Pharmaceutical Industry Management

Submitted to:
Mam Rizwana Raheel
Submitted by:
Umair Mazhar 1087
Waqar Ashraf 1097
Mohsin Raza 1100
Osama Saeed 1284
 CONTENTS

 Introduction
 Production management
 Production control
 Planning control
 Material management
 Inventory management
 Budget and cost control
INTRODUCTION
Management:
Management is the process of designing and maintaining an
environment in which individuals, working together in groups,
efficiently accomplish selected aims.
Pharmaceutical industry:
 The pharmaceutical industry discovers, develops, produces,
and markets drugs or pharmaceutical drugs for use as
medications to be administered to patients, with the aim to
cure them, vaccinate them, or alleviate the symptoms.
 Pharmaceutical companies may deal in generic or brand
medications and medical devices.
 PRODUCTION MANAGEMENT

 Production management is a process of planning, organizing,

directing and controlling the activities of the production
function.
OR
 It combines and transforms various resources used in the
production subsystem of the organization into value added
product in a controlled manner as per the policies of the
organization.
OBJECTIVE OF PRODUCTION MANAGEMENT
 RIGHT QUALITY
 RIGHT QUANTITY
 PREDETERMINED TIME
 PRE-ESTABLISHED COST
Other objectives are :
 Machinery and Equipment
 Materials
 Manpower
 Supporting Service
The objective of the production management is ‘to produce
goods services of right quality and quantity at the right time and
right manufacturing cost’.
RIGHT QUALITY:
 The quality of product is established based upon the customers
needs.
 The right quality is not necessarily best quality. It is
determined by the cost of the product and the technical
characteristics as suited to the specific requirements.
RIGHT QUANTITY:
 The manufacturing organization should produce the products
in right number.
 If they are produced in excess of demand the capital will
block up in the form of inventory and if the quantity is
produced in short of demand, leads to shortage of products.
RIGHT TIME:
 Timeliness of delivery is one of the important parameter to
judge the effectiveness of production department.
 So, the production department has to make the optimal
utilization of input resources to achieve its objective.
RIGHT MANUFACTURING COST:
 Manufacturing costs are established before the product is
actually manufactured.
 Hence, all attempts should be made to produce the products at
pre-established cost, so as to reduce the variation between
actual and the standard (pre-established) cost.
 5 P`S OF PRODUCTION MANAGEMENT

1) PRODUCTS
2) PLANT
3) PROCESS
4) PROGRMS
5) PEOPLE
When this five element integrated a successful production
management takes place.
SCOPE & ACTIVITIES OF PRODUCTION
MANAGEMENT
There are two types of scope & activities of PM:
1. Strategic level:
 Design & development of new product
 Process design & Planning
 Facilities location & layout planning
 Design of material handling
 Capacity planning
2. Operational level
 Production Planning
 Inventory Control
 Product maintenance & replacement
 Cost Control & Cost Reduction
 PRODUCTION & PLANNING CONTROL (PPC)

