Final supply chain in pharma

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Final supply chain in pharma

  1. 1. Pharmaceutical Supply Chain PRESENTED BY: MRADUL GUPTA 213 VIPIN RAWAL 214 AAMIR BOMBAYWALA 215 PRATIKSHA 216 SHASHIKANT 149 SOMAN PANDA 163
  2. 2. Introduction  The pharmaceutical industry can be defined as a complex of processes, operations and organizations involved in the discovery, development and manufacture of drugs and medications.  Number of key players in the industry include:  The large, research and development-based multinationals  The large generic manufacturers, who produce out-of-patent ethical products  Local manufacturing companies  Contract manufacturers  Drug discovery and biotechnology companies
  3. 3. The Pharmaceutical Industry  The Pharmaceutical market will reach nearly $1100 billion by 2015  India Pharmaceutical industry ranks 4th in production volume and 13th in domestic consumption volume  To meet customer service improvement and cost reduction  Supply chain is highly crucial as it is time-sensitive
  4. 4. Drivers in the pharmaceutical industry  Most important driver in the pharmaceutical industry is the time-to-market.  Companies secure very significant returns in the early life of a successful drug, before any competition.  The competition-free life is shortening, typically from 5 to 1–2 years.  This industry is subject to very stringent regulation.  complex manufacturing processes  Huge investment in R&D
  5. 5. Pharma Supply Chain Considerations  End-user (patient) safety  Anti-counterfeiting requirements  Product integrity  Quality assurance  Fraud prevention and detection  Electronic signature requirements  Records access and retention requirements  Product tracking  Class 2 pharmaceuticals must carry unique identifiers at the item level  ―Chain of custody‖ tracking from manufacturer to distributors and point-of-use What business requirements differentiate pharmaceutical SCM from other manufacturers? Regulation!!
  6. 6. supply chain performance measures  The stock levels in the whole chain (―pipeline stocks‖) typically amount to 30–90% of annual demand in quantity  There are usually 4–24 weeks‘ worth of finished good stocks.  Stock turns (defined as annual sales/average stock) are typically between 1 and 8.  Supply chain cycle times (defined as elapsed time between material entering as raw material and leaving as product) are often between 1000 and 8000 h.  Material efficiencies (the amounts of product produced per unit amount of total materials used) are 1–10%.
  7. 7. Key issues in the pharmaceutical supply chain  Uncertainty in the demands for existing drugs (due to competition, uncertainty in the ability to extend the protected life through new formulations, etc.)  Uncertainty in the pipeline of new drugs—in particular, which ones will be successful in trials, what sort of dosage and treatment regime will be optimal.  Capacity planning—long lead times to make capacity effective means that decisions often need to be taken at times of high uncertainty. Waiting for the uncertainties to be resolved might delay the time to market by an unacceptable amount.
  8. 8. Key issues in the pharmaceutical supply chain  Network design—often tax implications take precedence over logistics issues, these result in economic but potentially complicated supply chains  Plant design—this tends to be very traditional, with no real change in manufacturing technology for 50 years. There are significant opportunities for intensified, continuous processing.
  9. 9. Components of the pharmaceutical industry  primary manufacturing  secondary manufacturing  market warehouses/distribution centres  wholesalers; and  retailers/hospitals.
  10. 10. Manufacturing strategies adopted  Standardization of manufacturing processes  Metrics  Product process ―toolkits‖  Managing network assets  Grouping plants with standard equipment and processes geared to specific product types (e.g., dry products, freeze-dried, parenteral)  Redundant facilities (security, shifting of work between plants)  Improved demand forecasting  Global demand management center  Centralized ownership of all forecasting tools and databases  Judicious use of contract manufacturing (e.g., packaging)  Joint planning between product launch team and SCM team at least 1 year before NDA submission to FDA  Cross-functional development, marketing, clinical, SCM and regulatory teams for each product
  11. 11. The Current Supply Chain: US  Five large drug wholesalers (―Big 5‖) dominate the business  Many smaller wholesalers – partial product lines, regional players  More than 6,500 licensed wholesalers in the U.S.  Stock small target list of medications provided to a limited customer set  Secondary wholesalers  Sell to other wholesalers  Specialize in discounted products
  12. 12. Significant aspects of logistics in pharma industry  Logistics in pharma industry is very critical for providing the right medicine to the right patient at the right time, place and dosage and most importantly at the right price.  Since business is highly competitive today, success largely depends upon the efficiency of supply chain.  Supply chain is very critical as it maintains the complex network relationship between the organisations  inventory control plays a significant role in pharma value chain as lots of inventory exists in the supply chain.
