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Majority of pharmaceutical companies are persisting with decade old processes and routines.\u00a0 They have transactional relationships with suppliers, lack of concerted efforts to progress ahead, and no vision to reap productivity rewards.\u00a0 The reasons for continuing with these traditional practices include tax regimes, regulatory hurdles, and stable revenues from customers dependent on existing industry offerings.<\/p>\n
Disruption\u2014spurred by technological Innovation<\/a>, fluctuating customer demand patterns, and more agile and creative competitors\u2014has forced the pharmaceutical sector to think of ways to face these challenges, survive, and thrive. \u00a0One of the strategic response to this competitive disruption\u2014by leading manufacturers\u2014is to reexamine their manufacturing operations, embracing agile principles, reducing costs, revolutionizing procurement and distribution functions, and striving to achieve Operational Excellence<\/a>.\u00a0 Above all, they view their supply chain not as a cost center, but as a source of Competitive Advantage<\/a>.<\/p>\n The increasing influence of generic drugs is another challenge for large multinational pharmaceuticals.\u00a0 In the past, multinational companies (MNCs) dominated the market owing to possessing a number of high-market drugs protected under patents.\u00a0 Patent protection afforded them the leverage to set high prices on each product.\u00a0 The scenario is fast changing.\u00a0 Expiry of high-market drugs patents is creating a huge opening for generic competitors and the space is widening compared to the past.<\/p>\n In the past, pharma manufacturers were able to counter the threat to generic competitors by developing new drugs.\u00a0 However, this is becoming difficult and the new drugs pipeline is shrinking with time.\u00a0 R&D expenditure has continuously gone up, however, drug approval from the authorities has not kept paced with it.\u00a0 It has rather declined, straining the MNCs further.<\/p>\n Other disruptive factors include newer distribution methods, public health plans favoring generic drugs over proprietary ones due to cost effectiveness, the newer internet \/ mail delivery options displacing traditional pharmacy dispensing options.\u00a0 Pharmacy chains\u2014e.g. Walgreens\u2014have given a leverage to the retailers to negotiate reduction in medicine prices where again generics have an edge over MNCs.<\/p>\n Moreover, the trend of drugs purchased through a formal tender process is increasingly gaining acceptance, adding to the difficulties of large pharma manufacturers. \u00a0Additionally, strict regulations are minimizing the cost benefits that MNCs traditionally enjoyed in the past.<\/p>\n All these factors have forced the pharma companies to reorganize their Supply Chains in a more flexible manner to manage complexities, bring in efficiency, and contain costs to compete in off-patent segment with generics.<\/p>\n Reorganization of a conventional pharmaceutical Supply Chain<\/a> into an Agile, flexible, and inexpensive Supply Chain warrants developing Operational Excellence and Cost Reduction competencies.\u00a0 This necessitates 5 strategic steps (phases):<\/p>\n Let\u2019s discuss these steps in detail.<\/p>\n Large pharma MNCs typically maintain the Supply Chain of all of their drugs with a single strategy of retaining high inventory and service levels.\u00a0 Such a strategy can only work for products having a high profit margin, in a static environment.\u00a0 It is not suitable for low-margin products, contrasting environments, and does not take into account fluctuations in demand patterns.\u00a0 An appropriate approach is to implement a multiple Supply Chains model based on individual products and markets.<\/p>\n The 2nd<\/sup> step in Pharma Supply Chain Reinvention involves quick distribution of different versions of products to markets based on demand. For low-margin products with high demand volatility, the Supply Chain Management<\/a> Strategy should be to employ Pack-to-Order system.\u00a0 The Pack-to-Order approach involves developing a version of a product that could be timely dispatched to several markets of varying demand across the globe. \u00a0This approach coupled with Postponement Strategy\u2014where products are packed to order during later stages of production based on regional demand\u2014assists in trimming down the inventory, reducing complicatedness, and enhancing Supply Chain nimbleness to demand volatility.<\/p>\n Interested in learning more about how to reinvent your Pharmaceutical Supply Chain?\u00a0 You\u00a0can download\u00a0an editable PowerPoint on Pharmaceutical Supply Chain Reinvention<\/strong>\u00a0here\u00a0<\/a>on the\u00a0Flevy documents marketplace<\/a>.<\/p>\n You can download in-depth presentations on this and hundreds of similar business frameworks from the\u00a0FlevyPro Library<\/a>.\u00a0\u00a0FlevyPro<\/a>\u00a0is trusted and utilized by 1000s of management consultants and corporate executives.\u00a0 Here\u2019s what some have to say:<\/p>\n \u201cMy FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market.\u00a0 They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.\u00a0 I strongly recommend FlevyPro to any consultant serious about success.\u201d<\/p>\n \u2013 Bill Branson, Founder at Strategic Business Architects<\/p><\/blockquote>\n \u201cAs a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.\u00a0 For us, it is an invaluable resource to increase our impact and value.\u201d<\/p>\n \u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p><\/blockquote>\n \u201cFlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.\u00a0 In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!\u00a0 The quality of the decks available allows me to punch way above my weight \u2013 it\u2019s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.\u201d<\/p>\n \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":" Majority of pharmaceutical companies are persisting with decade old processes and routines.\u00a0 They have transactional relationships with suppliers, lack of concerted efforts to progress ahead, and no vision to reap productivity rewards.\u00a0 The reasons for continuing with these traditional practices include tax regimes, regulatory hurdles, and stable revenues from customers dependent on existing industry offerings.… Pharmaceutical Supply Chain Reinvention<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":10304,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[82],"tags":[222,14,2816,1015,1080,2,30,2814,2817,2819,2813,802,2299,22,2818,2815,2008,500],"class_list":["post-10297","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-operations","tag-agile","tag-cost-reduction","tag-demand","tag-disruption","tag-distribution","tag-innovation","tag-manufacturing","tag-mncs","tag-operational-effectiveness","tag-packaging","tag-pharmaceutical-industry","tag-procurement","tag-product-design","tag-productivity","tag-rd","tag-regulatory-regime","tag-scm","tag-supply-chain-management"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/10297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=10297"}],"version-history":[{"count":5,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/10297\/revisions"}],"predecessor-version":[{"id":10307,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/10297\/revisions\/10307"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/10304"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=10297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=10297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=10297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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<\/a><\/p>\nStep 1 \u2013 Avoid a One-size-fits-all Approach to SCM<\/strong><\/h2>\n
Step 2 \u2013 Develop Agile Product Design and Packaging Capabilities <\/strong><\/h2>\n
Do You Find Value in This Framework?<\/h2>\n