 PPC is the powerful tool available to the management to

achieve the stated objective.
 Production planning starts with the analysis of data like
demand & delivery schedule etc & the basis of information
available and resources like machine, material & men.
 So, PPC is the process of directing & coordinating of firms
resources towards attaining prefixed goal.
FUNCTIONS OF PRODUCTION & PLANNING
CONTROL
 Material Function
 Machine & Equipment
 Methods
 Routing
 Estimating
 Scheduling
 Dispatching
 Expediting
 Inspection
 Evaluation
TYPES OF PRODUCTION:
1) BATCH PRODUCTION
2) MASS & FLOW PRODUCTION
3) PROCESS PRODUCTION
4) PROJECT PRODUCTION
5) JOBBING PRODUCTION
BATCH PRODUCTION:
Batch production is the manufacturing of limited number of
product produced at regular intervals & stocked in warehouse as
finished goods.
CHARACTARISTIC OF BATCH PRODUCTION:
 Short Run
 Skilled labors in specific trades
 Limited span of control
 General purpose machine and process type layout
 Manual material handling
 Manufacturing cycle time affected due to queues
 Large WIP
 Flexible production schedule
 Need to have PPC.
MASS & FLOW PRODUCTION:
Mass as well as flow production are characterized by the
manufacturer of several number of a std product and stocked in
the warehouses as finished goods awaiting sales. The goods
under mass production are manufactured either at a single
operation or a series of operation on one machine.
CHARACTARITIC OF MASS & FLOW PRODUCTION:
 Continuous flow of material
 Product type layout
 Mechanized material handling
 Low skilled labor
 Short manufacturing cycle time
 Easy supervision.
PROCESS PRODUCTION:
Process production is characterized by the manufacture of single
product produced and stocked in the warehouses awaiting sales.
CHARACTARITIC OF PROCESS PRODUCTION:
 Special purpose m/c with built in control.
 Highly mechanized material building.
 Virtually zero manufacturing time.
 Low skilled labor.
 Highly qualified supervisors.
 Limited PPC.
PROJECT PRODUCTION:
Project production is characterized by complex sets of activities
that must be performed in a particular order within the estimated
expenditure.
CHARACTARITIC OF PROJECT PRODUCTION:
 Definite beginning & definite end.
 Non uniform requirement of resources.
 Involvement of different agencies.
 Fixed position layout.
 High cost over run.
 Scheduling & control.
JOBBING PRODUCTION:
Jobbing production is characterized by the manufacture of one
or few number of a single product designed and manufactured
strictly to customer’s specifications within the given period and
within the price fixed prior to the contract.
CHARACTARITIC OF JOBBING PRODUCTION:
 Small production runs.
 Discontinuous flow of materials.
 Not proportionate manufacture cycle time.
 Highly skilled labor.
 Highly competent knowledgeable supervision.
 Limited function of PPC.
MATERIALS MANAGEMENT:
 Materials management involves planning, programming,
organizing, directing, controlling, and co-coordinating the
various activities concerning the materials.
 The production managers found it necessary to develop an
organized body of knowledge on this subject.
 The resulting set of related disciplines is known as materials
management.
 Materials management is the grouping of management
functions supporting the complete cycle of material flow, from
the purchase and internal control of production materials to the
planning and control of work in process to the warehousing,
shipping, and distribution of the finished product.
FUNCTIONS OF MATERIALS MANAGEMENT:
 Materials planning and programming
 Raw material purchase
 Receiving, store keeping, and warehousing Issuing of material
 Inventory control
 Value engineering
 Transportation of materials
 Vendor development
 Vendor rating
 Disposal of scrap and surpluses
5 M’S OF MATERIAL MANAGEMENTS:
 Men
 Machines
 Methods
 Money
 Materials
FOCUS OF MATERIAL MANAGEMENT:
 To : procure right materials
 In : Right Quantity
 Of : Right Quality
 At : Right Time
 From : Right sources
 At : Right prices
5 R’s, principles of purchasing
PRIMARY OBJECTIVES:
 Buying the best item at the lowest cost Reduction in inventory cost
and High inventory turnover
 Maintaining the flow of production Maintaining the consistency of
quality
 Optimization of acquisition and possession, resulting in lower cost
 Cordial relationship with suppliers
 Maintaining good records
 Contribution towards competitiveness
 Personnel development
SECONDARY OBJECTIVES:
 Promotion of standardization with suppliers
 Development of reciprocal relations with customers
 Committees to decide on economic make –or- buy decisions
Development of inter departmental relationships
 Can undertake acquisitions
 ADVANTAGES OF MATERIAL
MANAGEMENT
 Material cost can be lowered
 Controlling of indirect cost
 Risk of inventory loss minimized
 Reduction in loss of time of direct labour
 Cost of material used in different department ascertained
 Control of manufacturing cycle
 Material congestion in storage places avoided Improvement in
delivery of the product
 PHASES IN MATERIAL MANAGEMENT

 Planning (Plans for capacity or production levels and required

inventory levels
 Material utilization (efficiency of the flow of materials
through the plant)
 Physical (storing, receiving and issuing of materials and
physical checking of inventory of raw materials, work in
process, finished goods, record keeping)
 Control or follow up (feedback and corrective action involved)
 CHALLENGES OF MATERIAL
MANAGEMENT
 Selection of appropriate vendors
 Land and storage cost increase
 Difficulty in forecasting demand accurately
 Scarce capital for investment in materials inventory
 Diversification of product lines
 Optimizing time and quantity for products
 Management of information
 INVENTORY MANAGEMENT
INVENTORY MEANS:
All the materials , parts, suppliers, expenses and in process or finished products
recorded on the books by an organization and kept in its stocks, warehouses or
plant for some period of time.
Definition of inventory control:
Inventory control is the technique of maintaining the size of the inventory at
some desired level keeping in view the best economic interest of an
organization.
SCOPE OF INVENTORY CONTROL:
 Determination of inventory policies
 Determining various stock levels
 Determining economic order size
Safety or buffer stock
Determining lead time
Examining the work of inventory policy
OBJECTIVES OF INVENTORY CONTROL
 To ensure smooth flow of stock
 To provide for required quality of materials
 To control investments in stock
 Protection against fluctuating demand
 Protection against fluctuations in output
 Minimization of risk and uncertainty
 Risk of obsolescence
 Minimization of material cost.
TYPE AND REASON FOR HOLDING INVENTORY:
(1) Raw materials: To reap the price advantage available on seasonal raw
materials.
(2) Work in progress: To balance the production flow.
(3) Ready made components: When the components are bought rather than
made.
(4) Scraps: They are disposal of in bulk.
(5) Finished Goods: Lying in stock rooms and waiting dispatches
MAJOR ACTIVITIES OF INVENTORY CONTROL:
 Planning the inventories
 Procurement of inventories
 Receiving and inspection of inventories  Storing and issuing the
inventories
 Recording the receipt and issues of inventories
 Physical verification of inventories
 Follow-up function
 Material standardization and substitution.
INVENTORY COSTS:
 Ordering cost
 Carrying cost
 Out of stock or shortage cost
 Capacity cost
ORDERING COSTS:
 Cost of placing an order with a vendor of materials
 Preparing a purchase order
 Processing payments
 Receiving and inspecting the material
 Ordering from the plant
 Machine set up
 Start up scrap generated from getting a production run started
CARRYING COSTS:
 Costs connected directly with materials Obsolescence
 Deterioration
 Pilferage
FINANCIAL COSTS:
 Taxes
 Insurance
 Storage
 Interest
CAPITAL COSTS:
 Interest on money invested in inventory
 Interest on money in land and building
Storage space costs:
 Building rent
 Depreciation
 Cost of maintenance
Out of stock costs
Lost sales, transportation
Capacity costs:
 Overtime when capacity is low
 Idle time when capacity is large
BENEFITS OF INVENTORY MANAGEMENT:
 Inventory control ensures an adequate supply of materials, stores, etc.
 Minimizes stock outs and shortages, and avoids costly interruptions in
operations.
 It keeps down investments in inventories, inventory carrying costs and
obsolescence losses to the minimum
 It facilitates purchasing economies through the measurement of requirements
on the basis of recorded experience
 It provides a check against loss of materials through carelessness or pilferage
 BUDGET AND COST CONTROL

