This document discusses issues in the pharmaceutical supply chain. It outlines the life cycle of a pharmaceutical product from research to commercial manufacturing. It then describes the various components in the manufacturing and distribution chain from primary manufacturing to retailers. It notes challenges like the bullwhip effect, need to hold large active ingredient stocks, and lack of visibility beyond the first customer. Finally, it proposes steps to improve supply chain performance through increased visibility, reducing working capital, and ensuring efficiencies benefit all parties.

1. Issues in Pharmaceutical Supply
Chain Management

2. The Pharmaceutical Industry
• Life Cycle of a Pharmaceutical product
– Research or discovery phase
– Testing for safety and efficacy
– Registration with Food & Drug Association and Medical Control
Council
– Commercial manufacturing/Development
• Components in manufacturing and distribution chain
–
–
–
–
–
Primary manufacturing (production of active ingredients)
Secondary manufacturing (final product in SKU form)
Market warehouses/distribution centers
Wholesalers
Retailers/hospitals.

3. Pharmaceutical Supply Chain
Manufacturer
Packer
Carrying and
Forwarding Agent
Primary Selling
Stockist
Secondary Selling
Chemist /
Retailer
Tertiary Selling
Patient

4. Pharmaceutical Supply Chain
Introduction

5. Business process of the companies
Demand Management
In each geographical region, forward forecasts (e.g. 3–24 months) are developed, based on historical
data, market intelligence, etc.
Inventory Management & distribution requirements planning
The demands determined are aggregated and imposed on the appropriate warehouse/distribution center.
The impact on finished goods inventory is assessed
and if necessary, orders are placed on upstream secondary manufacturing sites.
Secondary production planning and scheduling
The orders placed on the secondary sites are planned (typically using MRP-II type tools) and then
scheduled in detail.
Primary manufacturing campaign planning
The demands placed by secondary manufacturing are satisfied by careful
management of inventory and production planning

6. Operational Issues in Pharma Supply Chain
•
•
•
•
•
•
•
•
Customer facing end -> PULL (driven by orders)
Primary Manufacturing process -> PUSH (driven by long term and medium term forecasts)
Bullwhip effect is felt at primary manufacturing site
Large stocks of AI (Active ingredient) must be held to ensure good service levels
Difficult to exploit short term opportunities e.g. shortage of supply of a competitor’s
product, tenders for national supplies
Large scale and geographical span of supply chain
Different nodes are not really aware of upstream nodes’ resource constraints
Orders are filled in order of receipts rather than on an economic basis
Typical performance of this industry
•
•
•
•
•
Stock level in whole chain 30-90% of annual demand in quantity
Stock turns (Annual sales/average stocks) are between 1 to 8
Supply chain cycle time 1000 to 8000 hours
Value added time is around 0.3 to 5 %
Material Efficiencies are 1-10 %

7. Study by OPPI – EY (2012)
•
•
Effectiveness of the post-CFA supply chain in making products available to the end
consumer, which manifests in loss of sales over the retail counter
Efficiency of the supply chain in terms of the cost of making products available to the end
consumer, which manifests itself in excess inventory levels in the channel and a month-end
“skew” in stockists’ inventories

8. Lack of Visibility of post CFA supply chain

9. Steps for improvement
•
key levers to address the root causes are –
i. Increase visibility of the channel
ii. Release working capital at the stockist
iii. Ensure generated efficiencies are passed down the channel up to retailers

10. Conclusion
 The pharmaceutical supply chain was used to be seen as a tool to supply products
to market in an effective way, where the emphasis was on security of supply.
 Recent changes in the operating environment mean that companies are revisiting
the components of their supply chains and identifying ways of extracting additional
benefits from them.
 Not only physical processes of conversion and distribution of materials, but the
“value-chain” physical processes of conversion and distribution of materials is
important perspective of managing the innovation and development processes
through to capacity and production planning.
 Logistics has emerged as an important element in the pharmaceutical industry as it
becomes a greater percentage of total costs
 Unlike other sectors, value-chain perspective of managing process innovation
through capacity and production planning is equally important
 Emerging technologies like RFID can mitigate many of these logistics issues

11. References
• Paper: “Pharmaceutical supply chains: key issues and
strategies
for
optimisation”;
Author:
Nilay
Shah;
source: ScienceDirect.com
• Paper: “The Pharmaceutical Supply Chain: a Diagnosis of the
State-of-the-Art”; MIT; Author: Mahender Singh
• Paper: “Pharmaceutical supply Chain Risk management”
• OPPI-EY study “unlocking the potential of Pharma distribution
Channel”
http://www.ey.com/Publication/vwLUAssets/Unlocking_the_potential_of_the_pharma_distributi
on_channel/$FILE/OPPI-EY_Pharma_Report_2012.pdf

12. Give Feedback on this address:
Jayu8102rana@gmail.com