NEED OF SUPPLY CHAIN MANAGEMENT AND ITS IMPORTANCE
IN MANUFACTURING UNIT – AN OVERVIEW
NAME:
SANTOSH PAL
ADMISSION NO.:
HPGD/AP16/3662
SPECIALIZATION NAME:
SUPPLY CHAIN MANAGEMENT
NAME OF THE INSTITUTE:
WELINGKAR INSTITUTE OF MANAGEMENT
DEVELOPMENT AND RESEARCH
YEAR OF SUBMISSION:
APRIL 2016
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ACKNOWLEDGEMENT
With immense pleasure I would like to present this report on “NEED OF SUPPLY CHAIN
MANAGEMENT AND ITS IMPORTANCE IN MANUFACTURING UNIT – AN
OVERVIEW”
I would like to thank Welingkar Institute of Management for providing me the opportunity
to present this report.
My special thanks to Mr.Kapil Chavan (Project Guide) for his invaluable guidance, cooperation and for taking time out his busy schedule to help me.
Acknowledgements are due to my family members, friends and all those people who have
helped me directly or indirectly in the successful completion of the project.
Santosh Pal
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INDEX
Sr. No.
1.
2.
3.
4
5.
6
7.
Contents
Introduction
Background
a) Company Profile
b) Organization Chart
Methodology
a) Need of Study
b) Objective of Study
c) Developments in supply chain
management
d) Supply chain management and
Efficient Customer Response
Supply Chain –Recommendations and
Useful Tips
Conclusion & Review of studies
Scope & Limitation of Study
bibliography
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Page
No.
5 - 16
17 - 21
22 -
34 - 57
58 – 60
60 - 61
62
INTRODUCTION –
Supply Chain Management is a combination of various activity within an organization which
starts from the procurement or sourcing of one item in shape of unfinished / semi-finished /
finished condition to the delivery at End user in terms of Semi-Finished or Finished condition
for the end user.
Supply Chain Management is working as a centralized department among the Sales/
Marketing,
Production,
Store,
Purchase/Material
management,
Logistics
and
Accounts/Finance.
Supply Chain Management constitutes the series of interdependent upstream, manufacturing
and downstream processes targeted at transforming raw materials into products to meet
customer demand.
In the backdrop of global markets, increased competition and extended Supply Chain
Managements, manufacturing firms are now confronting new challenges.
The need to eliminate waste, embrace new technologies, improve on supplier/ customer
relations, better manage inventory, comply with regulation, and be more cost efficient is
becoming more apparent in the quest to achieve operational excellence. A well-organized
supply chain management system involves optimizing operations functionality to be fast and
efficient.
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Supply chain management in not only a process served to generate a cost reduction in the
budget or a mission to create greater operational efficiencies within an organization. While
these are a part of the whole ecosystem, modern supply change management encompasses the
strategic alignment of end-to-end business processes to realize market and economic value, as
well as giving a firm the competitive advantage over their business rivals.
In recent times, the dawn of the digital age has brought wholesale transformation to the world
of commerce. Only twenty years ago, these processes were arduous, labor intensive, time
consuming and disorganized. It now may seem like ancient history, delivery times have gone
from two weeks to a month down to a turnaround of hours in some cases. Automated systems
and high-speed communication have paved the way for supply chain management and its
increased demand.
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Why is Supply Chain Management So Important?
Today, more than ever before, supply chain management has become an integral part of
business and is essential to any company’s success and customer satisfaction. Supply chain
management has the power to boost customer service, reduce operating costs and improve the
financial standing of a company, but how does this work?
IMPROVE CUSTOMER SERVICES

Customers expect to receive the correct product mix and quantity to be
delivered on time. For example, if you buy five books from Amazon and
only two of the actual titles arrive, one is an entirely different book and two
are missing, the customer will lose faith in Amazon, prompting them to
leave a bad review and hinder them from returning to the platform.

Products need to be on hand in the right location. Customer satisfaction
is tarnished if your car’s brake pads fail and the auto repair shop is delayed
in making the repairs because parts are not available in-house.

Follow up support after a sale must be done quickly. When an
appliance store sells a furnace with a warranty and it breaks down when
temperatures are below freezing, it is a great possibility the customer will
be irate if the heating unit cannot be fixed immediately.
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REDUCE OPERATING COSTS

Decreases Purchasing Cost - Retailors depend on supply chains to
quickly distribute costly products to avoid sitting on expensive inventories.

Decrease Production Cost - Any delay in production can cost a company
a huge amount. This factor makes supply chain management ever more
important. Reliable delivery of materials to assembly / manufacturing
plants avoids any costly delays in manufacturing.

Decrease Total Supply Chain Cost - Wholesale manufacturers and
retailer suppliers depend on proficient supply chain management to design
a network that meets customer service goals. This gives businesses a
competitive edge in the marketplace.
IMPROVE FINANCIAL POSITION

Insert Profit Leverage - Businesses value supply chain managers because
they help control and decrease supply chain expenditures.

Decrease Fixed Assets - Supply chain managers decrease the use of large
fixed assets such as plants, warehouses and transportation vehicles,
essentially diminishing cost.
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
Increases Cash Flow - Firms appreciate the added value supply chain
management contributes to the speed of product flows to customers.
This rapid growth in the pharmaceutical industry is yet to create radical changes in the Indian
distribution system. Movement of goods across the country is mainly in the form of road
Optimization Of Supply Chain Management In Pharmaceutical Industry transport with its
attendant problems of lack of or bad roads. The problem is further complicated by
bureaucracy at various checkpoints on the way resulting in delays. The main hurdles are:
•
The highly fragmented nature of distribution network
•
Limited advances in regulatory reforms
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•
Strong resistance from trade associations in the supply chain
•
Infrastructure for cold chain management still in developing stage
This study attempts to assess the status of digital technology adoption by the Pharmaceutical
Industry in India with specific reference to Channel Management activities. It aims to look at
the latest electronic methods globally adopted in the distribution channel of the
pharmaceutical industry. It deals with deciphering the need, desire and ability for adopting
digital technology in Channel Management by the Indian pharmaceutical Industry.
Understanding and deliberate architecting of a Channel Management strategy can make
channel management program a success, and help avoid costly disappointments along the
way.
Need for Structured Distribution Channel
With each pharmaceutical company having a large number of products in various packs, and
having to reach the remote rural markets on a national scale, it becomes imperative to have a
chain of intermediaries to achieve the above objective. Since the market is highly competitive
in terms of pricing and new product features, availability at the right place and at the right
time is very significant to success in the market. Even for a company which operates in few
states or a single state, the intensity of distribution in that state remains unchanged. It is a fact
that the cost of these intermediaries in terms of their margins and also the extended credit site
offered to them is a significant part of the total cost of operations. More often, for
pharmaceutical companies, it becomes a fait accompli and they have to toe the line if they
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wish to exist and expand. It is therefore difficult to bring about major structural changes in the
pattern of distribution.
