Improving Pharmaceutical Warehouse Supply Chain
Lead Time – From Production to Cross-Docking
Ahmed Zainul Abideen1
Faculty of Industrial Management
University Malaysia Pahang
Gambang, Malaysia
abideen.m@gmail.com
Abstract—Bottlenecks and wastes are prevalent issues in
warehouses, particularly in the pharmaceutical industry with
large stock volumes. Value stream mapping (VSM) is a powerful
lean instrument to detect value-adding and process efficient
feasibilities in a production chain. It has the ability to connect all
the stakeholders in the chain and manage customer demand.
Optimum information and material flow are needed in a
pharmaceutical warehouse supply chain without backlogs to avoid
the supply chain lead time build-up. In this study, a
pharmaceutical warehouse has been studied by dividing it into two
major segments and the VSMs for both present state and future
state were drawn to find out possible feasibility of lean
implementation to improve the warehouse operations. There was
a 20.22 % increase in the value-added time and 23.17 % decrease
in the non-value added time based on the lean proposals and
assumptions in the future state. But still, more quantifiable
methods are needed to dynamically visualize the proposed lean
tools in the supply chain.
Keywords—Lean Warehousing, Value Stream Mapping,
Warehouse Supply Chain, Lead Time Reduction, Pharmaceutical
Warehouse.
I. INTRODUCTION
In the event of attaining supply chain optimization towards
robust competitive advantage, many multifaceted problems
arise depending on the increased demands and other supply
chain complexities. Companies controlling complex inventories
make stringent efforts to manage their supply chain networks
efficiently. A well-intended procurement, research, and
development, production, and logistics aid in constructing an
optimal supply chain which is possible only by attaining inputs
from all levels of an organization [1],[2]. It reduces customer
delivery time and related costs [3]. Better product handling
operations are needed to tackle products with a shorter life cycle.
So, firms try to reduce time-to-market by keeping a constant
watch on the On-Time Delivery (OTD) [4].
II. OVERVIEW OF LITERATURE
A. Lean Supply Chain
Dissimilar inventory quantities reside at different levels of
the supply chain. Effective management of the chain is needed
for a positive yield. Best strategies and techniques are applied to
reduce unwanted waiting time. The lean approach is one of the
key tools that facilitate both green and agile strategies to deal
with shop floor activities [5]. Inventory should be maintained at
par levels with safety stocks ready to manage a sudden increase
Funded by UMP PGRS Research Grant, No – PGRS190374
978-1-7281-3276-1/19/$31.00 ©2019 IEEE
Authorized licensed use limited to: Middlesex University. Downloaded on November 07,2020 at 16:01:43 UTC from IEEE Xplore. Restrictions apply.
Fazeeda Binti Mohamad2
Faculty of Industrial Management
University Malaysia Pahang
Gambang, Malaysia
fazeedamohamad@ump.edu.my
in the demand. Strategies like First-in-First-Out (FIFO), healthy
supplier and customer relationship, supply chain risk assessment
procedures, auditing, spot-checking, and cycle counting are
practiced to build best inventory planning practices [6], [7].
Lean practices help eradicate complexities that unfold during
inaccurate decision making which creates more risks and after-
effects [8]–[10].
B. Lean in Healthcare Supply Chain
The pharmaceutical supply chain consistently needs
continuous improvements to provide better customer service.
Some of the major challenges confronted in the pharmaceutical
supply chain are warehouse inventory management, order
management, lack of coordination, lack of demand information,
inventory shortage, product expiration, and supply chain
invisibility [11], [12]. Storage and control costs of
pharmaceutical products are very high and On-Time Delivery
(OTD) and distribution towards customer locations prove to be
a daunting task. Hundred percent of product availability at the
right cost and time can only be probable by developing a
competent pharmaceutical supply chain [13]. The health care
industry requires substantial inventory procedures. Medicines
that are stored and handled in an improper manner have an
adverse impact on the customers [14].
C. Supply Chain Value Stream Mapping
VSM acts as a platform to map operations related to both
service, product and as well as information associated with it.
The map displays the level of inventory, process times and the
number of employees involved [15]. The overall business
processes can be precisely created after developing a future state
map which can be integrated with other tools and techniques to
solve problems. It determines optimal product delivery time and
place and can be further used as a Supply Chain Value Stream
Mapping tool (SCVSM) to reduce On-Time Delivery (OTD)
[16], [17].
III. METHODOLOGY
The study was carried out in a state- of- the- art Malaysian
government based pharmaceutical organization. The study was
limited only within warehouse and warehouse activities.
Warehouse floor activities were random and not standardized so
they were split up into segments and one of them is from
production despatch until the customer cross-docking point.
This study aimed to construct a VSM for this phase of the supply
chain segment. Firstly, an apt product family was selected
through lead time and ABC analysis and then spaghetti diagrams
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were jotted down to capture the movement of that particular movement is not perfectly standardized, few assumptions on the
product family. inventory routing are made to complete the Spaghetti diagram.
After a detailed construction of the cross-functional diagram
and process activity charts, a present state map was developed.
Later, this present state map was analyzed to build a future state
map to improve the warehouse supply chain through lean tools
and practices that were proposed in the future state.
Interview, observation (Gemba Walk) and past company
records were used for data collection. A supply chain VSM is
completely different from a production VSM since some of the
parameters differ. A proper sequence of the method was adapted
from [18]. To initiate a VSM, it was essential to divide the
supply chain into segments and identify product families and
construct process activity chart to build a VSM and finally
validate the processes which are portrayed in Fig. 1.

