products can be
optimally integrated into the supply chain and capacity management
 • Information Technology infrastructure, to support supply chain operations
• Where-to-make and what-to-make-or-buy decisions
• Aligning overall organizational strategy with supply strategy

Tactical

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, scheduling, and planning process
definition.
• Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of
best practices throughout the enterprise.
• Milestone payments
• Focus on customer demand.

Operational

• Daily production and distribution planning, including all nodes in the supply
chain.
• Production scheduling for each manufacturing facility in the supply chain
(minute by minute).
• Demand planning and forecasting, coordinating the demand forecast of all
customers and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving
inventory.
• Production operations, including the consumption of materials and flow of
finished goods.
• Outbound operations, including all fulfillment activities and transportation to
customers.
• Order promising, accounting for all constraints in the supply chain, including
all suppliers, manufacturing facilities, distribution centers, and other
customers.
Under Focus: Supply Chain Management at a local
Pharmaceutical Company
Martin Dow Pharmaceuticals (Pakistan) Limited, is a private limited company
dealing in Pharmaceutical products. The company is based in Karachi where as its
production facility is based near Lahore. The company has been doing great in the
sales of certain products mainly Osteoporosis medicines. The company works with
Mueller & Philips Pakistan for distribution and inventory purposes.

Different parts of company were dealing with the different type of supply chain
process:

1. Materials/Procurement Department

This department is responsible to make sure that the raw material

from its country of origin reaches Karachi in order to be delivered to
Lahore (in case of sea delivery) or directly to Lahore (in case of air
delivery).

2. Commercial Department

This department is responsible to handle the stock for the products

being manufactured. The company earlier dealt with UDL Distributors
but August 2009 onwards, the company has signed Mueller & Philips as
its primary distributor. Marketing Services, responsible for promotional
activities is also under this department.

3. General Administration & HR Department

This department is responsible to arrange any logistics for the delivery

of promotional material, mostly done through Agility Logistics and/or
Leopard Courier Services.

4. Business Development & Export Department

This department is responsible to find the different kinds of business

opportunities for the company around the world as well make
recommendations for any deals regarding raw materials.

The above mentioned department all report to the Director, Corporate and Human
Resources. The DCHR reports to the Managing Director of the firm. The entire
important decision making is done at the level of Managing Director.
Problems at Supply Chain Management at Martin
Dow Pharmaceuticals (Pakistan) Ltd.
• The unavailability of a Manager in the Materials/Procurement Department,
leaving only Officers to handle the business.

• The Manager, Commercial Department being overworked as he is given

charge of both dealing with the Finished Goods Inventory as well as the
activities of Marketing Services.

• The involvement of General Administration & HR for Logistical purposes.

• The scope of work for Director, Corporate & Human Resources is too wide.

• The production date is usually missed, due to logistical problems.

• The unavailability of Legal Affairs department.

• High turnover in the company.

The problems at Martin Dow Pharmaceuticals are very minute and are only caused
due to insensible cost reduction. Furthermore, the company is ambitious to make its
environment, “paper-free”. The company claims to be the first accredited
“Integrated Management System” Certified Pharmaceuticals Company of Pakistan,
certified with ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:1999. The
company employs over 300 employees all over Pakistan. The company is efficiently
reacts to any complains in its products and holds a good market portfolio.
Proposed Solutions & Conclusion:

• The company requires defining the scope of work in order to develop an

efficient internal Supply Chain.

• An efficient Legal Affairs department has to be established in order to

develop better contracts.

• The Material Dept. needs an efficient manager as well as Marketing Services

Dept. has to be separated from Commercial or should to be entirely handed
over to Mueller & Philips Pakistan.

• Aggregate planning mechanism for raw material should be in place, in order

to maintain inventory more efficiently.

• Logistics (apart from General Mail services) should be directly handled by the
Materials department. It would be preferable that the Materials Dept. should
be reconfigured into Materials & Logistics Dept. containing 3 officers and a
manager, directly reporting to DCHR.

• Contingent planning is also required in the company.

• The current IT systems are too outdated, it requires upgrading.

The company discussed here is not large in size and can be handled with more
efficiently. The main problem of Supply Chain Management was that the scope of
work is not defined; else the processes are in place and were in practice before the
company went for downsizing in 2008.

Ultimately, the company requires being right-sized as well as automated in order to

improve the current process.
References:
1. www.wikipedia.org, an exhaustive encyclopedia on the world
wide web.

2. Wal-Mart’s Supply Chain Management Practices, a case study on

Wal-Mart’s SCM authored by P.Mohan Chandran, ICFAI.

3. Handbook: Supply Chain Management, James B Ayers

4. Supply Chain Management, Brigit Dam Jespersen

5. http://www.ontarioinstitute.com/refandres/glossary.htm OIPMAC
Glossary of Terms