Transition to digital system is already half way through its course and is known as ecommerce or the more encompassing e-business. Supply chain optimization with particular
reference to channel management can transform the organisation to better utilize assets and
resources, generate profits, enhance shareholder value, and positively respond to customer
demand.
Digitally enabled channel management is expected to shorten cycle times, transform
purchasing from a tactical operation to strategic sourcing, reduce inventories, decrease
logistics costs and streamline communication processes across a total network from initial
supplies to final consumption and post-sale service.
IT Adoption
IT adoption in healthcare has grown drastically. Pharmaceutical companies have realized the
need for integrated solutions in SCM to keep inventories at optimum levels, to improve
distribution, to provide for liquidation of stock, and to streamline interconnectivity between
manufacturing facilities, warehouses, and CFAs in different states. The use of software like
SAP and SAS, apart from other customized software, is increasing. However, the adoption of
technologies such as radio-frequency identification (RFID) has been slow.
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Future Challenges
Pharmaceutical companies in India have realized the importance of SCM and are aggressively
looking for ways to improve the costs associated with SCM. Distribution in India is
proportionally much more costly than it is in the US or EU. The companies, which have spent
as much as one-third of their revenues toward financing their supply-chain operations,
recognize that the cost of logistics is very high in India. In US and EU, the expenditure on
SCM alone is perhaps 2%, whereas in India, it averages 4–6% of total sales. According to
Gokarn, "It's mainly because in India, the cost of drugs is very low compared to the developed
markets. Taking into consideration the poor infrastructure and extreme geographic conditions,
it is difficult to curtail the cost involved in SCM."
Long-Channel Inventory Management
The multilayered distribution channel and lobbying at all layers has been successful at
preventing pharmaceutical companies from bringing in significant reforms toward higher
trade margins, and at bypassing the multiple distribution layers to reach customers directly.
Because pharmaceutical companies do not have direct access to retailers' data on sales
(tertiary sales), most pharmaceutical companies depend on stockists' sales data to monitor
sales (secondary sales). The primary sale involves transferring stock from the central
warehouse to its CFA. The medical representatives are given predefined sales targets. To
meet these targets they push inventory on the stockist to levels that exceed the actual demand.
When the next level of sale does not take place, the stockist will either return goods to the
company or the stock expires.
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Increasing Competition Between Wholesalers and Retailers
Today, with so many mergers and acquisitions in the Indian pharmaceutical industry, the
number of stockists for each company has increased. Now two stockists from the same
company may be competing against each other. Retailers take advantage of this situation by
prolonging the credit period and asking for more discounts, which has an adverse effect on
stockists, because they have to comply with the retailers to sustain their business.
Brand Substitution
The emergence of generic drugs has also taken a toll on Indian pharmaceutical company
sales, as prices can be almost two to 15 times less for the same drug. Moreover, to capture
market share generics, companies offer higher trade margins at the retail level. Sometimes
generic drugs provide up to 500% trade margins, which is a lucrative offer for a retailer to
pass up, and this leads to brand substitution.
Recalling Drugs
There is no foolproof system for recalling drugs in India. Once a medicine is released into the
market, it becomes a daunting task for a pharmaceutical company to recall because of the
highly fragmented nature of the distribution network. Newer technologies such as RFID
would help in keeping track of products along the entire chain and would prevent counterfeit
drugs to enter into the system.
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International Competitiveness and Cold-Chain Management
Indian pharmaceutical companies are increasingly seeking opportunities to supply drugs to
the world market. More developed cold-chain management practices will be required to
achieve this goal. This is one of the major challenges faced by the industry if they are to retain
product quality during shipment. Companies like Eli Lilly in India have implemented
initiatives such as having their own vehicles equipped with cold-chain management systems.
Other companies such as World Courier have developed cold-chain management models to
help pharmaceutical companies maintain the cold chain.
PRICING AND MARGINS
The prices and the margins of drugs for the wholesaler and retailers are largely decided by the
National Pharmaceutical Pricing Authority (NPPA), which varies depending on whether the
active constituent of the product is a scheduled drug or a nonscheduled drug. Scheduled drugs
are price-controlled whereas nonscheduled drugs are not. The NPPA is an organization of the
government of India established to fix or revise prices of controlled bulk drugs and
formulations. Companies must keep drug prices affordable to the general public. To keep
medicines within reach of the poor population, the government has covered 76 scheduled
drugs.
In addition to the above mentioned margins, wholesalers and retailers are also compensated
with additional trade offers. Hospitals and large institutions sometimes directly negotiate with
the manufacturing company and get the drugs in their pharmacy at lower costs. Stockists
compete with each other in a given city. Generally, hospitals order large quantities and can
negotiate with stockists, who provide payment terms, credit periods, and margins.
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Further, retailers and distributors form associations locally and nationally, and manufacturing
companies must comply with their terms. For example, in many states when a company
launches a new product (either branded or generic), to make that product available in the
pharmacy, the company has to pay commissions to the chemist (pharmacy) association. On
receiving the commission the association will issue a no-objection certificate, which is
mandatory for any company to make their product available in the market. Cipla, a
manufacturer of asthma drugs, tried to bypass the supply chain by providing home service for
its products. Cipla faced strong resistance from the traders lobby, which stopped stocking
Cipla's product. Ultimately, Cipla had to withdraw the scheme.
THE FUTURE OF INDIA'S DISTRIBUTION SYSTEMS
Organized Retail
Organized retail pharmacies are in a nascent stage in India, but have started making inroads in the
distribution system. The first retail pharmacy chain was started by the Subiksha Retail Services
Pvt Ltd. The Medicine Shoppe, one of the largest retail drug stores in the US, opened two retail
outlets in Mumbai and has franchised three more in Mumbai, Calcutta, and Baroda. Others have
also entered the field including Health & Glow, Pills & Powders, and Reliance that has set up
units under the brand name of Reliance Wellness.
Nitin Gokarn, senior manager of supply-chain management (SCM) at Merck India, is optimistic
for the growth of organized retail. He says that, "Though organized retail faces strong resistance
from the traders lobby, it has a great potential." He also opines that, "It will take a great deal of
political will and reforms to make this happen." With an organized retail system, pharmaceutical
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companies would be able to offer medicine at higher margins, and some speculate that retailers
may even be able to pass on cost benefits to the end-users as well.
Large Untapped Rural Market
The growth of institutional sales had little impact on the accessibility of medicine in rural areas,
according to an analysis by the Indian Retail Druggists and Chemists Association.
A large proportion of the rural population still does not have access to proper medication and the
situation may take long to improve. Rural areas contribute around 21% to the total pharmaceutical
market. In 2006–2007, the rural pharmaceutical market was estimated at around $1.4 billion.