Fig. 2. Finished Goods from Production (Temporary Storage and Quality

Check) – Level III

Fig. 1. Methodology

IV. INVENTORY MOVEMENT FROM PRODUCTION TO CROSS-

DOCKING
Fig. 3. Level III to Level II (Long-Term Storage)
Firstly, the raw materials are unloaded at the warehouse
gates followed by order receipt and order sorting procedures.
Secondly, these raw materials are transferred to the quarantine
shelf at the ground level and later to the production unit after
quality approval. Then after production and primary packing,
the finished goods inventory is first sent to level III cold storage
zone for secondary quality assurance and quality check
(QA/QC). The firm outsources the packaging material for this
particular product family, in our case (vials and ampules). The
inventory movement of the finished goods that arrives at the
batch waiting zone at the ground floor is later sent to level III
(quarantine zone) through the commercial elevator.
Secondly, after the post-production quality check, they stay
at the level III location for a while and then to Level II (Long
term Storage) then again to level III (Pick and Pack). Fig. 2, Fig.
3 and Fig. 4 shows the movement of inventory in a spaghetti Fig. 4. Level II to III (Pick and Pack)
diagram. The warehouse layout was first drawn to understand
the inventory storage locations. Then physical observation and V. PRESENT STATE MAP
several semi-structured interviews were carried out to construct Most of the operations at the warehouse are push-based
the spaghetti diagram. production that leads to a huge finished goods inventory stock-
The spaghetti diagram helps in designing the process activity piling, buffer, and waiting time in the form of non-value added
chart to easily build the VSMs with a clear understanding of the delays and with no adequate supermarket or special storage
inventory movement. Even though the real-time inventory facility to counteract this drawback. Lack of Just-In-Time (JIT)
and Kanban tool contributes to unnecessary finished goods
inventory safety stock levels. Due to the lead time build-up,