  13. 13. Advantages  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
  14. 14. Issues & Challenges  Managing perishable products  Degradation of medicines as they move along the supply chain which results in allowing substandard products to be dispensed  Maintaining temperature control  More focus is give on R&D  No control once pharmaceuticals are docked to wholesalers  Shipping of expiry products
  15. 15. Issues & Challenges  Crisis Management  In case of epidemic break out, global demand for certain medicines overshoots the demand suddenly  Product withdrawal during sales due to side effects and expiry
  16. 16. Issues & Challenges  Little Incentive for Reducing Inventory - Ethical requirement of providing medicines - Out of stock situations are unacceptable - Patent Lifespan is low - Exceptionally long cycle times,huge inventory  Counterfeit Drugs & Security - High price of drugs worldwide - Easy to fake prescription drug labeling
  17. 17. Issues & Challenges  Out-dated Manufacturing Sites - Reluctant Govt bodies to approve any changes fearing product quality  Parallel Trade - Cross trading across borders - Black market transactions-developing nations - No track of drugs coming in and going out
  18. 18. Issues & Challenges  Controlling wide supply chain with huge stock keeping units becomes very difficult  Training and Education cost to the stakeholders is high  Integration of domestic and international business Eg: Nicholas Piramal India Ltd  Bringing a consensus manufacturing, sales marketing and distribution department to agree on a forecast
  19. 19. Conclusion  Logistics has emerged as an important element in the pharmaceutical industry as it becomes greater part of total costs  Value chain perspective of managing process innovation through capacity and production planning is equally important  Emerging technologies like RFID can mitigate many of these issues
  20. 20. Source - End-User Safety Considerations 20  Foremost of all the considerations in the pharma supply chain  Are the materials provided by our suppliers safe?  Are the products manufactured by our company safe?  Are all the products being manufactured reaching the distributors?  Are any of our products being adulterated or counterfeited?  The supply chain begins with the material supplied for product manufacture  Key ingredients need to be covered by Supply Agreements  Price, Source, Quantity, Quality, Delivery  Quality Agreements  Defined Specification Control, Change Control, Complain Resolution  Pre-purchase Usability Tests  Toxicity Requirements  Know where starter materials are manufactured  Know who tests it and how Define the Material Qualify the Material Approved Vendor List Qualify the Vendor Monitor the Vendor MajorProblems? DelisttheVendor AudittheSupplyChain Source Make Deliver Buy  Foremost of all the considerations in the pharma supply chain  Are the materials provided by our suppliers safe?  Are the products manufactured by our company safe?  Are all the products being manufactured reaching the distributors?  Are any of our products being adulterated or counterfeited?  The supply chain begins with the material supplied for product manufacture  Key ingredients need to be covered by Supply Agreements  Price, Source, Quantity, Quality, Delivery  Quality Agreements  Defined Specification Control, Change Control, Complain Resolution  Pre-purchase Usability Tests  Toxicity Requirements  Know where starter materials are manufactured  Know who tests it and how
  21. 21. Source - Supplier Materials 21  Biologic suppliers  Chemicals  Farm products (plants, eggs, animals, animal by-products)  Laboratory animals  Growth media, cell cultures  Pathogens  Proteins  Test organisms  Non-biologic suppliers  Equipment  Computers, software  Databases (e.g., target molecules, DNA sequences)  Clinical trial supplies  Clinical trial subject population information What materials/resources do pharmaceutical suppliers provide? Source Make Deliver Buy
  22. 22. Source - Supplier Strategies 22  Single source materials  Reduced supplier management issues  Facilitates relationship-building  Risk of supply issues in the event of  Supplier raw materials disruption  Supplier production issues  Supplier delivery issues  Higher supplier power (Porter)  Multi-source materials  Improved pricing and competition  Minimizes risk of supplier issues  Higher vendor management costs Source Make Deliver Buy