Nearly 70% of India's population lives in rural areas where the healthcare infrastructure is poor.
With increasing rural household incomes, the rural market is becoming more attractive.
According to estimates by the Planning Commission, rural households now spend 12% of their
income on healthcare.
Goods and Service Tax (GST) Impact
With the introduction of GST, medicine prices have been standardized and price discrimination,
in which different states pay different prices for the same products, has reduced. GST has also
helped reduce the illegal interstate transfer of goods and the unethical interstate trade for higher
margins.
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1. BACKGROUND
a) Company profile
Septodont Healthcare India Pvt. Ltd. is a 100% subsidiary company of Septodont, France.
This company having the manufacturing facilities at MIDC area in Taloja, Navi Mumbai
Maharashtra. Septodont is into the business of manufacturing Dental Pharmaceutical &
Cosmetic products. Apart of Manufacturing facility this company also Import many Dental
Drugs and Device from their parent company and group company around the world.
Septodont is a 90 years old company and their Indian operation is started in 1999. Group
turnover is appx. 2000 Cr. and Septodont India turnover is 20 Cr. per annum.
Septodont India is managed by a board of Directors in that two Directors are from France and
one is from India. Mr. Sanjeev Shinde is Indian Director and he is managing Indian facility
and business. He is Science Graduate and having vast knowledge and experience into Sales
and Marketing of Dental Pharmaceutical products in India. He worked with many MNC
companies in India.
We at Septodont Healthcare India Pvt. Ltd. have a Team of well qualified and experienced
professional who handles all the business activity and operations. We have good sales team of
35 persons headed by National Sales Manager. We have our own well equipped Laboratory
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setup for many kind of in house testing. All Plant activity is headed by Plant Manager Mr.
Kapil Chavan who is qualified Chemist and have good hands of experience in managing the
manufacturing plant activity.
We have all important departments like
1. Sales & Marketing
2. Production
3. Quality Control
4. Quality Assurance
5. Store
6. Purchase
7. Packing & Despatch
8. Logistics
9. HR & Admin
10. Accounts / Finance
11. Trading
In Septodont Healthcare India Pvt. Ltd. we are selling the product is domestic market as well
as international market. Our major export is for our group companies and some are outside the
group company.
Our Raw material and packing material are sourced from local market as well as international
market
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We Manufacture and Import Dental pharma products as per below category –
1. Impression material
2. Endodontics
3. Mouthwash
4. Disinfectants
5. Anesthetics
6. Dental paste for scaling
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B) Organization Chart
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3. METHODOLOGY
In this study, exploratory research was undertaken to gain insights and understanding of their
system and for preparing the assignment. To prepare this project report, I have collected
information from different sources: company personnel, things provided by the organization,
internet searching and our peer group. Some information, which was not available from any
of the sources, was assumed. After that a more comprehensive conclusive research was
undertaken to fulfill the main purpose of the study.
Limitations of the study
Delays in getting the necessary materials to collect information from different sources
Large-scale analysis was not possible due to constraints of data
Large-scale analysis was not possible due to constraints of time
Some parts on the report were written from individual’s perception and may vary from
person to person, thus made hypothetically.
Information provided by the concerned organization was not satisfactory
Some of the internal information is difficult to get for publication.
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a) NEED OF THE STUDY
The Indian pharmaceutical industry is continuing its high growth rate at 13% for the last six
years. From foreign control to domestic grass-roots growth, the Indian pharmaceutical
segment has evolved over the last three decades. According to BioPlan Associate's recent
report, Advances in Biopharmaceutical Technology in India, the Indian pharmaceutical
industry has the potential to reach $50 billion by 2020.
This rapid growth has yet to translate into a modernization of the Indian distribution system.
The main hurdles include the highly fragmented nature of the distribution network, limited
advancement in regulatory reforms, and the presence of strong resistance from lobbies of
traders involved in the supply chain of pharmaceutical products.
India's current distribution situation poses greater risks for pharma products, which require
careful climate control throughout its transit period. The relative lack of awareness toward the
importance of these requirements makes biotherapeutics even more vulnerable to spoilage
during distribution. Moreover, the infrastructure for cold-chain management is still
developing in India. This situation has forced both pharmaceutical and biotech companies to
consider alternate distribution systems. These attempts, however, have faced severe resistance
by the lobbies of traders involved in the channel.
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OBJECTIVE OF STUDY
The topic supply chain management is basically concerned with the following process of
supply chain management and operations, like
1. Procurement
2. Production
3. Packaging & Forwarding
4. Distribution
1. PROCUREMENT PROCESS AT SEPTODONT, INDIA
The very first step of production at the Septodont Healthcare Pvt. Ltd. is procurement process
Procurement of raw material plays a crucial and key role in production process and in Pharma
industry as whole. The procurement process involves mainly following things as
• Suppliers
• Quantity
• Quality
• Cost
• Transportation, handling, storage
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Suppliers:
There are two modes of raw material procurement & supply
1. From Direct Manufacturer
2. From Stockist / Bulk Importer
1. Direct Manufacturer:They are manufacturing the raw material and Septodont buys from them directly
without involving any agent, distributor or re-packing agency. This planning has to
done very perfectly as manufacturer don’t entertain small quantity supplies and
also there priority is for bulk order so we need to plan in very advance considering
the lead time of supply so that production should not suffer.
2. Stockist / Bulk Importer:Stockist / Bulk Importer are mediator or distributor of original manufacturer.
They accumulate many small orders in one big quantity order and place to
manufacturer (raw mtl ) and from that quantity they provide to respective further
manufacturing units who converts raw material to finished goods. Stockist / Bulk
Importer are always keeping buffer stock so that in emergency we can ask them to
supply.
Stockist / Bulk Importer are having regular business with manufacturer thus they
are getting preference for supply.
Quantity:
Quantity is very important factor. It is very important to forecast the material
requirement to the nearest accuracy. If there is big difference between forecast and
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actual requirement than this may cause production loss or huge inventory cost.
Quantity is also plays as a negotiable tools.
Quality:
Quality is crucial part of any manufacturing specially when we it comes to
pharmaceutical. One slight quality compromise can cause a huge setback to the
company. Quality is not only concerned with finished product but it start from the raw
material and packing material. Quality control department ensure that the material
used in manufacturing is as per approved quality standard. They evaluate the Vendor
of raw material and packing material.
Cost:
It impact the market competition because today’s market in majority there is no
monopoly business moreover end user are became more educated and internet
enhanced this information. Peoples now look good quality product with lesser cost so
only those company will survive in market who have more cost innovation in their
system.
Transportation, handling, storage:
Safely transportation, handling and storage from Vendor place to manufacturing place
is very critical as during this phase material passes through with various conditions
which can cause to loss the property of material, so all the precaution should be
taken.