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there is a decrease in product value since the medicines are
valued based on their manufacturing and expiry date. Non-
uniform inventory storage and handling at the ground level and
inventories such as raw materials finished and semi-finished
goods were mixed up together to sit in random order. Cross-
docking has only two gates for the inventory. Finished goods
and raw material unloading points are at the same location that
leads to inventory mix-up and poor shop floor space utilization.
Information is shared manually which includes a lot of
paperwork.
Advanced tracking and tracing technology is absent and
there is a need for Automated Storage and Automated Retrieval
System (AS/AR) and Automated Guided Vehicles (AGVs) in
some places of the warehouse to reduce unwanted lead time. The
third-party storage incurred a lot of time and money and the firm
needs some serious managerial decision making to eradicate this
issue. So, essential calculations were made starting with the talk
time.
Takt Time is the ratio of available production time per day
to the customer demand per day. The Demand per month =
28000 parts = 350 cartons (80 Vials/Carton); Number of
working days = 25 days; Number of shifts per day = 1 (8
hrs/Shift). The number of working hours per shift (Available
Time) = Time available per shift – Down Time = 8 hrs – 1.5 hrs
= 6.5 hrs. A present state value stream map can be seen in Fig.
10.
(Number of working hours ×Number of Shifts ×60)
Takt time = (Demand Per Month÷Number of working days in a month) 
6.5 ×1 ×60
=( )Minutes
350÷25
A detailed present state calculation is given in Table 1.
TABLE I. PRESENT STATE CALCULATIONS
Timeline Parameter Equation and Result
Total Process Time (PT) ∑1𝑛 𝑃𝑇 = 45420 Minutes
Total Production Lead
Time (PLT) ∑1𝑛 𝑃𝐿𝑇 = 10080 Minutes
Value Added Percentage ×100
(VA%) ∑1𝑛 𝑉𝐴𝑇 = 53.64 %
𝑇𝑃𝑇
Total Non-Value Added ×100
Percentage (NA%) ∑1𝑛 𝑁𝑉𝐴 = 46.36 %
𝑇𝑃𝑇
VI. FUTURE STATE MAP
The 5-Why analysis was developed which is also known as
the root cause analysis, based on five major problems inside the
warehouse workspace that eventually helped to build a strong
future state map by finding out possible and suitable lean tools
and principles wherever necessary. Fig. 5 displays the root cause
analysis diagram. Based on that, few suitable lean tools and
practices were proposed in the future state map to bring down
the lead time as low as possible.
Fig. 5. Ishikawa Diagram on Lead Time Build-up
Both the present state and future state maps were constructed
using “Gemba” or “Go See” procedure. The process time, value-
added, non-value added time and lead time were captured by
physical observation. Fig. 5 was designed after a series of semi-
structured interviews with the supply chain experts and workers.
Radio Frequency Identification (RFID) integrated ANDON
lights setup was proposed at the first stage when the finished
goods enter the warehouse to display and update information
into the central warehouse management system. 5S and a facility
layout change have been proposed at the ground level to ease the
inventory handling and transportation procedures and reduce
delays and unwanted material handling and storage. An
Automated Guided Vehicle (AGV) coupled Automated Storage
and Automated Retrieval (AS/AR) system has been proposed at
level 3 for the lead time reduction and also the movement of
manual forklift back and forth into the quarantine zone.
Artificial intelligence-powered Radio Frequency Identification
(RFID) technology is proposed at level II at Zone area 6A to
ease the pre-dispatch quality check and sorting.
A withdrawal Kanban backed up by a supermarket was
proposed to stop the random push of finished goods to level III
pick and pack zone. Partial automation (JIDOKA) is proposed
to fill up the supermarket racks to bring down the number of
forklifts and time taken by them. The pick and pack zone had
limited storage capacity and later at the cross-docking point, at
ground level, another supermarket shelf was proposed to set up
a production Kanban bypassing the third party cold storage in
which the distribution centre directly communicates to the
warehouse to stop sending excess items to reduce the storage
and also to ensure there is Just-In-Time shipment to the nearby
customers locations.
In the policy-making segment (Hoshin-Kanri), on demand
forecasting, a probabilistic forecasting method was suggested
behalf of deterministic forecasting technique to help in the pull
production. A present state map and future state map is shown
in Fig. 6 and Fig. 7.

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Fig. 6. Present State Map

Fig. 7. Future State Map

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 VII. FUTURE STATE CALCULATIONS
The following assumptions in the future state are taken into
consideration and the VSM timeline calculations are shown in
Table 2.