  23. 23. Make – Clinical Trial SCM 23  Requirement to manage the supplies involved in supporting clinical trials  Trial medications/‖drug kits‖  Multiple locations  Multiple investigators  Data collection/reporting devices (e.g., PDA‘s, cell phones, remote sensors)  Need to coordinate delivery of supplies to sites that are actively recruiting and enrolling patients  Flexibility  Speed of delivery  Consideration of special packaging and handling requirements (e.g., cold shipping)  Clinical supply teams typically use the performance of older trials to understand how much material is required in a new study and to determine their supply chain requirements  Variability in the number of patients enrolled, number of investigators, geographic distribution of trials will create larger variability in inventory and distribution of drug kits Source Make Deliver Buy
  24. 24. Make – Clinical Trial SCM Important Considerations 24  Drug kit pack types  How many different types of drug kits are needed?  Supply logistics  Local depots vs. centralized supply  Need for import licenses for specific countries can delay shipments from central depots to local depots  Subject enrollment  Some study centers may need to recruit patients very quickly and begin trials within a day or a week while others may require months  Medication management  Randomization of medication administration may trigger resupply at variable intervals, requiring safety stock  Monte-Carlo simulation being used to optimize supply chain for large (1,000 patient) studies Source Make Deliver Buy
  25. 25. Make - Manufacturing (Commercialization) SCM Strategies 25  Standardization of manufacturing processes  Terminology  Metrics  Product process ―toolkits‖  Managing network assets  Grouping plants with standard equipment and processes geared to specific product types (e.g., dry products, freeze-dried, parenteral)  Redundant facilities (security, shifting of work between plants)  Improved demand forecasting  Global demand management center  Centralized ownership of all forecasting tools and databases  Use of ERP web-enabled global planning capabilities  Judicious use of contract manufacturing (e.g., packaging)  Joint planning between product launch team and SCM team at least 1 year before NDA submission to FDA  Cross-functional development, marketing, clinical, SCM and regulatory teams for each product Source Make Deliver Buy
  26. 26. Distribute – The Current Supply Chain 26  Five large drug wholesalers (―Big 5‖) dominate the business  McKesson  Bergen-Brunswig  Cardinal  AmeriSource  Bindley-Western  90% of the market  Many smaller wholesalers – partial product lines, regional players  More than 6,500 licensed wholesalers in the U.S.  Stock small target list of medications provided to a limited customer set  Secondary wholesalers  Sell to other wholesalers  Specialize in discounted products Source Make Deliver Buy
  27. 27. Distribute – The Current Supply Chain Models 27  Three principal models of distributing drugs today Source Make Deliver Buy Model 1 Model 2 Model 3 Manufacturer Manufacturer Manufacturer Retailer Retailer Retailer Repackager Wholesaler Wholesaler Wholesaler Repackager Other Sources of Drugs (foreign, private mfrs) “Secondary Market” – Major source of counterfeit drugs
  28. 28. Distribute – The Drug Counterfeiting Problem 28  A complex, organized crime activity with multiple distributed players – secondary wholesalers a principal mechanism  The World Health Organization estimates that 5-10% of all pharmaceuticals are counterfeit  35% in Third-World countries  U.S. Customs and Canadian Border Patrol inspected 1,153 shipments of drugs into the U.S.  88% contained unapproved, counterfeit or harmful goods  China is considered by U.S. Customs to be the worst offender in exporting counterfeits  More than 200,000 bottles of counterfeit Lipitor have been found in the U.S. in the past 3 years  The total economic impact is estimated at $1 billion - $12 billion  Low risk of being caught or punished Source Make Deliver Buy Source: FDA Consumer Magazine, March-April 2005
  29. 29. Distribute – Types of Counterfeit Drugs 29  Identical copies  Least common  Made with same ingredients, formulas and packaging but not by the same manufacturer  Look-alikes:  High-quality packaging and labeling; very convincing appearance  Little or no active ingredients  Rejects:  Drugs rejected for quality reasons by the manufacturer  Re-labels:  Authentic drugs that have passed their expiration dates  Distributed by foreign sources Source Make Deliver Buy