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2
PRODUCTION AT SEPTODONT, INDIA
After availability of raw material and packing material production is taking place.
Before production there will be a production plan based on the order received,
Machine capacity, Man power availability. Production planning is one part of
production planning and control dealing with basic concepts of what to produce, when
to produce, how much to produce, etc. It involves taking a long-term view at overall
production planning. Therefore, objectives of production planning are as follows:

To ensure right quantity and quality of raw material, equipment, etc. are available
during times of production.

To ensure capacity utilization is in tune with forecast demand at all the time.
A well thought production planning ensures that overall production process is streamlined
providing following benefits:

Organization can deliver a product in a timely and regular manner.

Supplier are informed will in advance for the requirement of raw materials.

It reduces investment in inventory.

It reduces overall production cost by driving in efficiency.
3. PACKAGING & FORWARDING
Once production is done the next step is to do the proper packing of finished goods.
Packaging should be as per specification and guidelines of Regularity so that during
handling, storage and transportation this should not loose its property.
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4. DISTRIBUTION
Current Distribution System in SEPTODONT
Figure 1 shows how a manufactured product passes through the company-owned central
warehouse, which supplies it to the CFA or super stockist. From the CFA the stocks are
supplied either to the stockist, substockist, or hospitals. The retail pharmacy obtains products
from the stockist or substockist through whom it finally reaches the consumers (patients).
Certain small manufacturers directly supply the drugs to the super stockist.
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In 2006, the market size of India's pharmaceutical logistics segment (distribution) was valued
at around $200 million and the logistics/distribution industry has been growing at an average
annual growth rate of 4% since 2002. According to the Indian Retail Druggists and Chemists
Association, in 1978, there were roughly 10,000 distributors and 125,000 retail pharmacies in
India. Today, the total number of stockists in India is around 65,000 and the number of
pharmacies is about 550,000, an increase of around six- and four-fold, respectively.
Despite the rapid increase in the number of stockists and pharmacies, there has not been a
proportional increase in the volume of prescriptions distributed. Thus, the efficiency of the
current system has clearly not been demonstrated. Further, it is estimated that more than
three-fifths of Indians still do not have access to modern medicines. This clearly shows that
the rural market is largely unattended and untapped
Developments in supply chain management Over the time modern technology and improved concepts like e-commerce and logistics have
contributed to the development of supply chain. We can see it in chronology as following
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Physical Distribution Management THE Physical Distribution Management (PDM) focuses upon the physical movement of
goods by treating stock management, warehousing, order processing and delivery as related
rather than separate activities. Although information systems were developed to manage these
processes they were often paper-based and not integrated across different functions. However,
some leading companies started using EDI at this time. PDM was essentially about the
management of finished goods but not about the management of materials and processes that
impacted upon the distribution process. PDM was superseded by logistics management which
viewed manufacturing storage and transport from raw material to final consumer as integral
parts of a total distribution process.
Material Requirement Planning (MRP) and Just-In –Time (JIT) Logistics Management
The Just-in –time (JIT) philosophy is still a relatively recent development of logistics
management, its aim being to make the process of raw materials acquisition, production and
distribution as efficient and flexible as possible in terms of material supply and customer
service.
Minimum order quantities and stock levels were sought by the customer and
therefore manufacturers had to introduce flexible manufacturing processes and systems
interfaced directly with the customer who could call an order directly against a prearranged
schedule with a guarantee that it would be delivered on time.
Materials Requirement Planning systems were important in maintaining resources at an
optimal level. The design for manufacture technique was used to simplify the number of
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components required for manufacture. However, none of the above methods looked at the
management of total supply chain. An associated phenomenon is lean production and lean
supply where supply chain efficiency is aimed at eliminating waste and minimizing inventory
and work in progress.
Supply chain management and Efficient Customer Response:Effective management of supply chain involved much closer integration between the
supplier, customer and intermediaries and in some instances involved one organization in the
channel taking over functions that were traditionally the domain of the intermediary.
Bottlenecks or undersupply/oversupply can have a significant impact on the organization’s
profitability. The two primary goals of supply chain management are to maximize the
efficiency and effectiveness of the total supply chain for the benefit of all the intermediaries,
but one section of the channel, and to maximize the opportunity for the customer purchase by
ensuring adequate stock levels at all stages of the process.
These two goals impact upon the sourcing of raw materials and stockholding. A recent
phenomenon has been the rapid in global sourcing of supplies from preferred suppliers,
particularly amongst multinational or global organizations. The internet will provide
increased capability for the smaller players to globally source raw materials and therefore
improve their competitiveness. The internet will revolutionize the dynamics of international
commerce and in particular lead to the more rapid internalization of small and medium sized
enterprise. The web will reduce the competitive advantage of economies of scale in many
industries, making it smaller companies to compete on a worldwide basis.
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New integrated information systems such as the SAP Enterprise Resource Planning (ERP)
system have helped manage the entire supply chain. ERP systems include modules which are
deployed throughout the business and interface with suppliers. Technology have enabled the
introduction of faster, more responsive and flexible ordering, manufacturing and distribution
systems, which has diminished even further the need for warehouses to be located near to
markets that they serve.
Technological Interface Management
The challenges facing suppliers, intermediaries and customers in the supply chain will shift
from a focus on physically distributing goods to a process of collection, collation,
interpretation and dissemination of vast amounts of information. Enterprise resource planning
systems are continuously being updated to support direct data interfaces with suppliers and
customers, for example to support EDI.
A more recent development is interfacing of ERP systems with B2B intermediary sites or
exchanges such as commerce One. SAP has also created mySAP facility to help customers
manage and personalize their interactions with these exchanges. XML is increasingly used as
the technical means by which technological interface management is achieved.(The critical
resources possessed by these new intermediaries will be information rather than inventory.
This stage has been taken a bit further by suggesting that customer information capture will
sere customers rather than vendors in future. Currently customers leave a trail of information
behind them as they visit sires and make transactions. This data can be captured and then used
by suppliers and agents to improve targeting offers. However, as customers become more
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aware of the value of information and as technology the internet enables them to protect
private information relating to site visits and transactions, then the opportunity grows for
intermediaries to act as customer agents not supplier agents.
Practice by Septodont Healthcare India Pvt. Ltd.
Septodont Healthcare India Pvt. Ltd. has got a Distribution Channel Management (DCM) that
primarily works for the downstream supply chain that we can relate to Physical Distribution
Management (PDM), the earliest phase of supply chain management. This is responding to
the need of the market from the front end, the distribution channel, and back end, the
procurement of raw materials.
The Block list, total procurement needed for a year, is usually made at the beginning of a year
with minor adjustment afterwards. This is determined by a forecasting based on previous
years sale with adjustment for the micro factors, every single response from the field force
who visit doctors and chemists.