TABLE II. FUTURE STATE CALCULATIONS

Timeline Parameter Equation and Result

Total Process Time
∑1𝑛 𝑃𝑇 = 11940 Minutes
(TPT)
Total Production Lead
∑1𝑛 𝑃𝐿𝑇 = 4260 Minutes
Time (TPL)
Value Added Percentage ×100 Fig. 10. Decrease in Non-Value Added Percentage
∑1𝑛 𝑉𝐴𝑇 = 73.86 %
(VA%) 𝑇𝑃𝑇
Total Non-Value Added ×100
∑1𝑛 𝑁𝑉𝐴 = 26.13 %
Percentage (NA%) 𝑇𝑃𝑇

A. Lean Changes in the System

Total process time has been decreased from 45,420 to 11,940
minutes. Value-added time has been increased from 24,360 to
8,820 minutes i.e., (53.64 % to 73.86%). Non-value added time
has been decreased from 21,060 to 3,120 minutes. The
workforce has been reduced from 51 to 31 (39.21 percent).
There is a considerable difference in process time, lead time,
value-added time and non-value added time between both the
states of value stream map which is evident in Fig. 8, 9, 10 and
11 respectively.
Fig. 8. Process Time Comparison
Fig. 9. Lead Time Comparison
Fig. 11. Increase in Value-Added Percentage
B. Managerial Implications
Kanban method is incorporated into the supply chain to
enable smooth flow of medicines in batches from one process to
another process. The Kanban post derives signals from a process
to send it to activate production kanbans that wait for those
signals in order to control the flow in specific inventory sources
and also control supermarkets. Withdrawal kanbans proposed
shall inform the employees about the inventory required to be
pulled from a supermarket and later returned to the next step of
the value stream for value addition. Kaizen works on five major
principles such as specify a value, identify the value stream,
flow, customer pull, and continuous improvement. Several areas
in the warehouse have been tagged with proper kaizen bursts to
impart great value to the supply chain. Effective policy and
decision making can also make a great deal of difference to
strengthen a value stream.
VIII. SCOPE FOR FUTURE STUDY AND CONCLUSION
VSM lags behind the capacity to carefully evaluate the
efficiency of the future state model, which could lead to useless
iterations. VSM cannot depict all system inefficiencies and
discrepancies caused by inappropriate communication and
material flow [19]. Another instrument is needed to transform
its static nature into a dynamic one [20]. Discrete Event
Simulation (DES) is one of the best ways to catch spontaneously
occurring supply chain events [21].
DES helps to bring down uncertainty and create consensus
by visualizing dynamic process views [22]. It gives quantifiable
evidence needed to convince any proposed lean practice or tools
[23], [24]. Different product families with different processing
time, setup time, queue length, throughput time and machine
utilization percentage for each and every operational step could

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be keyed into a DES model. Hence, Simulation becomes an
integral part of a lean approach. A conceptual framework
adapted from [25] on VSM integrated simulations has been
shown in Fig. 12.
Fig. 12. Conceptual Framework
IX. CONCLUSION
This pharmaceutical case study has shown the way in which
practitioners can use VSM as a tool to identify the key functional
areas for the elimination of wastes. There is a lot of scope for
continuous improvement in warehouse activities and eliminate
process wastes such as unnecessary inventory, machinery,
workers, storage area, excessive process and lead time. This
study has both managerial and practical insights for the
managers to adapt and improve warehouse operations in a
supply-chain context. There is scope for more research studies
in the area of lean warehouse and lean simulations. Effective
methods are yet to be explored for the quantification of lean
implementations and lean assumptions. More research into
service levels, cost factors and viability of other simulation and
visualization approaches that can be combined with VSM in
real-time is needed.
ACKNOWLEDGMENT
This research was supported by [Post Graduate Research
Grant, No – PGRS190374]. Authors sincerely thank University
Malaysia Pahang for providing this assistance.
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