  30. 30. Distribute – Supply Chain Security 30  FDA Counterfeit Drug Task Force created July, 2003  "FDA will not rest until we have strong protections in each link of the drug supply chain ... ." Mark McClellan, Former FDA Commissioner  Increased number of counterfeit drug investigations  Average of 5/year through late 1990‘s  Now averaging 20/year  Most recent cases involved fake Lipitor and Procrit  Recent support for new technologies to ensure drug ―pedigrees‖  RFID tagging of all prescription and OTC drug items by 2007  Authentication technologies (color-shifting inks, invisible bar codes  Tougher criminal penalties  10 years in prison for counterfeiting the drug label  3 years in prison for counterfeiting the drug  Increased demands on pharma companies for scrutiny of business partners Source Make Deliver Buy Source: FDA Report, ―Combating Counterfeit Drugs‖, February 18, 2004
  31. 31. Distribute – Pharmaceutical Pedigree 31  Pedigrees track product flow from regulated entity to regulated entity  Major concerns are how (electronic or otherwise) and cost Source Make Deliver Buy Source: FDA Report, ―Combating Counterfeit Drugs‖, February 18, 2004 Pharmaceutical Manufacturer Distributors Providers 1,500 (Top 30 = 80%) 100 (Top 3 = 85%) 100,000+ 80% 20% 2-3% Simplified US Pharmaceutical Supply Chain
  32. 32. Distribute – Pharmaceutical Pedigree 32  Some states are not waiting for a national solution  Florida has enacted a Pharmaceutical ―Pedigree Papers‖ law that goes into full effect in 2006  A paper pedigree must be maintained through the entire supply chain back to the manufacturer  Eleven states are using the Florida statute as the template for proposed legislation  Required information includes: product identity, lot number, quantity and distribution or pharmacy licensure for each change of possession  Estimates on the distribution side alone indicate that pick efficiency will be reduced by 85% Source Make Deliver Buy Source: FDA Report, ―Combating Counterfeit Drugs‖, February 18, 2004 A paper solution will be very costly to the industry
  33. 33. Distribute – Product Diversion 33  The diversion of licit drugs for illicit purposes  99% price differential between price charged by manufacturer to wholesaler and price charged to the retailers  Prescription drugs account for 30% of the U.S drug abuse problem – 6.2 million people over 12 years of age (2002)  Common methods of diversion  Theft of drugs from the manufacturing plant  Theft of drugs in transit from plants to distributors  Theft of drugs from distributors warehouses  Call-ins of fake prescriptions to pharmacies  Forged prescriptions, ―doctor shopping‖  Health care professionals (doctors, nurses, hospitals, pharmacists)  Most commonly diverted products  Vicodin, Lortab, Lorcet, Norco, Tylenol #3, Diazepam, Xanax, Stadol (NS), Valium, Phenergan with codein, Tussionex, OxyContin, Ultram, Ultracet, Soma Source Make Deliver Buy Source: Task Force on Drug Diversion Through Institutional Outlets, Council of State Governments
  34. 34. Distribute – Product Diversion 34 Source Make Deliver Buy Source: National Drug Intelligence Center Number of emergency-room treatments for opiates other than heroin
  35. 35. Distribute – Product Diversion 35 Source Make Deliver Buy Source: National Drug Intelligence Center Thefts of pharmaceuticals from pharmacies, manufacturers, distributors, manufacturers and importers/exporters in dosage units; 2000 - 2003 Drug 2000 2001 2002 2003 Codeine 569,425 1,223,205 596,972 622,132 Dilaudid 37,531 22,647 23,072 41,668 Lorcet 100,548 540,997 126,451 360,115 Lortab 686,197 451,091 340,325 738,584 OxyContin 260,688 519,597 587,168 464,312 Percocet 421,063 127,525 193,085 278,581 Percodan 14,646 12,704 9,151 34,102 Ritalin 117,408 123,720 74,541 67,751 Valium 171,883 176,280 145,070 146,683 Total 2,379,389 3,197,766 2,095,835 2,753,928
  36. 36. Distribute – Institutional Diversion 36  Manufacturers are not required to, and often do not, verify that a pharmacy is actually servicing the population they claim to be servicing in order to receive a discount  ―Closed door‖ pharmacies (since they do not service walk-in patients), resell discounted pharmaceuticals at a significant profit to secondary source wholesalers who resell them at a significant profit to other secondary source wholesalers, or even to primary wholesalers, who purchase them for less than they can purchase the products from the manufacturers  Experts have estimated that between 50% and 80% of ―closed door pharmacies‖ are participating in these diversion schemes  Inconsistent state laws prohibiting this practice, and Federal regulations have a loophole that defines ―medical entity‖ in ways that allow this  Federal requirement that a ―drug pedigree‖ be established and RFID may address much of this form of diversion along with strengthened Federal and state laws limiting resale of products by closed-door pharmacies Source Make Deliver Buy Source: Task Force on Drug Diversion Through Institutional Outlets
