PROCUREMENT BUSINESS MODEL

FOR RETAIL HOMEOPATHIC

PHARMACY
Pharmacies are often the first point of contact for patients seeking
health care as they are usually more accessible and less socially
distant than other providers, including medical doctors.

In low and middle income countries (LMIC) in Asia, pharmacies are

often patients’ first point of contact with the health care system and
their preferred channel for purchasing medicines.
The product range offered in the proposed Retail Homeopathic
Pharmacy is a blend of both multinational and national companies’
products and general products (Food Supplements, Toiletries,
Shampoos, Soaps, Diapers (sanitary napkins) and Cellular Prepaid
Cards).
Having too much inventory (or the wrong type) during certain
periods can slow your cash flow and reduce profits with too many
markdowns. On the other hand, if you under-buy (meaning buy too
little product) and miss sales opportunities, then you are not making
your potential profit (plus damaging the customer experience).

A retailer can be sure to stock the right amount of the right products
at the right time by using an Open-To-Buy (OTB) plan.
Open-To-Buy can be calculated in either Units or Value. However,
it's best to use Value since there are significant variations in costs
between same products.
Examples:
Nuxvomica 1x2 10m
German 625 Rs. approx
Local 100Rs. approx. (Local Pharma)

Caps Thougha
German 170 approx.
MRP 100 approx. (Local Pharma)

Natrimphos 1x
German 625 approx.
MRP 150 approx. (Local Pharma)

Brionia 1x
German 775 approx.
MRP 150 approx. (Local Pharma)

Nephlitum Q
German 625 approx.
MRP 145 approx. (Local pharma)
Pre-Feasibility Study RETAIL
HOMEOPATHIC PHARMACY
 Pakistan has a very vibrant and forward looking Pharmaceutical
Industry. Today Pakistan has about 800 pharmaceutical
manufacturing units including those operated by 25 multinationals
present in the country.

 Pakistan’s Pharmaceutical Industry meets around 70% of the

country's demand of finished medicine. The domestic pharmaceutical
market, in terms of share market is almost evenly divided between the
local and multinational companies.

 The total initial project cost for setting up a single outlet (1000 sq.
feet) is estimated at Rs. 5lacs; out of which:


 Rs. 2.5 lacs is Capital Cost

 Rs. 2.5 lacs as Working Capital
 Project Cost
Amount
Description Rs.
Capital Cost
Furniture and Fixture 150,000
Medical Store Equipment 50,000
Pre-operating Cost 50,000
Total Capital Cost 250,000
Working Capital
Medicines Stock 200,000
Upfront Shop Rent 40,000
Cash 10,000
Total Working Capital 250,000
Total Project Cost 500,000

A key decision in retail Homeopathic pharmacy is how much

inventory to keep on hand. Inventory is usually a pharmacy’s
largest asset. Once inventory levels are established, they become
an important input to the financial aspect of any business, as they
are key to driving cash flow and profitability.
 Brief Description of Project &
Product
The proposed project is a well-built homeopathic store with all
of the product range in stock for sales.

The proposed Size of the medical store should be around 1000

sq.feet.
 Product Mix
The proposed Homeopathic store will be offering a blend of
different products. Percentage quantity of each item offered on the
store is based on a survey of distribution companies.
Following is the list of products, which are to be offered at the
Homeopathic store:

Product Category Percentage In Total Sales

Products of Multinational Companies 36.80
Products of National Companies 45.00
Herbal Products 4.55
Food Supplements 2.73
Eatables 4.55
Toiletries 1.82
Sanitation Products 1.82
Pre-Paid Cards 2.73
Total 100.00
Critical Factors (Procurement)
Retail Homeopathic pharmacy is similar to a trading business,
some of the Key Success factors that will determine the success of
this project include:
 Availability of complete product range
 Availability of regular medicine supplies
 Reasonable and competitive prices
 Inventory control to avoid any expiry, damage, pilferage

Availability of complete product

 range
Challenge 1: Sourcing & Stocks

Sourcing a high number of SKUs (Products) from a highly

fragmented market to manage hundreds and thousands of brands
and products in terms of sourcing, stocking and payments.

