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Pharmaceutical Supply Chain
This document summarizes a study on supply chain practices in the pharmaceutical industry. It finds that the pharmaceutical supply chain is very fragmented, complex, and global. It operates in a competitive environment while also needing to ensure high regulations for patient safety. An effective supply chain can reduce costs and increase efficiency. However, it also faces risks like counterfeiting and needs strong risk management practices. The document outlines Pfizer's successful risk management efforts and FoxMeyer Drug Company's risk management failure which led to bankruptcy. Overall, the pharmaceutical supply chain is highly complex and regulated, with high costs of success or failure.
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Pharmaceutical Supply Chain
- 1. PHARMACEUTICAL SUPPLY CHAIN A STUDYOF 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 CHAINAT 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 CHAINAT A GLANCE Components similar to other industries Requires FDA regulations/Test/Tracking European Example & Future progress
- 4. RISK MANAGEMENT Pharmaceutical SupplyChain 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 X √
- 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 fragmentedsystem 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
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