1. PHARMACEUTICAL
SUPPLY CHAIN
A STUDY OF SUPPLY CHAIN PRACTICE IN PHARMACEUTICAL INDUSTRY
DIVYA KUMAR, JIE ZHAN, GARY GARRETT,
MATTHEW KESNER, CHASEY TEZAK
SCM541 –LOGISTICS IN THE SUPPLY CHAIN
WP CAREY MBA –CLASS OF 2014, TEMPE CAMPUS
2. 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
3. PHARMACEUTICAL SUPPLY CHAIN AT A GLANCE
Components similar to other industries
Requires FDA regulations/Test/Tracking
European Example & Future progress
4. 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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5. RISK MANAGEMENT SUCCESS: PFIZER INC.
• World largest research based
Pharmaceutical (Fortune 500:2012)
• > 95 Plants worldwide
• > 300 External suppliers/contract Mfg.
• > 175 Distribution centers
• > 35,000 SKUs
•Pfizer‘s Effort to Risk Management:
> 2,109 Global logistics lanes
• Cargo Theft
•• >Counterfeit Drug
45500 Shipments
•• >Economically motivated lines
17394 Freight contract
adulteration
• Illegal diversion
6. 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
7. 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
