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Opportunities and Challenges

for Pharmaceutical SupplyChains in India: A Case

BY

Dr. RA!S" #$%AR SI&'"

Associate Professor

Delhi (echnological $ni)ersity *DC!+, Delhi

1



Plan of Presentation

• Introduction of PharmaceuticalIndustry

• Critical issues

• Pressures and Challenges

• Case Study

• Supply Chain PerformanceFramework



Introduction• The pharmaceutical industry can be dened as a combination

of processes, organizations and operations inoled in thedeelopment, design and manufacturing of usefulpharmaceutical drugs !Shah, "##$%

•Pharmaceutical supply chain more comple& !'hakoo and Chan ,"#((%)

• The Indian Pharmaceutical sector is highly fragmented withmore than "#,### registered units) Indian pharmaceuticalmarket is likely to grow at a compound annual growth rate!C+-% of ($.(/ per cent in between "#(".(0 in terms ofolume)

•India is now among the top ten pharmaceutical emergingmarkets of the world)

•Indian pharma industry is mainly operated as well as controlledby dominant foreign companies haing subsidiaries in India dueto aailability of cheap labor in India at lowest cost)



Critical Issues in 1anagingPharmaceuticals

• 1anaging perishable products

• 2egradation of the medicines as theymoe along the supply chain which

results in allowing substandard productsto be dispensed to the patients

• 1aintaining temperature control

• 1ore focus on -32• Shipping of e&piry products




• In case of an epidemic break.out,global demand for certain medicinesoershoots the demand suddenly)

• Product withdrawal during sales dueto side.e4ects and e&piry

• 5ut of stock situations areunacceptable 3 patent lifespan is low

• Comple& 6etwork 2esign




• Controlling wide supply chain withhuge Stock 7eeping 8nits becomesery di9cult

• Training 3 education cost to thestakeholders is high

• Integration of domestic andinternational businesses)



(he -alue Chain Cost Distriution

Value Chain Stages Cost Distribution

Research & Development Cost 15%

Primary Manufacturing cost 5 – 10%

econ!ary Mfg"Pac#aging 15 – $0 %

Mar#eting " !istriution 0 – 5%

'eneral (!ministration 5%

Profit $0%

Total 100 %



Pressures,

• To e4ectiely green the PSC i)e) correctly disposing of

e&pired:unwanted medications and reducing the leel ofpreentable pharmaceutical waste !'reen and ;ie, "##<%)

•Innoatie and enironmentally friendly medication designs!6onaka and Takeuchi ,(<<= , ;ie and 'reen, "#("%)

•Cleaner production methods:processes and green packaging

!>hu and Sarkis, "##$%)•?ean manufacturing principles for pharmaceuticale@uipment manufacturing rm to reduce waste in its shopAoor operation !+lbert ,"##$%

•2eelopment of decision support strategies and systems for

managing new product portfolios !Perez.Bscobedo et al),"#("%

•2eelopment of Trust among supply chain members andconsumers

!ausman and Stock, "##D%



Signicance of SC1 inPharmaceutical sector

B&cellent supply chain management canyieldE

• "=.=# reduction in total supply chain costs• "=.0# reduction in inentory holding

• "=.G# increase in forecast accuracy

• D#.=# improement in order.fullmentcycle time

• "# increase in after.ta& free cash Aows



Challenges•

To manage operational e&cellence in terms ofcost.e4ectie deelopment and faster lead.times!Pisano , "###%)

• B&penditure of high cost and time in conductingclinical trials with low success rate in productdiscoery and clinical 2eelopment, !?aHnez etal), "#("%)

• To improe Innoation rates in the industry!Talias, "##/%)

• 2rug prices rises as high as 0=# percent than theacceptable international standard in underdeeloped countries in addition to the lowaailability of cheap medicines in the market,

5 !"##<%)



Challenges• Inability to forecast accurately, lack of

incenties for maintaining stocks, ine9cientdistribution systems and pilferage of medicinesfor priate resale !ealth +ction Internationaland 5, "##<%)

• 1aJority of hospitals seem to hae outdatedinformation systems with inter.organizationalconnectiity !'urns,"##"%)

• Inentory costs in the health care sector aresubstantial and are estimated to be between(# and (G of net reenues !Karett,(<<G%)

• 2etermining optimal inentory leels in thepharmaceutical supply chain is a comple&



