PHARMACEUTICA

L SUPPLY CHAIN
A STUDY OF SUPPLY CHAIN PRACTICE IN PHARMACEUTICAL
INDUSTRY
 PHARMACEUTICAL SUPPLY CHAIN AT A GLANCE
Introduction
• Very fragmented & complex framework

• Multibillion $$ industry with global presence

• Very Competitive

• Patient Safety is important, thus requires

high regulations (Testing/Tracking by FDA)
Advantage/Benefits of effective Pharma
Supply Chain
• Reduce Mfg.-to-Mkt. cost

• Minimize cost of non-conformance

• Improve business efficiency

• Reduce waste and scrap

• Increase market confidence & security of

supplies
 PHARMACEUTICAL SUPPLY CHAIN AT A GLANCE

Components similar to other industries

Requires FDA regulations/Test/Tracking European Example & Future progress

RISK MANAGEMENT
Pharmaceutical Supply Chain Risks:
• Counterfeit (10% of worldwide drug supply: ‘world bank’)
• Outsourcing/Join Venture Risk (Regulations)
• Patient Safety (FDA requires test/track of each drug)
• Distribution/Inventory level (Delay Time-to-market)
• Uncertain Consumer demand (seasonal decease etc.)

RISK MANAGEMENT PROCESS

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 RISK MANAGEMENT SUCCESS: PFIZER INC.
• World largest research based
Pharmaceutical (Fortune 500:2012)
• > 95 Plants worldwide
• > 300 External Mfg
suppliers/contract .
• > 175 Distribution centers
• > 35,000 SKUs

• Cargo Theft
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RISKS MANAGEMENT FAILURE: FOXMEYER DRUG COMPANY
• A $5 billion company
• 4th largest wholesaler in US in 1993~1996
• Original Capacity of 420,000 orders per night

• Hired SAP R/3, Pinnacle automation, Anderson Consulting

• ‘Delta III” project to improve its efficiency
• Signed large contract to supply University Health system Consortium (UHC)

• But, R/3 could only process about 10,000 orders per night .
• ERP/Management failure?
• 3 warehouse closed, $34 million inventory lost

• CEO resigned
• Went bankrupt in 1996.
• Sold to McKesson for $80 million
• Sued all 3 for $500 million each
CONCLUSION

• Highly fragmented system because of many players at global level

• Very Complex Supply chain framework
• Highly Regulated by FDA & other law enforcement agencies. Yet, risks exists
• If implemented successfully, huge cost reduction and increased efficiency
• Risk management process is very important and necessary to maintain growth.
• Consequences of success and failures are very high
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QUESTIONS