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  • Harnessing the competitive advantage, What an opportunity to take this years SAPICS theme slogan and spend the next 40 minutes detailing for you how a south african supply chain innovation is being sought after by many global pharmaceutical manufacturers around the world. Because they believe it to be a key corporate differentiator going forward. That supply chain innovation is described in the title of my paper to you today.
  • Instead of using an agenda, I have highlighted the items of focus from the abstract of this paper. I am therefore going to use this as my guide to ensure that I stay on track. My motive for this talk is not get you up to speed on pharmaceutical supply chain details but rather to use this case study to illustrate that - South Africa 1 st world / 3 rd world mix makes is an excellent beachhead for supply chain innovation into the rest of the region and or world - South African logistics solutions can be world firsts, we are make it happen people - International companies are looking to logistics partners to offer them competitive advantage
  • South African subsiduary acts as a proof of concept for the rest of the company globally. South Africa is therefore acts as a low risk proving ground for these types of innovations. Taking a concept anywhere – regionally or abroad you need to remember that you come in with history, hind sight and battle scars, the prospective clients come in with questions, doubt and fear. Fear knowing that they have to change but just hope that it is not going to be too painful. The question therefore is can you be sufficiently sensitive to their needs to get them sufficient confident in your solution Evolution of this model in the south african market over the last 13 years Four early adoptors, require a critical mass – usually 10% of market share Market penetration of this business model was not with out its challenges – competition commission etc.
  • Pausing here is valuable to appreciate the global scale of the opportunity/threat that this market is facing and the fact that the business is looking to maintain its competitive advantage through leveraging strategic global supply chain innovations and challenging the status quo. As Is There are a few areas in the world who currently leverage direct pharmaceutical distribution on behalf of a select pharmaceutical manufacturers Southern Africa (13 yrs) – 26 manufacturers East Asia (5 years) – 14 manufacturers South East Australia (Dec 2006) – 2 manufacturers Spain (q1 2006)– 1 manufactuer UK (Jan 2007) – 1 manufacturer using a wholesaler Market factors at play Product Product pricing is country specific resulting in some products being more expensive based on geographies. The product is small and light and has a high value to volume ratio making transport costs competitive Companies have significant R&D costs that need to be recouped before patents expire Actual inventory cost is low since most of the cost is incurred in getting the product to market. Geography The European Union has facilitated inter-europe product movement and reduced exchange controls Pan European wholesalers are amongst the most powerful companies in europe The cost of pharmaceuticals is significantly higher in the states than anywhere else in the world “Americans pay more than anyone else in the world for American made drugs” Legal All Governments want affordable healthcare and acceptable service levels to all citizens Current U.S. law makes it illegal for pharmacists and drug distributors to re-import prescription medication. Timing Single exit price (SEP) legislation is being passed in many countries around the world. States will be having an election in 2008. Germany has just banned, April 2007, any distribution of pharmaceutical sales information into the channel PAN european wholesaler Celesio has purchased, May 2007, Doc Morris the largest on line pharmacy distributor in Europe. Markets “ Despite strong opposition from the drug industry, it is envisaged that Congress members will be swayed by the lobbying of citizens, complaining about the high cost of medication”. "Patients could not be assured medicines had been properly stored and transported. Moreover, it would allow medicines that have not received the approval of the Food and Drug Administration, which has the highest standards for patient safety in the world, in U.S. medicine cabinets." Supply chain innovations to meet market demands. Pharmaceutical manufacturers need to ideally own their product all the way until preliminary or final consumption Pharmaceutical manufacturers need to share the costs of the expensive final stage fine distribution aspect of their supply chain with other manufacturers – More than one manufacturers products in a box. The pharmaceutical supply chain needs independent logistics companies to become business partners The potential of parallel pharma product trade into the states needs to be managed from thse areas capable of meeting the demand (Europe / UK)
  • 21 4 How do you explain the supply chain interaction to parties that have previously been silo-ised Using SCOR offers a degree of confidence to approach international audiences since it provides an international standard of describing supply chains. The supply chain operational reference model allows each party to identify their different processes in a common environment It was this fundamental business process alignment and identification that proved so effective in describing how by certain fundamental changes in a clients supply chain could result in the desired outcomes that they are striving for. Building block approach Source connects to supplier Deliver connects to customer Not all companies have make We can model as far up or down the supply chain as we view important (not limited to two tiers) Customers and / or suppliers can be internal or external
  • The clients confidence to embrace a different logistics business model is greatly influenced by their ability to touch and see the infrastructure. Kick the tyres and touch the walls so to speak. This requires that you need to make acquisitions in the market place to get the necessary infrastructure in the time available. Such an example was a company in italy.
  • Coerce existing supply chain partners to take on different roles and illustrsate how there future is going to be impacted by the current market changes.
  • Strategic Requirements :
  • 21 4 How do you explain the Using SCOR offers a degree of confidence to approach international audiences since it provides an international standard of describing supply chains. The supply chain operational reference model allows each party to identify their different processes in a common environment It was this fundamental business process alignment and identification that proved so effective in describing how by certain fundamental changes in a clients supply chain could result in the desired outcomes that they are striving for. Building block approach Source connects to supplier Deliver connects to customer Not all companies have make We can model as far up or down the supply chain as we view important (not limited to two tiers) Customers and / or suppliers can be internal or external
  • Two strategic drivers of most multinational pharmaceutical companies : Direct to Pharmacy Adapt to scale
  • South Africans 1 st /3 rd world mix makes it a suitable beach head for SC innovation/incubation and a POC for other 1st world countries ? -- South Africa’s logistics requirements are onerous being so far away from all the major markets – the supply chain solutions that are developed in SA can be world firsts. -- Supply chain innovation through visibility and control platforms offers a compelling value proposition.