The technology used here are simple mail communication for the overall supply chain while
keeping track of every movement of inbound and outbound logistics are kept in custom
database.
On downstream supply chain the communication is web. Every performance on delivery of
goods is communicated through web to update database. So present stock level, the delivered
lot and present demand from the customer can be traced at every moment.
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Supply Chain Models
Two prominent models are very widely used. They are illustrated below
Push supply chain
The push model is illustrated by a manufacturer who perhaps develops an innovative
product and then identifies a suitable target market. A distribution channel is then
created to push the product to the market.
Pull supply chain
This model emphasizes on using the supply chain to deliver the value to customers
who are actively involved in product and service specifications. Here the supply chain
is constructed to deliver value to the customer by reducing costs and increasing
service quality.
Septodont Healthcare India Pvt. Ltd. is following the Pull model of supply chain as they are
demand oriented and this model has been the strategy for many organizations.
Supply Chain –Recommendations and Useful Tips
As part of strategy definition for e-business, managers will consider how the structure of the
supply chain can be modified. These choices aren’t primarily based on internet technology
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choices, rather they are mainly choices that have existed for many years. What internet
technology provides a more efficient and enable and lower cost communications within the
new structure.
Supply chain management options can be viewed as a continuum between internal control of
the supply chain elements and the external control of supply chain elements through
outsourcing. The two end elements of the continuum are usually referred to as ‘vertical
integration’ and ‘virtual integration’.
Vertical integration refers the extent to which supply chain activities are undertaken and
controlled within the organization.
Virtual integration refers the majority of supply chain activities are undertaken and controlled
outside the organization by third parties.
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Vertical
Vertical
Virtual
Integration
Disintegration
integration
There was a general trend in during the second half of twentieth century from vertical
integration through vertical disintegration to virtual integration.
A good example is provided by the car manufacturing industry where traditionally car plants
would be located near to a steelworks so that the input to the car plant would be raw
materials, with finished cars produced as the output. Other components of the car such as
engine and passenger equipment would also be manufactured by the company. In addition
other value chain activities such as marketing would also largely performed in house. There
has been a gradual move to sourcing more and more components such as lights, upholstery ad
trim and even engines to third parties. Marketing activities such as web site development,
brochure fulfillment and advertising campaigns are now largely outsourced to marketing
agencies.
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Another example is the purchase by pharmaceuticals companies of pharmacy benefit
managers (companies that manage drug distribution with private and company health
schemes). By acquiring these companies which are part of pharmaceuticals company’s
downstream supply chain the aim is to ‘get closer to the customer’ while at the same time
favorably controlling the distribution of the company’s own drugs.
Hayes and Wheelwright provide a useful framework that summarizes choices for an
organization’s vertical integration strategy. The three main decisions are:
1.
The direction of any expansion: Should the company aim to direct ownership at the
upstream or downstream supply chain? The pharmaceuticals companies referred to above
have decided to buy into the downstream part of the supply network (downstream vertical
integration). This is sometimes referred to as an offensive strategic move since it enables the
company to increase its power with respect to customers. Alternatively, if the pharmaceuticals
company purchased other research labs this would be upstream-directed vertical integration
which is strategically defensive.
2.
The extent of vertical integration: How far should the company take downstream or
upstream vertical integration? Originally car manufacturer had a high degree of vertical
integration, but more recently they have moved from a wide process span to a narrow process
span. This change is the main way in which e-business can impact vertical integration by
assisting the change from wide to narrow process span.
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3.
The balance among the vertically integrated stages: To what extent does each stage
of the supply chain focus on supporting the immediate supply chain? For example, if a
supplier to a motor manufacturer also produced components for other industries this would be
an unbalances situation.
Combining these concepts, we can refer to the B2B Company. If it owned the majority of the
upstream and downstream elements of the supply chain and each element was focused on
supporting the activities of the B2B Company, its strategy would be to follow upstream and
downstream directions of vertical integration with a wide process span and a high degree of
balance. Alternatively, if the strategy were to focus on core competencies it could be said to
have a narrow process span.
How, often can electronic communication support these strategies? Through increasing the
flow of information between members of the supply chain, a strategy of narrower process
span can be supported by e-commerce. However this relies on all members of the supply
chain being e-enabled. If only immediately upstream suppliers have adopted e-commerce then
the efficiency of the supply chain as a whole will not be greatly increased. It may be difficult
for a manufacturer to encourage companies further up the supply chain to adopt e-commerce.
So companies undertaking offensive strategies will be in a better position to stipulate adoption
of e-commerce, and so increase the overall efficiency of the supply chain.
Following are two examples of the manufacture of personal computers also illustrate the
concept of the two different supply chain products well.
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Approach 1 (IBM Practice)
Manufacture of many components by IBM plants in different locations including IBM
processor, IBM hard disks, IBM cases a IBM monitors and even IBM mice. Distribution to
companies by IBM logistics.
Approach 2 (DELL Practice)
Manufacture of all components by third parties in different locations including Intel
processors, Seagate hard disks, Sony monitors and Microsoft mice. Assembly of some
components in final product by third parties, e.g. adding appropriate monitor to system unit
for each order.
E-supply chain management
E-business can be used to improve supply chain management in a number of ways in that
cases challenges were
•
Reduce order-to –delivery time.
•
Reduce costs of manufacturing.
•
Manage inventory more efficiently.
•
Improve demand forecasting.
•
Reduce time to introduce new products.
•
Improve aftermarket/ post-sales operations.
The typical benefits that B2B companies have from e-SCM are as following
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1.
Increased efficiency of individual processes: Here the cycles time to complete a
process and the resources needed to execute it are reduced. If the B2B Company adopts eprocurement this will result in a faster cycle time and lower cost per order.
Benefits: Reduced cycle time and cost per order.
2.
Reduced complexity of supply chain: This is the process of disintegration. Here B2B
Company will offer the facility to sell direct from its e-commerce site rather than through
distributors or retailers.
Benefits: Reduced cost of channel distribution and sale.
3.
Improved data integration between elements of the supply chain: The B2B Company
can share information with its suppliers on the demand for its products to optimize the supply
process.
Benefits: Reduced cost of paper processing.
4.
Reduced cost through outsourcing: The company can outsource or use virtual
integration to transfer assets and costs such as inventory holding costs to third companies.
Technology is also enabler in forming value networks, and in making it faster to change
suppliers on the basis of cost and quality.
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Benefits: Lower costs through price competition and reduced spend on manufacturing
capacity and holding capacity. Better service quality through contractual arrangement.
5.
Innovation: E-SCM should make it possible to be more flexible in delivering a more
diverse range of products and to reduce time to market. For example, the B2B company may
use e-commerce to enable its customers to specify the mixture of chemical compounds and
additives used to formulate their plastics and refer to a history of previous formulations.