Challenges• 6P2 as more important issue than the accepted

need of high @uality, low cost, anddi4erentiation to e&cel in todayLs competitiemarket !6onaka and Takeuchi, (<<=%

• Muality standards are ery stringent !reeneand 5L-ourke, "##0%)

• 5ptimal process planning and scheduling is

crucial for the 2eelopment of 6ew Product!Perez.Bscobedo et al),"#("%)

• -eerse ?ogistic for e&pired medicines !;ie and'reen , "#("%)



Challenges

• -isks and uncertainties related to the

recoery of pharmaceutical drugs !Sriastaa, "##G%)

• To control potential impact ofpharmaceuticals that reaches lakes andriers ia sewage plants and other sources!6ew ampshire 2epartment of

Bnironmental Serices, "##<%

• Implementation of e.business practices inthe healthcare supply chain such as lack ofconsistenc and oor data ualit and lobal



C+SB ST82N F-51P+-1+CB8TIC+? SBCT5-



Prole of Company

• +'C ?imited was formed in the year (<$=. The rm used to import Pharmaceuticalformulations from Burope and distributethem in estern India

• +'C ?imited has three plants which arespread across 1aharashtra and oa inestern India

• These facilities are built in line with the 1C+.87 guidelines and in compliance with 51P re@uirements

• It manufactures a wide range of products)



Prole of Company !Contd%

• +'C ?imited has oer G## eld sta4s and ($##stockists) +'C ltd has emerged as the most suitablepartner and proider of C-+1S !Contract -esearchand 1anufacturing Serices% to its customers

globally)• The -32 Centre has three diisions iz)

Formulations, +ctie Pharmaceutical Ingredients 3Intermediates and -egulatory 3 IP- Cell surrounded

oer an area of /#,### s@ feet)• It has built a strong international presence across its

markets in 8S+, Burope, +sia, +frica, ?atin +mericaand other CIS countries

• It has set up a state.of.the.art -32 Centre at



S5T +nalysisStrength Weakness

• Cost competitiveness

• Well developed infrastructure

with strong manufacturing base

• Access to pool of highly trained

scientists, both in India and

abroad

• Strong marketing and

distribution network

• Low investments in innovative

R!

• Lack of strong linkages between

industry and academia

• "nable to maintain global

#uality standards



Opportunities Threats• Significant e$port potential

• %arketing alliances to sell

%&C products in domestic

market

• Contract manufacturing

arrangements with %&Cs

• 'otential for developing India as

a centre for international clinical

trials

• Supply of generic drugs to

developed markets

• 'roduct patent regime poses

serious challenge

• Lack of (ovt Support for R!

activities

• !rug price control order puts

unrealistic ceilings on product

prices and profitability

• %ore competitive global players



Initiaties Taken• Changing its role in the market from a

OContract 1anufacturer of Finished 2osageFormsO to a OComplete Solutions ProiderO)

• In order to manage operations, +'C ltd

was helped by multiple Fo&Pro based in.house applications)

• +'C ?td has also made e4orts forconseration of energy which includes .

a%Installation of = star rating +irconditioners and 1otors for plantmachineries)

c% Introduction to -ain water haresting



+ction Plan for improement

Step (. Primary 2istribution SetupStep ".Baluated e&isting C3F+ network

to setup independent C3F+ network

STBP D. 5ne company appointed as2istribution arm for the other

STBP $. Forecast from eld implemented

STBP =. Incoming ?ogistics

STBP 0. Transportation 3 Freight Cost

STBP /. Inentory leels

STBP G. IT Initiaties



Supply Chain Performance/rame0or1

S l Ch i P f I d



Supply Chain Performance Inde&SCM Coordination Issues References

Top management commitment Factors• Investment of time and money for resource

development)• *ocused communication system• Ready to adopt new technology• +mployees training and empowerment

• Investment in R!