Recommendation:
It is recommended that a Medicines stock (Page 2 : PKR 2.5lacs for
a single outlet of 1000sq. feet) is maintained initially for:
 WHO study for common diseases in Pakistan
Mosquito-borne Diseases Cancer
Heart Disease Diabetes
Intestinal Infections Stroke
Bacterial Diseases Respiratory
Viral Diseases Accidents, Injuries, Poisoning
Hepatitis A and E Seasonal Diseases
Tuberculosis
The following categories of drugs fall in the list of scheduled drugs
(source: DRAP):
 Biological,Infusions and Drugs used for the treatment of
Cancer,T.B.,Hepatitis,HIV,Thalassemia and Organ Transplant.
 160 molecules of public health significance from the Essential Drug
List (EDL) of Drug Regulatory Authority of Pakistan.
 Top 50 molecules in unit terms as per Information Medical Statistics
(IMS).
One can understand that 160 + 50 + 115 = 325 molecules of drugs from
Top 20 Pharmaceuticals will bring SKUs to 6,500 (which will double as
most of the drugs are available either in 2 or 3 strengths); it is
recommended FOR RETAIL Homeopathic PHARMA to adopt
PROCUREMENT “Open-To-Buy Plan with Value” instead of Units
Once the sourcing is established, following must be monitored to achieve
the targets:

 Identifying and estimating the demand for the products in the area

 Maintaining stock levels and ensuring availability of the products

 Minimizing stock loss due to expiry (FEFO), damage, theft or pilferage

 Negotiating prices, discounts and payment terms with the suppliers

 Procuring in time and as per need

 Maintaining a record of customer details, sales data and stock outs

 Continuous updating of stock based on knowledge acquired over time

Managing Inventory:
Break down inventory into two broad classes: Base Stock and Safety Stock.

Base stock is the portion of inventory that is replenished after it’s sold to customers.
Think of base stock as the foundation of your pharmacy from which prescriptions are
filled day in and day out.

Safety stock is the portion of inventory that is held to protect against uncertainty. It’s
that extra bottle that you keep “just in case.” The rule of thumb in base stock and safety
stock is simple: Keep an adequate supply of base stock and as little safety stock as
possible.
Reduce overall inventory Get rid of excess safety stock, outdated products and items
that are on the shelves but rarely or never move by return for credit anything that hasn’t
moved in the last 30 days and increase safety stock on faster moving products to
ensure adequate stock.
Just in time ordering only works when you have reliable delivery, reliable supply, and
stable, predictable demand
Challenge 2: Low Quality and Fake Medicines

This can be catered by procuring all products directly from manufacturers and its direct
authorized distributors only.

The stocks are then meticulously maintained in proper storage conditions during
warehousing by following a Hub & Spoke model (wherein all the outlets are connected
to a mother distribution center)

This makes the distribution centralized and there is no scope of spurious drugs getting
into the system, in a way that right from procurement till the counter sale of products,
the batch number and expiry dates are traceable (which will also be helpful during
reverse logistics, in case of expiry, batch recall from manufacturer, defect et cetera).

Drug Regulatory Authority of Pakistan has also GS1 Data Matrix 2D Machine Readable
Bar Coding of Primary, Secondary & Tertiary Packaging
 SUMMARY
Procurement Strategy: Open-To-Buy {Value Based (based on WHO study for
common diseases in Pakistan) instead of Unit Based}
 Feasibility for a Single Outlet of 1000 sq. feet.
 Total initial project cost PKR 5 lacs approx., including Medicine Stock Value PKR
2.5 lacs approx.
 Product Mix (Open-To-Buy ~ Value Based supported by WHO study for common
diseases in Pakistan)

 Products of Multinational Companies

 Products of National Companies
 Herbal Products
 Food Supplements
 Eatables
 Toiletries
 Sanitation Products
 Pre-Paid Cards
 Product Range
 Based on WHO study for common diseases in Pakistan + Seasonal diseases
Categories of drugs fall in the list of scheduled drugs (source: DRAP)
 Managing Inventory
 Demand

 Negotiation

 Stocks, Par Levels (Base Stock, Safety Stock), First Expiry First Out (FEFO)

 Hub & Spoke Model

 Reordering via centralized distribution location to outlets

 Delivery to outlets via centralized location:

 Minimizing time & efforts

 Reducing Overall Inventory by avoiding duplication

 Control of Fake product

 Traceability from Ordering till counter sale

 Helpful in Reverse Logistics

Drug Regulatory Authority of Pakistan
 GS1 Data Matrix 2D Machine Readable Bar Coding for counterfeiting drugs
Price Component of a locally manufactured generic (source:The Network for Consumer
Protection 2006)

Retail MarkUp 15%

WholeSale MarkUP 02%
Local Distribution 05% Central
Research Fund 01%
Manufacturer’s Selling Price 77%
Total 100%
CONTACT DETAILS
In order to facilitate customers, contact details of Service Provider of the
proposed project is given below:

Name of service Provider: Mr. Saleem Akhter (Healthvision Homeopathic store)

Address: saraey Kharbooza, Pari Stop, Tarnol, Islamabad