Benefits: Better customer responsiveness.
Flexibility in adapting to a new business requirements is a key capability of e-SCM systems.
For example, in 2006, e-business system supplier and integrator SAP explained the three key
capabilities of its SCM solution as
•
Synchronize supply to demand: Balance push and pull network planning processes.
Replenish inventory and execute production based on actual demand.
•
Sense and respond with an adaptive supply chain network: Drive distribution,
transportation, and logistics processes that are integrated with real-time planning processes.
•
Provide network wide visibility, collaboration, and analytics- Monitor and analyze
your extended supply chain.
An alternative perspective on the benefits is to look at the benefits that technology can deliver
to customers at the end of the supply chain. For the B2B company these could include:
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•
Increased convenience through 24 hours a day, 7 days a week, 365 days a year
ordering.
•
Increased choice of supplier leading to lower costs.
•
Faster lead times and lower costs through reduced inventory holding.
•
The facility to tailor product more readily.
•
Increased information about products and transactions such as technical data sheets
and order histories.
IS infrastructure for supply chain management
Information systems need to deliver supply chain visibility to different parties who need to
access the supply chain information of an organization, whether they be employees within the
organization, suppliers, logistics service providers or customers. Information systems have a
key role in providing this visibility. Since a huge volume of information defines supply chain
processes for each organization, users of this information need to be able to personalize their
view of information according to their need- customers want to see the status of their order,
suppliers want to access the organization’s database to know when their customer is next
likely to place major order.
Security is also important – of a company has differential
pricing, it will not want customers to see price differences.
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FIG
These requirements for delivering supply chain information imply the need for an integrated
supply chain database with different personalized views for different parties. A typical
integrated information systems infrastructure for delivering supply chain management is
illustrated in above figure. It can be seen that applications can be divided into those for
planning the chain and those to execute the supply chain process.
A key feature of modern supply chain infrastructure is the use of a central operational
database that enables information to be shared between supply chain process and applications.
This operational database is usually part of an enterprise resources planning system such as
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SAP, Baan or Prism and is usually purchased with the applications for supply chain planning
and execution.
Practice around the world
Today’s competitive business environment calls for companies to pay much more attention to
how they manage their supply chains. Customers are insisting on greater value, faster order
fulfillment and more responsive services when they make purchase. Shorter product life
cycles, global sourcing and greater product variety have increased supply chain costs and
complexity. The value of so many businesses are linked together that competitive advantage
may be based on entire supply chains rather than individual firms.
Supply chain process:
Many process and sub processes are involved in managing the supply chain to expedite flow
of information and materials. The Supply Chain Council developed a Supply Chain
Operations Reference Model which identifies five major supply chain processes: Plan,
Sources, Make, Deliver and Return
Plan: consist of processes that balance aggregate demand and supply to develop a course of
action to meet sourcing, production, and delivery requirements.
Source: consist of processes that procure goods and services needed to create a specific
product or service.
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Make: consists of processes that transform a product into a finished state to meet planned or
actual demand.
Deliver: consists of processes that provide finished goods and services to meet actual or
planned demand, including order management, transportation management and distribution
management.
Return: consists of processes associated with returning products or receiving returned
products, including post delivery customers support.
Logistics plays an important role in these processes, dealing with the planning and control of
all factors that will have an impact on transporting the correct product or service to where it is
needed on time and at the least cost.
Information and supply chain management
Inefficiencies in supply chain such as parts shortages, underutilization of plant capacity,
excessive finished goods inventory are caused by inaccurate or untimely information. These
supply chain inefficiencies can waste as much as 25% of company’s operating costs.
If a manufacturing had perfect information about exactly how many units of product
customers wanted, when they could be produced, it would be possible to implement a highly
efficient just-in-time strategy.
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In supply chain uncertainties arise because many events cannot be foreseen- uncertain product
demand, late shipments from suppliers, defective parts of raw material, or product process
breakdowns. One recurring problem in supply chain management is the bullwhip effect, in
which information about demand for a product gets distorted as it passes from one entity to
the next across the supply chain. These changes ripple throughout the supply chain,
magnifying what started out as a small change from planned orders, creating excess
inventory, production, warehousing, and shipping costs.
The bullwhip can be controlled by reducing uncertainties about demand and supply when all
members of the supply chain have accurate and up-to-date information members of the supply
chain could share dynamic information about inventory levels, schedules, forecasts and
shipments, they would have a more precise idea of how to adjust their sourcing,
manufacturing and distribution plans. Supply chain management system provides the kind of
information that can help members of the supply chain make better purchasing and scheduling
decisions.
Supply Chain Management Application
The central objective of supply chain management systems is information visibility- open and
rapid communication and information sharing between members of the supply chain. Supply
chain management systems automate the flow of information between a company and its
supply chain partners so they can make better decisions to optimize their performance.
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Supply chain performance measurement
Companies need to be able to measure the performance of their supply chain management
efforts using objective performance information. A metric is a standard measurement of
performance. Important metric for measuring supply chain performance include the fill rate,
the average time from order to delivery, the number of days of supply in inventory, forecast
accuracy, and the cycle time for sourcing and making a product.
Demand driven supply chain:
From Push to Pull manufacturing and efficient customer response
Earlier supply chain management systems were driven by a push based model (also known as
build-to-stock). In push based model, production master schedules are based on forecasts or
best guesses of demand for products, and products are “pushed” to customers. With new
flows of information made possible by web- based tools, supply chain management can more
easily follow a pull based model. In a pull based model which is also known as demanddriven model or build- to- order, actual customer orders or purchases trigger events in the
supply chain. Transactions to produce and deliver only what customers have ordered move up
the supply chain from retailers to distributors to manufacturers and eventually to suppliers.
Only products to fulfill these orders move back down the supply chain to the retailer.
Manufacturers would use only actual order demand information to drive their production
schedules and the procurement of components or raw materials.
Business value to supply chain management system
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Supply chain management systems enable firms to streamline both their internal and external
supply chain processes and provide management with more accurate information about what
to produce, store, and move. By implementing a networked and integrated supply chain
management system, companies can match supply to demand, reduce inventory levels,
improve delivery service, speed product time to market and use assets more effectively.
Effective supply chain management system enhances organizational performance in the
following areas:
1.
Improved customer service and responsiveness: make the products easily available to
the customers. Having the right product at the right place at the right time will increase sales.
2.
Cost reduction: supply chain management helps companies contain, and often reduce
some or all of the costs associated with moving a product through the supply chain.
3.
Cash utilization: the sooner a company delivers a product, the sooner that company
will get paid.
Strategic analysis or critical success factors
The strategic analysis, or critical success factors, approaches argue that an organization’s
information’s requirements are determined by a small number of critical success factors
(CFSs) of managers. If these goals can be attained, success of the firm or organization is
assured. CFSs are shaped by the industry, the firm, the manager, and the broader
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environment. New information system should focus on providing information that helps the
firm meet these goals.