Shin et al) -.../, Arshinder et al)

-..0/*isher 1223/, Arshinder et al)-..3/,Stanley et al) -..2/, (owen and4allon -..-/

Organizational Factors• Lean organi5ation structure• 6I4 environment and lean practices

• 7rgani5ation culture for SC implementation• Integration of functions with in the

organi5ation

%elton -..8/, 7thman and (hani-..0/(rittel and Wises -..9/,Arshinderet al) -..0/, Sawik -..2/, Sorooret al) -..2/

Mutual understanding Factors• Agreed vision and goals of members of supply chain• 4rust development in SC members• +ffective implementation of :oint replenishment and

forecasting decisions• Supply chain risk; reward sharing

Arshinder et al) -..3/, <ianchiand Saleh, -.1./, Aviv -..1/,Arshinder et al) -..0/, Cachonand Lariviere -..8/, Ryu and=ucesan -..2/



Flow of information Factors

• "se of information technology I4/ toolsand techni#ues

• Information sharing; e$change

• Sharing of data related to purchasing andsupplies

Arshinder et al) -..0/, Arshinderet al) -..3/, Cao et al) -..0/,Stanley et al) -..2/, %arek and

%alys5ek -..0/

Relationship and decision making Factors

• Long term relationship with suppliers•

Long term relationship with retailers• Collaborative decision making; planning

with SC members• Logistics network optimi5ation

!isny and 4owill -..>/, Arshinderet al) -..0/, Lyu et al) -.1./,Arshinder et al) -..0/, Cao et al)-..0/, Soroor et al) -..2/, Sawik-..2/, 7thman and (hani -..0/

Performance Factors• +fficiency• *le$ibility• Responsiveness• !rugs #uality

<eamon 1222/, 'ersson and7lhager -..-/, Lai et al) -..-/,<erry -..?/, Luning et al) -..-/,@an der Spiegel -..9/, @aleeva-..8/



Supply Chain B4ectieness Inde&

Issues2 )op management commitment* Mutual un!erstan!ing* +lo, ofinformation* Relationship an! !ecision ma#ing* -rgani.ational factors*

Responsiveness• 5n the basis of Cleeland et al) !(<G<% model, SC

e4ectieness inde& is gien as

S 3 4∑ 5i 6og # i

here S 3

SC e4ectieness inde& for company K

• i Coordination Factor• - -ank of Coordination Factor• 7 i Inerse -ank ! For i 0, If -(, 7 0, if -",

7 =%

• i eight assigned to particular CoordinationFactor

Q( !Strength%, when percentage score R0# !1ean alueRD%)

# !6eutral%, when percentage score is.



Supply Chain B4ectieness 1apping for Case Company

S ! Coordination Factors Fi"e Point #ikert Scale

1 - > 9 8 %ean

$ TopmanagementCommitment

Investment of time and money forresource development

%-)3

*ocused communication system %

Ready to adopt new technology %

+mployees training and empowerment %

& Mutual'nderstanding

Agreed vision and goals of members ofsupply chain

%>).

4rust development in SC members %

+ffective implementation of :ointreplenishment forecasting decisions

%

Supply chain risk; reward sharing %

( Flow ofInformation

"se of Information 4echnology I4/ toolsand techni#ues

%9 Information sharing; e$change %

Sharing of data related to purchasing andsupplies

%

Supply Chain B4ectieness 1apping for



Supply Chain B4ectieness 1apping forCase Company

) Relationship

and decisionmaking

Long term relationship with suppliers %>)-8Long term relationship with stockist %

Collaborative decision making; planningwith SC members

%

Logistics and network optimi5ation %

* OrganizationFactors

Lean organi5ation structure %>)38

and lean practices %

7rgani5ation culture for SCimplementation

%

Integration of functions with in the

organi5ation

%

+Performance

+fficiency %9)8

Innovations and &'! %

Responsiveness %

!rugs #uality %

I ustrat on or ea uat ng oor nat on



I ustrat on or ea uat ng oor nat onInde&

Sr) &o

)

Issues of coordination %ean Rank

InverseRank

i/

Logi

Weight Wi/

WiLogi

1) 4op managementcommitment

-)3 ? 1 .).. . .

-) %utual understanding >). 8 - .)>. . .).

>) *low of information 9 - 8 .)3. B1 .)3.

9) Relationship anddecision making

>)-8 9 > .)90 B1 .)90

8) 7rgani5ational factors >)38 > 9 .)?. B1 .)?.

?) 'erformance 9)8 1 ? .)30 B1 .)30

Coordination Inde, - C. - /0Wi #og 1i2- &*+

C l di



Concluding-ecommendations

• Improing Forecasting +ccuracy

• -educing Inentory leels

• Improing Customer Sericing leels and

trust building• Increasing Information +ailability of all S78s

• 2eelopment of new product deelopmentcapability

• 6eed to deelop e4ectie performanceframework for pharmaceutical supply chainconsidering emergency situation



THANK YOU

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