PHARMACEUTICAL SUPPLY CHAINA 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

PHARMACEUTICAL SUPPLY CHAIN AT A GLANCEIntroduction• 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

PHARMACEUTICAL SUPPLY CHAIN AT A GLANCE

Components similar to other industries

Requires FDA regulations/Test/Tracking European Example & Future progress

RISK MANAGEMENTPharmaceutical 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.)

√XRISK MANAGEMENT PROCESS

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

• > 2,109 Global logistics lanes

• > 45500 Shipments

• > 17394 Freight contract lines

Pfizer‘s Effort to Risk Management:• Cargo Theft• Counterfeit Drug• Economically motivated

adulteration• Illegal diversion

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

• But, R/3 could only process about 10,000 orders per night . • ERP/Management failure?• 3 warehouse closed, $34 million inventory lost

• 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)

• CEO resigned• Went bankrupt in 1996.

• Sold to McKesson for $80 million • Sued all 3 for $500 million each

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

THANKS

?QUESTIONS