INVENTORYCompany usually has two kinds of inventories: raw material which they import from different countries and finished products. Following are the different types of finished products.Tablets Liquids/Syrups/O.R.S Injectable Creams/Ointment Abbott Company maintains a safety stock to cover a mismatch between demand and supply of 6 weeks in a form of MO and FO. The lead-time of material procurement from ship is approximately 75 days and by air is approximately 45days. FACILITYAbbott has two warehouses i.e. MO warehouse that is material order warehouse and the other is FO finished order warehouse. In material order warehouse, company use to put its raw material which it imports from different countries. Abbott Pakistan has 270 Stock keeping units, out of which 240 are Pharmacy products and 30 are Nutritional products.PRICINGSome of its product price is economical and rest has competitive pricing strategy but still it doesn’t endure quality for price, as its prime objective is to maintain the best quality.TRANSPORTATIONAbbott Pakistan uses different modes as their mean of transportation. Abbott has its own transportation truck, which it uses with in Karachi and near by areas with Abbott’s monogram which Abbott uses to deliver to different institutions and wholesalers. Abbott uses air transport as well as ship transport for the import of its raw material from different countries. Following is the transportation services hired by Abbott:Lahore Naulakkah TransportBashirSiddiqueTrasportFast Track Cargo ServiceLeopard Courier ServicesCourier Per emergencyProduction: refers to the capacity of a supply chain to make and store products.Key Production Decision “Responsiveness VS EfficiencyFactories and Facilities with “Excess” Or “Limited” capacities?Focuses on:Customer & market demandResource ManagementInternal sourcing (what and which plants)Outsourcing to capable suppliersCapacity Management
All the production at Abbot Pakistan is make to stock i.e. 99% of the production is based on push process while only 1 % of production is on pull process i.e. make to order.By using push process, company has more time to respond to customer demand and the company can use its cost efficient strategy because they have time to respond to customer. Basically when we analyze the supply chain on the basis of push/pull view we got to know that company only has pull process at the time of customer order and then the entire chain has push view because of having make to stock nature of the product in which procurement, manufacturing and distribution are based on push view where they stock materials on the basis of anticipation of demand.As the company has make to stock supply chain, they have a chance to reduce its cost by using economies of scale and as the medicine doesn’t have many variations and customer has to choose as per the prescription of the doctor which gives company a chance to handle its supply chain effectively by negotiating with different doctors by given them bonuses.
Supply Chain in Abbot
FINAL PROJECT PRESENTATION ABBOTT PAKISTAN SUBMITTED BY: Mubashir Ahmed
MARKET AND PRODUCT PROFILETARGET MARKET: Diabetic patient 220 million people Advances and Revolutionary technologies Treatment coronary artery disease (CAD) Heart disease Drug-eluting stent (DES) Designed to improve deliverability and access to long lesions in the artery
MARKET AND PRODUCT PROFILEMARKET SHARE: IMS report market share of Abbott is 5.2% All exchanges of Pakistan Achieve Class-A certification 370 pharmaceutical manufacturing in Pakistan Including 30 multinationals operating units Market Size PKR 80. 11 billionSALES TURNOVER: Sales increase more than 14% in 2010 Sales of the pharmaceutical products increased by 4%.
SUPPLY CHAIN STRUCTUREI CUSTOMERNFORM PA RT OI RETAILER/ WHOLESELLERO DN U DISTRIBUTOR CF TL WAREHOUSEO FW L MANUFACTURING O W WAREHOUSE TRANSPORTATION SUPPLIER MARKETING
SUPPLY CHAIN PROCESS Manufacturing Planning Production (Demand Generated) Material Planning QA Vendors (Quotations asked) Released by QA LC FO Warehouse Follow up ---import & dispatches Clearance Transit Time Central Depot’s Material in Warehouse Dispatches Wholesalers Material Available For Production Retailers Institutions
FORECASTING TECHNIQUE AND TOOLSQUANTITATIVE TECHNIQUE future demand is forecasted on the bases of historical patterns of demand. Marketing department uses ADS and provides two years aggregate demand forecast to the SC department.
ROLE OF AGGREGATE PLANNING Attempt of matching the supply of and demand for a product or service by determining the appropriate quantities and timing of inputs, transformation, and outputs. Considers few things at the time of planning such as past statistical figures like what they have achieved in the last 2-3 years.. It is not possible to make an ADS without considering the opinions of Abbott Pakistan’s 14 Product Managers who are responsible for projecting Aggregate demand for the next 24 month.
PRODUCTION STRATEGYLEVEL STRATEGY as it maintains stable machine capacity and workforce levels with a constant output rate Moreover it builds up its inventory based on forecasted demand.
ROLE OF MRPMPS Entire production of Abbott is based on MPS Master production scheduling is done on the based of forecast and some times abnormal demand as well.BILL OF MATERIAL Billof material is the list of quantities and components needed to make the product. It helps the company to manage its raw material issues effectively and efficiently on the basis of information provided by MPS. This requirement tells the company what is the quantity required according to the Master Production Schedule.
PROCUREMENT LEAD TIME Abbott has its lead time of procurement of material of approximately 45days by Air transport and approximately 75 days by ship transport which a company use to import from different countries.
ROLE OF CAPACITY PLANNING It is used to measure and manage the resource requirements and where appropriate, the work through put and queue levels. To manage the capacity control process Abbott Pakistan uses a system known as BPCS which stands for Business Process Control System. Once they got the ADS than they sub divide that plan into monthly basis and adjust the machines capacity according to it. The planned capacity utilization at Abbott is more than 90%.
