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Opportunities and Challenges for Pharmaceutical Supply Chains in India: A Case

Opportunities and Challenges for Pharmaceutical Supply Chains in India: A Case. BY Dr. RAJESH KUMAR SINGH Associate Professor Delhi Technological University (DCE), Delhi. Plan of Presentation. Introduction of Pharmaceutical Industry Critical issues Pressures and Challenges Case Study

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Opportunities and Challenges for Pharmaceutical Supply Chains in India: A Case

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  1. Opportunities and Challenges for Pharmaceutical Supply Chains in India: A Case BY Dr. RAJESH KUMAR SINGH Associate Professor Delhi Technological University (DCE), Delhi

  2. Plan of Presentation • Introduction of Pharmaceutical Industry • Critical issues • Pressures and Challenges • Case Study • Supply Chain Performance Framework

  3. Introduction The pharmaceutical industry can be defined as a combination of processes, organizations and operations involved in the development, design and manufacturing of useful pharmaceutical drugs (Shah, 2004) Pharmaceutical supply chain more complex (Bhakoo and Chan ,2011). The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. Indian pharmaceutical market is likely to grow at a compound annual growth rate (CAGR) of 14-17 per cent in between 2012-16in terms of volume. India is now among the top ten pharmaceutical emerging markets of the world. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labor in India at lowest cost.

  4. Critical  Issues in Managing Pharmaceuticals • Managing perishable products • Degradation of the medicines as they move along the supply chain which results in allowing substandard products to be dispensed to the patients • Maintaining temperature control • More focus on R&D • Shipping of expiry products

  5. Critical  Issues in Managing Pharmaceuticals • In case of an epidemic break-out, global demand for certain medicines overshoots the demand suddenly. • Product withdrawal during sales due to side-effects and expiry • Out of stock situations are unacceptable & patent lifespan is low • Complex Network Design

  6. Critical  Issues in Managing Pharmaceuticals • Controlling wide supply chain with huge Stock Keeping Units becomes very difficult • Training & education cost to the stakeholders is high • Integration of domestic and international businesses.

  7. The Value Chain Cost Distribution

  8. Pressures, • To effectively green the PSC i.e. correctly disposing of expired/unwanted medications and reducing the level of preventable pharmaceutical waste (Breen and Xie, 2009). • Innovative and environmentally friendly medication designs (Nonaka and Takeuchi ,1995 , Xie and Breen, 2012). • Cleaner production methods/processes and green packaging (Zhu and Sarkis, 2004). • Lean manufacturing principles for pharmaceutical equipment manufacturing firm to reduce waste in its shop floor operation (Albert ,2004) • Development of decision support strategies and systems for managing new product portfolios (Perez-Escobedo et al., 2012) • Development of Trust among supply chain members and consumers (Hausman and Stock, 2003)

  9. Significance of SCM in Pharmaceutical sector Excellent supply chain management can yield: • 25-50% reduction in total supply chain costs • 25-60% reduction in inventory holding • 25-80% increase in forecast accuracy • 30-50% improvement in order-fulfilment cycle time • 20% increase in after-tax free cash flows

  10. Challenges • To manage operational excellence in terms of cost-effective development and faster lead-times (Pisano , 2000). • Expenditure of high cost and time in conducting clinical trials with low success rate in product discovery and clinical Development, (Laínez et al., 2012). • To improve Innovation rates in the industry (Talias, 2007). • Drug prices rises as high as 650 percent than the acceptable international standard in under developed countries in addition to the low availability of cheap medicines in the market, WHO (2009).

  11. Challenges • Inability to forecast accurately, lack of incentives for maintaining stocks, inefficient distribution systems and pilferage of medicines for private resale (Health Action International and WHO, 2009). • Majority of hospitals seem to have outdated information systems with inter-organizational connectivity (Burns,2002). • Inventory costs in the health care sector are substantial and are estimated to be between 10% and 18% of net revenues (Jarett,1998). • Determining optimal inventory levels in the pharmaceutical supply chain is a complex problem due to the involvement of various stochastic variables (Shang et al., 2008)

  12. Challenges • NPD as more important issue than the accepted need of high quality, low cost, and differentiation to excel in today’s competitive market (Nonaka and Takeuchi, 1995) • Quality standards are very stringent (Greene and O’Rourke, 2006). • Optimal process planning and scheduling is crucial for the Development of New Product (Perez-Escobedo et al.,2012). • Reverse Logistic for expired medicines (Xie and Breen , 2012).