Harnessing the competitive advantage of South Africa's direct ... Harnessing the competitive advantage of South Africa's direct ... Presentation Transcript

  • Harnessing the competitive advantage of South Africa’s direct pharmaceutical distribution model in Europe using SCOR “Lite”. JG COWPER MSc. Bio Medical Eng UTI Strategic Services BI Supply Chain Specialist
    • International pharmaceutical manufacturers desire, both at a strategic planning and execution level , that their primary logistics supply chain partners offer an integrated services platform to gain visibility and derive insights into their distribution channels .
    • This presentation will detail how a simple rendition of SCOR has been used to encourage adoption of this direct distribution business model abroad and will show case how such a supply chain visibility tool can enable order responsiveness , the management of inventory levels and the mitigation of financial risk .
    ABSTRACT SAPICS 2007
  • South African Pharma direct distribution value proposition
    • Direct to pharmacy channel model
    • Ability to adapt to scale
    • Maintain product integrity
    • Migrate from a trading focus to a fee for professional service
    • Accurate sales and marketing detail
    • Responsive supply chain performance
  • Multi-nationals delivering direct in South Africa
  • Migrating a direct distribution business model abroad
  • Pharmaceutical Supply Chain Model Consumer Supplier Plan Deliver Manufacturer Customer Make Make Deliver Make Source Source Channel to Market Source Return Source Deliver Return Pharmaceutical Multi-National Chemical Supplier Pharmacy Hospital Doctors Retailer Patient Direct Distributor Wholesaler Return Deliver Return Return Return Return Return
  • SCOR enables business model description across different European countries
    • Italy – Due Diligence
    • Greece -- Convert a wholesaler into a direct distributor
    • Germany – Separate Product and Information Flows
    • UK – Response to RFP
    • Slovakia – Integrated Service offering packaged into a Control Tower
  • Italy – SCOR handles the language barrier to facilitate a due diligence assessment. PLAN (P1-5) SOURCE (S1) MAKE (M1) DELIVER (D1) RTSource (SR1) RTDeliver (DR1,3) ENABLE
  • Greece- SCOR assist in defining the roles enabling a wholesaler to become a direct distributor LSP PLAN (P1-5) SOURCE (S1) MAKE (M1) DELIVER (D1) RTSource (SR1) RTDeliver (DR1,3) ENABLE
  • Channels to Market (Germany 2005)
  • Germany - SCOR shows the value of separating product and data flows.
  • UK – SCOR gives context to a RFP 1 2 3 4 5 6 7 8 9 10
  • Network design opportunity exposed through SCOR Mapping – Propose HUB building sequence
  • Slovakia – SCOR exposes the need for an integrated logistics services platform meeting strategic requirements
  • Pharmaceutical Supply Chain Model Consumer Supplier Plan Deliver Manufacturer Customer Make Make Deliver Make Source Source Channel to Market Source Return Source Deliver Return Pharmaceutical Multi-National Chemical Supplier Pharmacy Hospital Doctors Retailer Patient Direct Distributor Wholesaler Pharmaceutical Supply Chain Control Tower Return Deliver Return Return Return Return Return
    • International pharmaceutical manufacturers desire, both at a strategic planning and execution level , that their primary logistics supply chain partners offer an integrated services platform to gain visibility and derive insights into their distribution channels .
    • This presentation will detail how a simple rendition of SCOR has been used to encourage adoption of this direct distribution business model abroad and will show case how such a supply chain visibility tool can enable order responsiveness , the management of inventory levels and the mitigation of financial risk .
  • Prof Langley 2006 – Georgia Tech
  • IT capabilities are a key success factor for client bids Relationships Strategic/ Planning Transactional Visibility Clearing & Forwarding Warehousing Distribution Supply Chain Engineering Director of Account Solutions Operational Manager 60% of clients specifically assess a 3PL’s IT capabilities when selecting a provider (Capgemini Survey, 2006) Single service Multiple services
  • Prof Langley 2007 – Georgia Tech Visibility Tools - Web-Enabled Communications - Transportation Man (Execution) - Warehouse/DC Management - RFID - Transportation Man (Planning) - Collaboration Tools - Supplier Relationship Man - Transportation Exchange - Supply Chain Planning - Customer Relationship Man - Customer Order Management - Yard Management - Source: 2006 Third-party Logistics – results and findings of the 11 th annual survey Must Haves Emerging Needs
  • Clients are requiring an integrated systems offering supporting a range of logistics services Relationships Single service Multiple services VISIBILITY & CONTROL PLANNING & OPTIMISATION Must Haves Emerging Needs
  • Integrated Supply Chain Services Portfolio Logistics Services Logistics Services Planning and Optimisation ------------------------------------- Visibility & Control
  • How does the Pharma Control Tower map to client strategy? ADAPT TO SCALE DIRECT TO PHARMACY PHARMA LOGISTICS STRATEGY
  • What supports the Pharma Control Tower Functionality ? Pharmaceutical Control Tower
  • Clients have outsourced the logistics function so hide the detail and offer the insights.
  • Management of inventory – Pipeline Visibility
  • Order Fulfillment Accuracy
    • Orderline completed versus orderlines requested
  • Sales Growth
    • Orderline completed versus orderlines requested
  • Mitigation of financial risk – DSO Analysis
    • Debtors age analysis
  • Lessons learnt to date, this project has illustrated that: - SA is a beachhead for supply chain innovation - SA logistics solutions can be world firsts - International pharma companies are looking at logistics partners to offer them competitive advantage - Visibility and control platforms offer a compelling value proposition that differentiate. - Migrating innovation “overseas” requires significant investment.
  • QUESTIONS ?