  37. 37. Distribute – Addressing Diversion 37  DEA‘s Automated Reports and Consolidated Order System (ARCOS)  Requires manufacturers to track specific drugs from plant to distributor and to ultimate end-user  DEA analyzes data and provides it to state agencies at no cost  Looks for doctors and pharmacists who receive unusually large quantities of certain drugs  Controlled Substances Act  Requires any medical professional, manufacturer or distributor who works with any of the substances listed by the DEA to register with them  Five schedules (I – V) of substances  DEA authorized to prevent diversion of drugs identified under schedules II through V  National All-Schedules Prescription Electronic Reporting (NASPER)  Proposed national database of all patients consistent with HIPPA  Practioners can access for all patients  National monitoring of all Schedule II-IV drugs Source Make Deliver Buy
  38. 38. Distribute – DEA Drug Schedules 38 Source Make Deliver Buy
  39. 39. Distribute – Continuous Replenishment 39  What is it?  Automated replenishment of pharmaceuticals driven by utilization  Just-in-time inventory  An end-to-end automated process for pharmaceutical procurement  What‘s so different about distribution to pharmacies?  Pharmaceutical products are dynamic (contract pricing, brand/generic, package size)  Product is used in a different unit of measure than acquired (unlike POS)  Many products are interchangeable  Product availability changes constantly Source Make Deliver Buy Source: Cardinal Health
  40. 40. Distribute – Continuous Replenishment 40  Distributors are integral to this SCM concept:  They perform order fulfillment  Five core components  Site-level perpetual inventory system  Automated inventory replenishment engine  Store level inventory management and reporting  Central office inventory management and reporting  Dispensing transaction Interface (non-HIPAA) Source Make Deliver Buy Source: Cardinal Health Rx Data Summary Auto Replenishment Engine Product Sales History Store Perpetual Inventory Communications Interface Pharmacy Mgmt & Reporting Central Mgmt & Reporting Distributor DC Orders Pharmacy CIM Shipments
  41. 41. Buy – The Retailers 41  Pharmacy Group Purchasing Organizations (GPOs)  Alliances of pharmacies, hospitals and other healthcare systems  Leverage buying power to obtain manufacturer discounts  Often turn to secondary distribution channels when manufacturers or major distributors cannot supply critical drugs when needed  Drugs often stockpiled by secondary distributors for economic reasons  Drug markups can be 500 – 1,000% during shortages (e.g., a vial of flu vaccine purchased by a wholesaler for $23.65 was resold to an end-user for $147 in 2003)  Temperature-sensitive products, when diverted, are often not kept at the appropriate temperatures  Retailers attribute 48 percent of pharmaceutical inventory loss to employee theft  Emerging requirements for secondary distributors to provide a drug pedigree that can be tracked back to the original source (manufacturer)  Clear ―chain of custody‖  Cost of maintaining custodial information will fall on manufacturers Source Make Deliver Buy
  42. 42. What the Pharmaceutical Industry Can Teach Us about Supply Chain Security Best Practices  Over the last few decades, increasing globalization and supply chain complexity have posed risks to pharmaceutical safety, ultimately impacting businesses and, most importantly, patients  Today, materials are procured from multiple countries, manufactured somewhere else, potentially packaged in yet another country and distributed and sold globally  To successfully protect against these risks, proactive supply chain security must deliver actionable intelligence to mitigate those risks  Once implemented, this decision-based approach, utilizing information delivered in real time, allows for efficient business practices that not only protect a brand but also the many partners and people connected to that brand.  The lessons learned in both identifying risks and improving pharmaceutical supply chain security can be applied as best practices for a variety of industries.