INVENTORY MANAGEMENT TECHNIQUESDETERMINATION OF SAFETY STOCK: Safety stock is a buffer to meet some unanticipated increase in usage. Abbott maintains a safety stock of six week dependent and independent demand items in order to minimize the risk of shortage due to any uncertain demand.RE-ORDER POINT: When the inventory is depleted to lead time consumption, the order should be placed. In case of Abbott, Lead time of imported material is 45 to 75 days while local material is 7 to 30 days depending on the nature of the material.
A.B.C ANALYSIS: Abbott Pakistan classifies its materials according to the values or the cost of materials; basically they have allotted three grades or types to their materials: * Grade A (very costly materials, e.g. erythromycin) * Grade B (moderate cost, e.g. clathromycin) * Grade C (least cost, e.g. bubble gum and artificial flavors like mint)AGING SCHEDULE OF INVENTORY: This technique helps to classify the inventory according to the life of material. Abbott categorizes the inventory of a particular material/Finished product according to its expiry date.
LOT SIZING TECHNIQUES Abbott Pakistan uses POS (periods of supply) technique for its dependent and independent demand items. In POS technique, Lot size will be equal to the net requirements for a given number of periods (e.g. weeks) into the future. Abbott maintains six weeks stock in warehouses of dependent demand items and independent items which named as FO and MO respectively.
DISTRIBUTION OF PRODUCTS Outsource Depots in various cities 6% commission scenario for distributors Linking distributors to Abbott through satellite systems.
DISTRIBUTORS OF ABBOTT Premier Agency Muslimabad, Karachi. Babar Medicine, Lahore. Nadeem Traders, Peshawar. Baloch Enterprise, Multan. D.S Pharma, Rawalpindi.
SOURCINGGENERAL PURCHASE Includes the purchase of stationary, office equipment for the Office use, packaging material, transportation trucks for the delivery purpose and different other chemicals.
VENDOR SELECTION CRITERIA Bid sheet (low cost effective sheet )IT INCLUDES Vendor specification Testing method Signature of vendor MFG date expiry date/shelf life Stability data to support shelf life Vendor evaluation check list
Material safety data sheet (MSDS) Full range of raw material Vendors’ certificate of analysis Recommended storage condition Technical bulletin List of solvent if used & other residual levels Is your vendor already approved in other Abbott affiliate? TSE/BSE statement. Transmissible Spongiform Encephalopathy’s/Bovine Spongiform Encephalopathy Vendor capacity.
APPROVAL OF VENDORS Material Sample and vendor provides Certificate of Analysis & Form 7 Quality Assurance test in ABBOTT”s own laboratory Number is assigned with a Yellow Sticker Quality Assurance department do the Stability Testing Issues a Green Sticker Materials are sent for Batch Manufactured and then End Product is made
DIRECT PRODUCT RELATED PURCHASES: Direct product Related purchase includes raw material import from different countries.Abbott Pakistan import its raw material.Abbott classifies its products according to its costs. Grade A Very Costly Products Grade B Moderate Costs Products Grade C Least Cost Products
LOCAL SUPPLIERS & LEAD TIMES Designing: FP Plastics (Karachi, Korangi) Printing:(Karachi, Malir) Packaging: (Karachi, Korangi) Aluminum foils: (Karachi, Gulshan -e- Iqbal) Cartons:(Karachi,Dalmiya, Lalukhait, S.I.T.E Area) Dextrose: (Dextrose is a sterile solution injected intravenously) (Faisalabad) Chemicals: (Lahore)
SUPPLIERS OF IMPORTED MATERIALS Dye Red, UK Potassium chloride, Germany Sodium Citrate, Taiwan Sodium chloride, New Zealand Acid Citric, Austria Aluminum Seals and PV, Holland Artificial bubble gum, Holland Supplier for Sugar, Malaysia Sodium Sulphate, Germany
LEAD TIME FOR IMPORTED MATERIALS By sea it approximately takes 75 days By air it is approximately takes 45 days.CENTRALIZED PURCHASING Completely centralized Distribution is decentralized Quality of the raw materials and Cost
ROLE OF E-PROCUREMENT MRP II to effectively and efficiently handle the Material issues Based on the information’s provided by MPS Transactions are made electronically into Business Planning & Control System Changes are made in MRP if there is an abnormal demand
JIT / LEAN MANUFACTURINGJIT CONCEPT There is no concept of JITLEAN MANUFACTURING Production plan (based on MPS) MPS is made by the supply department which is forwarded to the MMD Arrange the raw material for the production department MMD is using MRP II
MRP II to effectively and efficiently handle the Material issues Based on the information’s provided by MPS Transactions are made electronically into Business Planning & Control System Changes are made in MRP if there is an abnormal demand. Plan is initially made during the plan stage Planning production Made on weekly bases as well as monthly bases depending upon the availability of the resources, which are required to make the required product.
PRODUCTION PLANNING Made on weekly bases as well as monthly bases depending upon the availability of the resources, which are required to make the required product. Then Sales & Operations meeting is held, which do two parties one from supply side and the other represent from demand side and production related decisions are made as per the plan.BUSINESS PLANNING AND CONTROL SYSTEM It monitors the status of manufacturing department Batch size produced No random manufacturing
DISTRIBUTION STRATEGY Since in majority of the cases drugs are not purchased by choice of the consumers- the distribution is to some extent selective. Most pharmaceuticals products require special storage conditions to be maintained at manufacturer’s warehouses, channels of distribution, and the point of sale. Many products need not supply at the pharmacies but to the hospitals only like cancer medications.
TRANSPORTATION NETWORK Lahore Naulakkah Transport Bashir Siddique Trasport Fast Track Cargo Service Leopard Courier Services Courier Per emergency They also have their own vans with Abbott monogram and they are generally used for distributing to local customers (distributors and institutions) within Karachi and nearby areas.