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Supply chains have improved drastically in the past ten to fifteen years. The revolution can be attributed to companies’ shift in focus on efficiency, total quality control and management. This is the case both to the supply and manufacturing operations. We are analysing the supply chain management initiatives undertaken by GlaxoSmithKline. It has made concerted efforts in betterment of its production processes, packaging and enhanced supply to meet demand better. GlaxoSmithKline – The Company GlaxoSmithKline (GSK) is the world’s second largest pharmaceutical and healthcare company. Its revenues figured around the GBP 20 billion mark, yielding an after tax profit of GBP 6 billion approximately. It provides employment to 100,000 people worldwide, with over 40,000 focused in sales and marketing. Primarily headquartered in London, it has 2 headquarters in the US, Philadelphia and Research Triangle Park respectively. GSK’s priority is and always has been activities include creation, discovery, development, manufacture, and marketing pharmaceutical and consumer health-related products the world over. GSK operates primarliy in two segments, Pharmaceuticals and Consumer Healthcare. GSK has more than 36,000 SKU’s manufactured across over 80 manufacturing plants worldwide. GSK has a market share of 7% in the pharmaceutical business.
1989 1995 2000 2001
Beecham merged with SmithKline Beckman Glaxo acquires Burroughs Wellcome & Co. Glaxo Wellcome merged with SmithKline Beecham GlaxoSmithKline acquires consumer health care company Block Drug Co.
New Company Name
SmithKline Beecham Glaxo Wellcome GlaxoSmithKline GlaxoSmithKline
Exhibit 1: Merger and Acquisition activity at GSK The Challenges Post merger Integration Issues With the spate of mergers and acquisitions, GSK faces three major integration challenges: * Integration of 2 separate identities * Integration of different strategies and missions
* Integration of the manufacturing and packaging operations of Glaxo. like its competitors has to combat the need for specialised drugs continuously and reaping quick rewards. Outsourcing/supplier challenges One of GSK’s products Aquafresh Floss‘N’Cap (AFNC) is a prime example of the typical outsourcing challenges. This also included sharing proper specifications that met with all the design parameters of all suppliers involved. especially outside GSK’s manufacturing facilities was a challenging task. printing and other associated challenges emerge. more traditional mom and pop stores and high-end deliveries. With over 250 legal entities across the world and no centralized legal framework. but the communication of these changes. namely managing small volumes of niche packages. Once the package reaches GSK. Due to the absence of alternate suppliers. different markets have different schedules on when GSK must incorporate the labelling changes. Burroughs Wellcome. GSK consequently had to lose market share not to mention . Different departments could always make different packaging design changes. each with different names that must appear on different products sold in different countries. Coordination with these three cross Atlantic suppliers. Such diverse markets have diverse supply chain needs. Catering to this varied bunch of customers brings along with it its own set of challenge. namely packaging specifications. Finding alternate/multiple suppliers GSK had an ugly experience early on. SmithKline Beckman and Block Drug Co. supply disruptions were rampant due to there a single source supplier. Beecham. The suppliers worked in sequence on the custom designed cap. AFNC has a flip top containing dental floss and toothpaste in the tube. GSK. graphics and artwork changes across the length and breadth of the organization covering varied functions and divisions is a herculean task in the least. only filling of the tube with toothpaste remained. AFNC had three custom designed sub-assemblies which had been outsourced to three different suppliers. Regulatory and operational challenges The frequent M&A activities implies a complex and laborious paper trail which requires reregistration and labelling and compliance with regulatory frameworks of different countries. Complex product portfolio Market dynamics has been moving towards the implementation of customized drugs and therapy for each human being. Almost a decade ago. one of its sole resin supplier’s plants exploded. Moreover. Multi-faceted US Markets The US market mainly comprises of a chain pharmacy stores. The complexity multiplies with the mergers owing to labelling changes. Such driving forces alongside a changing industry make creative marketing and innovative products crucial. The short life expectancy of patients has tilted the demand in favour of specialised and targeted drugs.