  43. 43. Key Trends Driving the Need for Supply Chain Security  83% of healthcare companies surveyed rank tapping into new global markets as a top strategy for the next three to five years. Today, up to 40% of the drugs Americans take are manufactured outside the U.S., as well as up to 80% of the active pharmaceutical ingredients in those drugs.  This rapid expansion of the global market opens companies up to an exponential increase in the number of vulnerability points, coupled with decreased visibility to them, due to insufficient supply chain information  At any stage in this long, multi-faceted journey from raw source materials to finished products to consumers, products can be contaminated from four primary risks:  Intentional adulteration, due to contamination in the manufacturing, storage, or distribution process, or from ingredient substitution for economic gain, is more prevalent with global supply chains.  Cargo theft is up due to the sluggish economy and security measures that rely too heavily on expecting people to consistently follow prescribed procedures. In the U.S. alone, cargo theft produces an annual loss of $35 billion and in 2011; the average loss per incident in pharmaceuticals due to cargo theft was $585,000.  Counterfeiting, which is fraudulently mislabeling a product in identity or source, is another significant risk to supply chain security, as well as diversion of products from the intended authorized market to another.
  44. 44. Risks Have Serious Consequences  In pharmaceuticals, the most serious consequences of these four primary risks are those that impact patient safety.  Adverse patient reactions can range from minor to as severe as death. Other consequences include drug recalls, and – because drugs are tracked by lot and not units – stolen drugs can compromise volumes that are multiples of the actual drugs stolen.  In general, businesses can also incur daunting costs, such as revenue loss, recall costs, legal costs for damage to health or life and regulatory fines.  Ultimately, complications in any supply chain impact a brand‘s reputation and require time and investment to rebuild trust among customers, partners and patients.  So while the opportunity to tap into the global market can generate greater revenue and efficiency, it‘s important to be mindful of these risks so that appropriate security measures can be implemented to protect a business‘ supply chain.
  45. 45. Move from a Reactive to a Proactive Security Program  An organization can protect against these risks by implementing an end-to-end proactive pharmaceutical supply chain security program that takes advantage of key advances in technology including cloud-based services, location sensors and real-time intelligent monitoring.  For example, cloud-based services enable remote video audits to ensure compliance with operational and regulatory standards.  Advanced truck security and control solutions with location sensors combined with an onboard system can detect trucks that are off route and remotely shut down a truck to prevent cargo theft.  There are also Physical Security Information Management solutions that automatically link disparate monitoring devices like video, access control and equipment sensors to minimize the risk of manual oversight and allows for real-time alerting.  This type of technology correlates relevant information and incidents from multiple systems and can apply corporate policy to enforce consistent actions across the enterprise.
  46. 46. Value Proposition of Proactive Supply Chain Security  In addition to protecting people and assets, a proactive supply chain security program provides the following benefits:  Product traceability  Early detection of derailed shipments  Compliance with corporate and regulatory group standards  Beyond these tactical rewards, proactive supply chain security programs can help a business retain its customers and partners and better protect its reputation. And in the case of pharmaceuticals, it can save lives.
  47. 47. What’s Next?  Industry supply chains beyond pharmaceuticals will continue to face challenges with cargo theft, government regulations and import/export security as market demands evolve.  To stay ahead of these threats, businesses must stay in tune with emerging technology, consumer and market trends, collaborating with partners and peers and engaging in industry-wide associations to share best practices, lessons learned and new ideas about the future of supply chain security.  Above all, organizations must utilize this developing technology to arm their businesses against increasingly sophisticated criminals.