Examples
Goals
CFSs
Profit concern
Earnings / share
Automotive industry
Return on investment
Styling
Market share
Quality dealer system
New products
Cost control
Energy standards
Non-profit concern
Excellent health care
Meeting government regulation
Future health needs
Regional integration with
other hospitals
Improved monitoring of
regulations
Efficient use of resources
An example of critical success factors and organizational goals
The principal method use in CFS analysis is personal interviews- three or four with a number
of top managers identifying their goals and the resulting CFSs. These personal CFSs are
aggregated to develop a picture of the firm’s CFSs. Then the systems are built to deliver
information on these CFSs.
Based on the condition of 15 sales outlet of Septodont, India, and inventory kept in the central
warehouse, the total planning is determined. After initiating the plan, goods are moved to the
outlets for sale, from the central inventory warehouse.
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Organization Service Department
The Organization Service Department of Septodont, India Ltd. includes Purchase Department
and Distribution Department.
Purchase Management System
The raw materials procurement system of Septodont, India Ltd. is called Purchase
Management System. From the beginning of coming raw materials, and to the reach of end
customers, every thing is computerized.
Mail Communication
The technology used here are simple mail communication for the overall supply chain while
keeping track of every movement of inbound and outbound logistics are kept in custom
database. Since the procurement is designed for once in a year there are tenders to bid by the
suppliers, the management is simple and largely done by the suppliers. For the local supplier
the complication is less and supply can happen as per order at any time.
On downstream supply chain the communication is web. Every performance on delivery of
goods is communicated through web to update database. So present stock level, the delivered
lot and present demand from the customer can be traced at every moment.
Software used by Septodont Healthcare India Pvt. Ltd.
The software currently used in the organization is called “Tally”. With this software they are
connected to the each of the department through their Software customization. At this
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moment, they are not fully automated, but in near future, hopefully, they will be fully
automated.
In Septodont, India, their Front End Distribution System is 100% computerized, and Back
End Distribution System is 20% computerized.
Septodont, India Ltd: Goods Distribution Process
Demand Planning
&
Supply Planning
The concept
Demand planners are kind of like weather forecasters -- they rarely get credit for doing their
job correctly, and they're only noticed when they get it wrong. Nevertheless, it's vitally
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important that they get it right, or else severe -- and potentially disastrous -- supply chain
glitches can occur.
"The bullwhip effect is as true today as it ever was in modern, elongated global supply chains
where small errors at the front are magnified throughout the process," observes Andrew
Kinder, director of product marketing for supply chain management at Infor, an enterprise
software provider. Kinder offers these 10 tips to gauge your company's demand planning
preparedness, and help guide you to getting the forecasts right.
1.
Get the process right. Demand planning is a sub-process within sales and operations
planning or integrated business planning, not a stand-alone activity. Create an integrated
business plan that is a cross-company activity and drives the rest of the business forward for
profitably meeting customer demand.
2.
Decide what levels you need to plan demand at that make sense for your business.
Some companies analyze and plan demand at the product family level, customer level or
geographic level. The way you forecast and plan demand is unique to your business. Don't be
dictated by limitations of your IT technologies -- and be prepared to change how you plan
demand according to changes in your business.
3.
Demand planning is a collaborative process, not a test of statistical algorithms. The
statistics provide a solid foundation to work with, but the real value comes from over-laying
knowledge that systems cannot possibly know. Deploy internal collaboration before external
collaboration, recognizing that the closer you get to the true demand signal, the better the
forecast will be.
4.
Demand planning is not just forecasting. Forecasting is a component of demand
planning and relates to your best estimate of future demand. Companies that excel in this area
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will challenge the forecast (and the integrated business plan) and seek opportunities to
influence demand through marketing events and promotions to bring the forecast more in line
with the company plan.
5.
You can't control what you can't measure. Put the right set of linked key performance
indicators in place and measure regularly against these.
6.
Educate before training. Because the demand planning process is cross-functional,
many people input to the forecast without realizing the importance of their contributions. As a
result, the quality of their contributions may suffer. A good educational program will help
everyone understand their contribution and impact on the performance of the demand plan.
7.
Cleanse the data so you don't spend all your time questioning it and losing confidence
in the process, which can create a breeding ground for others to second-guess the demand
plan and produce their own version. Demand planning deals with huge quantities of data and
robust processes are required to keep the data cleansed.
8.
Trust the numbers and manage by exception. 80% of your return can be achieved by
reviewing 20% of the items.
9.
Use the error in your forecast to positive effect. A good statistical forecast will have an
appropriate error which drives an appropriate safety stock target. This leads to good inventory
management and delivers higher service with lower total inventory.
10.
Deploy a proven best-in-class solution. A recent Aberdeen study shows that
companies that excel in demand management -- reporting higher forecast accuracies and
lower inventories -- are two-and-a-half times as likely to have implemented a best-in-class
demand planning system.
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THE demand planning
Since the supply chain management of Septodont Healthcare India Pvt. Ltd. is a pull model
supply chain, they aim at their product quality. This is done at the commencement of every
year and absorbs the amendment as needed throughout the year. They term it as block list
based on which suppliers from in and outside of the country are ordered to provide raw
materials on time. Following are the steps the tread when set the demand.
•
Response from the field force: They have got an efficient field force (52 persons) that
visits their customers, doctors and chemist, in particular make a demand plan that would
survive for the coming period based on their findings.
•
Make regional demand schedule: As not every region of their market need the same
product in same quantity, they make a regional demand schedule based on the data coming
from the field force that indicate different trends for territory.
•
Adjustment with the forecasted trend: Once they got the regional demand schedule
they adjust it with the forecasting based on the sales of previous years and quantity the total
needs for that year.
•
Adjustment with the stock in hand: The finished goods in hand and the returned goods
form the market is subtracted from the total demanded amount for that year. Company
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normally holds 8 weeks inventory level in end, front and back, of finished goods and raw
materials.
•
Technology and time lag: The technology used here is intranet that helps every field
force unit to update the present demand condition at the end of the day, every working day.
Since the downstream supply chain is more updated and automated the time lag is least, 12
hours. This can be checked at any moment.
The supply planning
The supply planning starts when the demand schedule is finalized for the upcoming year. As
supply comes from outside of the country, there are regulatory measurements to be followed.
The total demand is placed in a block list that is presented to the related government agency
for approval. So following are the steps, we can say, are treaded in supply planning.
•
Block list and approval: Once the demand schedule is ready, it is formatted into a
block list and seeks the permission for import. This is done for supplies from outside. For
inside oriented supply no such steps need to be maintained.