At these centres. labels were clearly printed online with . better equipment availability. GSK implemented the late pack customisation programme. Different packaging and assembly lines.000 numbers for cost effectiveness but GSK would produce as low as 100 or 500 packs to increase efficiency at a time with this programme. every facet of GSK’s supply chain should be up to the mark. In other words. due to which customers had to do without critical drugs and life saving devices. Typical production runs were up to 30. Some other considerations were quick machine setup. On the major machinery and equipment side. Its efforts and money will go waste unless its customers get the product in time without any defects and have no difficulty in package hadling. GSK may lose out in both cases owing to failure of the relatively new technology or lose out to competitors who can gain significantly by adopting the technology faster. Operational/production challenges The foremost challenge in production processes was synchronising with a varied number of manufacturing locations and multiple suppliers.customer goodwill. and flexibility besides handling innumerable design changes. GSK’s goals were different. GSK wanted to mitigate and try and eliminate such situations. minimum production stoppages. For example. GlaxoSmithKline – Supply Chain Challenges – Part 2 Glaxo Smithkline (GSK) spends about GBP 800 million to in R&D expenses on a drug. basic boxes were volume filled with blisters at the packaging warehouse and shifted to the two distribution centres in Europe. for example RFID in anti-counterfeiting are largely untested or simply not the best. implementing automation and advanced technology or process improvement programmes presented huge challenges. Countering Market Dynamics Late pack customisation To counter the challenges of supplying to a multifaceted US market and low volume niche segments. GSK has RFID supply chain projects planned but faces a tough test with respect to being the first mover in investing huge sums into the technology or adopt a wait and watch policy. The challenge was 2 fold : find alternate suppliers and they should be ones who complied with the FDA regulations and supplied according to schedule. Its objective was to limit the number of machinery suppliers which would consequently lead to better familiarisation with the manufacturer’s equipment and establish partnerships with machine suppliers who offered total packages when compared with independent system integrators. Technological Challenges Technologies.
3. UK. There are no serious encryption and security issues. 2. GSK has been striving hard to introduce its paperless labelling initiative. Countering Packaging Complexities Global Pack Management With more than 36.Change Standardisation. handling package specifications. So. Online Printing GSK is working on developing online printing which would help synchronize the speed of the packaging line and prints at the prescribed quality level. since existing inventory must be emptied. The GPM programme focussed on four major issues: 1. Uniform and centralised information technology. one preprinted on the top of the box.This has helped streamline workflow. if packaging artwork is transferred between similar standard systems. any label or leaflet change requires up to a year to reflect with pharmacy stores. four centres (strategically chosen at US. The aim of paperless labels and electronic leaflets is to make the whole process automated and easy to analyse data. Italy and India) were designated to service the packaging graphic needs of all products. 250 centres performed the same activity. Online inspection on the codes could be performed at one go owing to their inline position. Developing a pack catalogue.Packaging changes are standardised using global training and implementation programmes. the other pre-printed on the leaflet and another printed online on the label. Paperless labelling/electronic leaflets According to FDA regulations.country related information and automatically applied. Working along with the Pharmaceutical Research and Manufacturers of America (PhRMA). Standardization of the packaging changes was another major issue. Since all the employees use the same applications which ensures uniformity. This will help instant updating as any change in the leaflet/label is reflected automatically. Even country specific leaflets were automatically attached. Central artwork development: Accordingly. GSK developed the Global Pack Management (GPM)to counter packaging complexity.000 SKU’s and a six-month life cycle of its products.All employees have access to packaging information which is centralized and streamlined. . The objective is to keep costs of online printing down. Earlier. This helps improve idea sharing while achieving packaging optimisation simultaneously. Patient safety is of paramount importance of GSK. associated graphics was an enormous task. Quality was ensured with three two-dimensional bar codes. all drug companies in the US must print and attach labels to every product they sell in the market. 4.
than having disparate machines for same tasks. product. The system tracks downtime data allowing for ongoing production improvements. For instance. GSK has been able to maintain product quality with cameras and online inspection using bar code scanners. and people. The goal is to have enough capacity globally with all suppliers producing identical components with identical tooling on identical machines. Schubert gives GSK the advantage of assigning a dedicated and focused team that works for GSK alone. Organisations can follow its Supply Chain Management strategies which increase the value of plants. The CAD package has drawings indicating minor details and any subsequent or ongoing review to every component to overcome communication gaps if any. The team also has an office in GSK’s plant itself. all equipment from a single supplier facilitates a better understanding of the equipment functioning. GSK uses a central TIPS production management system which minimises downtime. two in Europe and one in the US. packages. Countering Operational/production challenges GSK has limited the number of equipment suppliers to reduce downtime. Healthy supplier relationships have helped GSK reduce downtime substantially. GSK uses lines. Moreover. GSK has three suppliers. Furthermore. .Countering Supplier/Outsourcing issues GSK realises the importance of finding and qualifying multiple suppliers to avoid any supply disruptions. for its popular Advair Diskus device. Thus training costs are also less. Robots do the cartooning and case packing as well. GSK’s concerted efforts have been successful. Meeting strict regulations is of prime importance. which are integrated to do final assembly and packaging also. For instance. Instead of using ‘packaging only’ lines. Communication can play a vital role in establishing coordination among multiple suppliers. In response. GSK uses an electronic CAD package. on one packaging line it has one supplier Schubert’s four robotic systems.
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