 Basically, it's making sure that you're spending less than you're
bringing in and planning for both the short- and long-term.
 Provide a forecast of revenues and expenditures, that is,
construct a model of how a business might perform financially
if certain strategies, events and plans are carried out.
 Enable the actual financial operation of the business to be
measured against the forecast.
 Establish the cost constraint for a project, program, or
operation
WHAT IS BUDGET?
 A budget is one of the most basic and probably most useful
things you can do to get in control of your finances.
 It is simply a snapshot of your financial situation at a
particular point in time, which can help you keep track of what
you're earning, what you're spending, and what happens to the
leftovers (if there are any).
WHAT IS BUDGETARY CONTROL?
 Budgetary control is the use of the comprehensive system of
budgeting to aid management in carrying out its functions like
planning, coordination and control.
 This system involves: Division of organization on functional
basis into different sections known as a budget centre.
ACCORDING TO FUNCTION:
SALES BUDGET:
Sales budget is the most important budget based on which all the other
budgets are built-up. This budget is a forecast of quantities and values of sales
to be achieved in a budget period.
PRODUCTION BUDGET:
Production budget involves planning the level of production which in turn
involves the answer to the following questions: What is to be produced? When
is it to be produced? How is it to be produced? Where is it to be produced? 70
COST OF PRODUCTION BUDGET:
 This budget is an estimate of cost of output planned for a budget period
and may be classified into
 Material Cost Budget, Labor Cost Budget, Overhead Cost Budget.
PURCHASE BUDGET:
 This budget provides information about the materials to be acquired from
the market during the budget period.
PERSONNEL BUDGET:
This budget gives an estimate of the requirements of direct labor
essential to meet the production target. This budget may be
classified into:
 Labor requirement budget
 Labor recruitment budget
RESEARCH AND DEVELOPMENT BUDGET:
 This budget provides an estimate of expenditure to be incurred
on R & D during the budget period.
 R&D budget is prepared taking into consideration the research
projects in hand and new R & D projects to be taken up.
CAPITAL EXPENDITURE BUDGET:
This is an important budget providing for acquisition of assets
necessitated by the following factors:
a) Replacement of existing assets.
b) Purchase of additional assets to meet increased production
c) Installation of improved type of machinery to reduce costs.
CASH BUDGET:
This budget gives an estimate of the anticipated receipts and
payments of cash during the budget period. Cash budget makes the
provision for minimum cash balance to be maintained at all times
MASTER BUDGET:
CIMA defines this budget as “The summary budget incorporating
its component functional budget and which is finally approved,
adopted and employed”. Thus master budget is a summary of all
functional budgets in capsule form available in one report.
ACCORDING TO FLEXIBILITY
FIXED BUDGET:
 This is defined as a budget which is designed to remain
unchanged irrespective of the volume of output or turnover
attained.
 This budget will, therefore, be useful only when the actual
level of activity corresponds to the budgeted level of activity.
FLEXIBLE BUDGET:
CIMA defines this budget as one “ which, by recognizing the
difference in behavior between fixed and variable costs in
relation to fluctuations in output, turnover or other variable
factors such as number of employees, is designed to change
appropriately with such fluctuations”
 COST CONTROL
 The process or activity on controlling costs associated with an
activity, process, or company.
 Cost control typically includes,
a) investigative procedures to detect variance of actual cost
from budgeted cost
b) diagnostic procedures to ascertain the cause(s) of variance
c) corrective procedures to effect realignment between actual
and budgeted costs.
REFERENCE
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subrahmanyam., J.Thimmasetty pg:no: 134-171
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jack.R meredith , samuel.k mantel Jr. 8th edition.
 Pharmaceutical Manufacturing – the Quiet Revolution Paul Sharratt
Institute for Chemical and Engineering Sciences Singapore.
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(4th Edn.) John Wiley & Sons
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PHI
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