  13. Challenges • Risks and uncertainties related to the recovery of pharmaceutical drugs (Srivastava, 2008). • To control potential impact of pharmaceuticals that reaches lakes and rivers via sewage plants and other sources (New Hampshire Department of Environmental Services, 2009) • Implementation of e-business practices in the healthcare supply chain such as lack of consistency and poor data quality and global nature of suppliers. (Bhakoo and Chan, 2011)

  14. CASE STUDY FROM PHARMACEUTICAL SECTOR

  15. Profile of Company • ABC Limited was formed in the year 1945. The firm used to import Pharmaceutical formulations from Europe and distribute them in Western India • ABC Limited has three plants which are spread across Maharashtra and Goa in Western India • These facilities are built in line with the MCA- UK guidelines and in compliance with WHO GMP requirements • It manufactures a wide range of products.

  16. Profile of Company (Contd) • ABC Limited has over 800 field staffs and 1400 stockists. ABC ltd has emerged as the most suitable partner and provider of CRAMS (Contract Research and Manufacturing Services) to its customers globally. • The R&D Centre has three divisions viz. Formulations, Active Pharmaceutical Ingredients & Intermediates and Regulatory & IPR Cell surrounded over an area of 70,000 sq feet. • It has built a strong international presence across its markets in USA, Europe, Asia, Africa, Latin America and other CIS countries • It has set up a state-of-the-art R&D Centre at Rabale, near New Mumbai (India).

  17. SWOT Analysis

  18. Initiatives Taken • Changing its role in the market from a 'Contract Manufacturer of Finished Dosage Forms' to a 'Complete Solutions Provider'. • In order to manage operations, ABC ltd was helped by multiple FoxPro based in-house applications. • ABC Ltd has also made efforts for conservation of energy which includes -  a)Installation of 5 star rating Air conditioners and Motors for plant machineries. c) Introduction to Rain water harvesting in order to save water. d) Improved air compressor efficiency

  19. Action Plan for improvement Step 1- Primary Distribution Setup Step 2-Evaluated existing C&FA network to setup independent C&FA network STEP 3- One company appointed as Distribution arm for the other STEP 4- Forecast from field implemented STEP 5- Incoming Logistics STEP 6- Transportation & Freight Cost STEP 7- Inventory levels STEP 8- IT Initiatives

  20. Supply Chain Performance Framework

  21. Supply Chain Performance Index

  22. Supply Chain Effectiveness Index Issues- Top management commitment, Mutual understanding, Flow of information, Relationship and decision making, Organizational factors, Responsiveness On the basis of Cleveland et al. (1989) model, SC effectiveness index is given as Sj=Wi Log Ki Where Sj = SC effectiveness index for company J i= Coordination Factor R =Rank of Coordination Factor Ki =Inverse Rank ( For i =6, If R=1, K= 6, if R=2, K= 5) Wi=Weight assigned to particular Coordination Factor = +1 (Strength), when percentage score > 60% (Mean value>3). = 0 (Neutral), when percentage score is between 40-60% (Mean value between 2 and 3). = -1 (Weakness), when percentage score< 40% (Mean value <2)

  23. Supply Chain Effectiveness Mapping for Case Company

  24. Supply Chain Effectiveness Mapping for Case Company

  25. Illustration for evaluating Coordination Index

  26. Concluding Recommendations • Improving Forecasting Accuracy • Reducing Inventory levels • Improving Customer Servicing levels and trust building • Increasing Information Availability of all SKUs • Development of new product development capability • Need to develop effective performance framework for pharmaceutical supply chain considering emergency situation

  27. THANK YOU

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