  48. 48. Case Study : Eli Lilly and Co.  INTODUCTION:  Eli Lilly and Company (Lilly) founded on May 10, 1876 is best known for its widely popular antidepressants Prozac and Serafem  Invest heavily in research and development to bring innovative drugs to the market for areas with unmet market needs, such as cancer, diabetes, pain, cardiovascular disorders, psychological problems  Lilly's product portfolio consists mainly of patented drugs, commonly known as Branded drugs  Manufacturing Infrastructure:
  49. 49. Eli Lilly SCM Function  The supply chain function falls under the purview of the manufacturing division.  Key Manufacturing Strategy and Supply Chain Organizational areas are as follows:  Strategy  Strategic Facilities Planning and Sourcing (SFP)  Supply Chain Management (SCM)  Demand Management Center (DMC)  Global Logistics  Global Procurement  Operational Standards for Supply Chain Excellence auditing (OSSCE)
  50. 50. Operational Objectives and Supply Chain Network  The main objective of the supply chain management  Balance customer service level, cost, flexibility, and risk management to fit the marketplace needs of each product by 'pulling the right levers.‗  A distinguishing characteristic of the pharmaceutical supply chains is that its efficiency and performance are constrained by the design decisions taken a few years before the actual launch of the drug.
  51. 51. Supply Chain Design  The key objective of the supply chain design phase is to manage the inherent risks by designing robust supply chains.  The biggest challenge at this stage arises due to the uncertainty resulting from a long horizon of around 4 years.  Deciding about the capacity requirements, additions, and sourcing poses a significant challenge when the probability of success of a drug is only 20% -40%.  Lilly uses an effective approach to address this problem in an objective manner by following a 3 step process:  Step 1 - Capacity Strategy and Sourcing - Global Capacity with Contingency  Step 2 - Sourcing Optimization using quantitative analysis techniques  Step 3 - Final decision: Can revenue be increased by using TPO?
  52. 52. Supply Chain Design  Step 1: Capacity Strategy and Sourcing - Global Capacity with Contingency  The key idea is to find a portfolio of potential drugs that can be pooled together to develop capacity targets.
  53. 53. Supply Chain Design  Step 2: Sourcing optimization using quantitative analysis techniques:  Goal: Maximize the value of manufacturing by selecting the best product mix for Lilly Networks
  54. 54. Supply Chain Design  Step 3: Final decision: Can revenue be increased by using TPO?  Excellent pharmaceutical supply chain design implies optimized capital investment and maximized revenue over the life of the product.  Keeping this in mind, the viability of using a Third Party Operator (TPO) is also considered before finalizing the capacity plan.  The steps involved in this process are:  manage capacity in standard technology networks  source new products from robust and flexible sites  utilize reliable TPOs for late lifecycle products
  55. 55. Supply Chain Operation  The key objectives of this phase are to maintain 100% customer service level and profit maximization.  The main processes involved in this phase are shown:
  56. 56. Demand Management  Demand Management: Supply chain operations are anchored by sales and marketing commitment to forecast accuracy.  Mission: To ensure a complete and accurate statement of demand exists for all manufacturing plants.
  57. 57. Inventory Management  Inventory Management:  Pharmaceutical financial realities demand a revenue based approached to API and finished stock inventories.  Inventory targets developed from a supply chain perspective establish the foundation for an operations plan that ensures 99% CSL in any given circumstances
  58. 58. Supply Chain Planning  Supply Chain Planning: Lilly runs several detailed multi layered centralized planning processes to plan supply in order to match the forecasted demand.  Planning Processes: In the first quarter of each year a Long-range business plan covering the next five years is generated.  Plan is based on the demand picture for new and existing products, the supply picture, the capacity utilization targets for new and existing facilities, and financial plans including expense budget and variance plans.  A formal long-range capacity analysis is also run at this time, which is used as the basis for a 5 year capital investment plan.  A formal inventory plan is also established at this time based on the Global S&OP (GS&OP) analysis.  The various planning processes run in parallel
  59. 59. Supply Chain Planning  Input data to this planning process include  sales data in dollars and units,  manufacturing finance figures (expenses, depreciation),  COGS and variance,  capital investment, production quantities  Inventory in dollar and unit  In addition to the long rage plan, a central plan is also generated for each quarter during GS&OP.  The horizon for this plan is typically from 6 months to 30 months, leaving each site to do the detailed scheduling inside of 6 months.  Inventory plans are developed one product at a time and the site operational plans are built for many products
  60. 60. Supply Chain Planning

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