•
Tender float: According to the approved block list the company calls the eligible
agents who can purchase the raw materials in favor of the company. There is a
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communication maintained between these agents and company to supply the materials on
time. This is manual.
•
Segregating into lots: Then suppliers are asked to supply the raw material needed in
each month. The forecasted demand of each month is communicated to the suppliers and they
perform their job.
•
Monthly production: According to the demand the company goes for monthly
production target. This may vary as per demand.
•
Distribution: The Company has got 15 sales depots across the country which supplies
the finished product to each district according to their monthly need. There is a central
inventory that keeps connection with the depots and upcoming supply needs.
•
Technology used: The technology used here to keep connection with suppliers is mail
communication. Since they maintain a safety stocks in both front and back end and
production is segregated into months, this mail communication serves their purpose well.
Recommendation:
In near future, they have the plan to use Planning Based Improvement process to strengthen
their Information System & Supply Chain Management, as per their opinion.
Nevertheless we can forward some recommendation based on our understanding of the
current position of supply chain management and overall information system. They are
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•
They need to acknowledge the pressure from the competitors and should understand
the leaders of their sector that how they are managing the IS and Supply chain.
•
As long as the other related parties in their supply chain network are not concerned
B2B e-commerce and as long as there are legacy system in the regulatory framework, a not
integrated supply chain network isn’t possible. So there should be a pressure from the
industry people to have it done.
•
In future business arena there should be an industrial practice of IS and Supply chain
network so that downstream supply chain can be more extended and reaches to consumers.
DISTRIBUTION SYSTEM: THE CURRENT STATE
India is a geographically diverse country with extreme climates that make distribution a
critical function. The long channel of distribution and high incidence of brand substitution
makes it mandatory for Septodont to make all its stock keeping units (SKUs) available at all
levels at all times. In India, most brands have generic versions of drugs and retailers can
usually obtain higher margins with generics than for branded products. To reduce risks of
substitution, innovator companies like us must make sure the products are made available to
the stockists and retail shops.
Drug distribution in India has witnessed a paradigm shift. Before 1990, pharmaceutical
companies used a different distribution system, in which they established their own depots
and warehouses that now have been replaced by clearing and forwarding agents (CFAs).
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These organizations are part of the distribution chain, and are primarily responsible for
maintaining storage (stock) of the company's products and forwarding SKUs to the stockist on
request. Most companies keep one to three CFAs in each state. On an average, a company
may work with a total of 25–35 CFAs. Unlike a CFA that can handle the stock of one
company, a stockist (a regional distributor) can simultaneously handle more than one
company (usually, 5–15 depending on the city area), and may go up to even 30–50 different
manufacturers. The stockist, in turn, after 30–45 days (a typical credit or time limit) pays for
the products directly in the name of the pharmaceutical company. The CFAs are paid by the
company yearly, once or twice, on a basis of the percentage of total turnover of products.
CONCLUSION
Manufacturers must ensure that their pharma products reaches customers with
uncompromised quality in India, because manufacturers do not retain control over the
multilayered distribution system, the cold-chain management process continues to be difficult
and expensive. However, manufacturers are increasingly realizing the importance of an
effective distribution system, all the way to the end-customer. Coping with the challenges of
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streamlining the systems in India will ultimately benefit the patient and the healthcare system.
To conclude, we say it is very vital for a player in pharmaceuticals industry to concentrate on
the Information System and Supply Chain Management. The value addition in each stage
would be more precise and quantifiable once they started to use a sophisticated supply chain
management. The investment in this task will surely give and it is much waited for those who
are entering into the foreign territory.
REVIEW OF STUDIES
Adoption of electronic means in the management of the channel can lead to several
advantages in terms of improved efficiencies, reduced operational costs, better customer
service, more satisfied channel members including reduction in conflict among channel
members .It will also lead to online management of inventories and real time monitoring and
control of sales targets and their achievement. All these could lead to improving revenues and
also profits. The online media could lead to better knowledge of competitive activities and the
ability to combat them on a real time basis.
A study by Hagedorn Scott and Galloway Scott (2011) concluded that the potential of the
digital platform is underestimated in the pharmaceutical industry. Tools such as e-mail,
mobile, social media are under-utilized. The Business Person’s Guide to Channel
Management Software (2011), is of the view that Channel Management Software is a unique
service through which one can increase channel revenue, build customer loyalty, and manage
all channel needs in a central location that is easily accessible. Another study by Marco Ruedi
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(2011) observed that Pharmaceutical industry needs service providers that can offer not only
qualitative data collection but also strong service orientation.
Ann Grackin (2010) state that adoption of digital technology in labeling, invoicing, moving of
goods, climate control, inventory management, JIT (Just in Time) concept can lead to
efficiency, effectiveness and reduction of costs. Bert Rosenbloom (2007) stated that the
advantages of Electronic Marketing Channels are global scope and reach, rapid transaction
processing, information processing efficiency, database management, and lowering cost of
sales and distribution. Some disadvantages far outweigh the advantages.
Most of the reviews suggest that the adoption of electronic means in the management of the
channel can lead to several advantages in terms of improved efficiencies, reduced operational
costs, better customer service, and more satisfied channel members including reduction in
conflict among channel members. All these could lead to improving revenues and also the
profits. However, there seems to be no specific indication as to how the existing entrenched
channel will react to the online means of channel management .It is possible that the existing
channel may consider the internet channel as a threat and fear disintermediation. This study
explores the prospect of the channel to accept digital technology by addressing the issues
from various angles.
Limitation in supply chain management
The practice by Septodont Healthcare India Pvt. Ltd. for its supply chain, the Goods
Distribution Process (GDP), has been suffering from many problems that a future participant
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in pharmaceuticals arena should have been eliminated. We can list the shortcomings as
following.
•
The system is comparable to the earliest model of supply chain management like
Physical Distribution Management (PDM). Here the information management and
coordination is least and it is integrated within the organization.
•
They need to maintain a safety level of inventory in front end for a period of 8 weeks
and in the back end for a period of 8 weeks. This signals more investment done for the
working capital.
•
Once a safety level of inventory is maintained, it cost more for storage and
management. Just in Time (JIT) eliminated this problem that they are yet to
introduce.
•
Their supply chain is dependent some intermediaries in back end and their own
multistage distribution channel in front end. So they aren’t able to order directly for
inputs and supply directly to customers.
•
They haven’t yet employed any high performing supply chain management software
like ERP system. They only rely on the database for the performance judgment and
forecasting the future needs based on it.
•
The time lag in back is high as it needs several steps for ordering the new materials
and coordination with different agencies.
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BIBLIOGRAPHY
Books:
•
Course material provided by Welingker for Supply Chain Management
Online Article
•
Prof. Ghadially Zoher H, Associate Dean, Institute Of Management, Christ University,
Bangalore
•
Management Accounting and Australian Perspective, 3rd Edition
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