final supply chain in pharma
TRANSCRIPT
Pharmaceutical Supply Chain
PRESENTED BY:
MRADUL GUPTA 213
VIPIN RAWAL 214
AAMIR BOMBAYWALA 215
PRATIKSHA 216
SHASHIKANT 149
SOMAN PANDA 163
Introduction
The pharmaceutical industry can be defined as a complex of processes, operations and organizations involved in the discovery, development and manufacture of drugs and medications.
Number of key players in the industry include:
The large, research and development-based multinationals
The large generic manufacturers, who produce out-of-patent ethical products
Local manufacturing companies
Contract manufacturers
Drug discovery and biotechnology companies
The Pharmaceutical Industry
The Pharmaceutical market will reach nearly $1100 billion by 2015
India Pharmaceutical industry ranks 4th in production volume and 13th in domestic consumption volume
To meet customer service improvement and cost reduction
Supply chain is highly crucial as it is time-sensitive
Drivers in the pharmaceutical industry
Most important driver in the pharmaceutical industry is the time-to-market.
Companies secure very significant returns in the early life of a successful drug, before any competition.
The competition-free life is shortening, typically from 5 to 1–2 years.
This industry is subject to very stringent regulation.
complex manufacturing processes
Huge investment in R&D
Pharma Supply Chain Considerations
End-user (patient) safety Anti-counterfeiting requirements Product integrity Quality assurance
Fraud prevention and detection Electronic signature requirements Records access and retention requirements
Product tracking Class 2 pharmaceuticals must carry unique identifiers at the item level “Chain of custody” tracking from manufacturer to distributors and point-of-use
What business requirements differentiate pharmaceutical SCM from other manufacturers?
Regulation!!
supply chain performance measures
The stock levels in the whole chain (“pipeline stocks”) typically amount to 30–90% of annual demand in quantity
There are usually 4–24 weeks’ worth of finished good stocks.
Stock turns (defined as annual sales/average stock) are typically between 1 and 8.
Supply chain cycle times (defined as elapsed time between material entering as raw material and leaving as product) are often between 1000 and 8000 h.
Material efficiencies (the amounts of product produced per unit amount of total materials used) are 1–10%.
Key issues in the pharmaceutical supply chain
Uncertainty in the demands for existing drugs (due to competition, uncertainty in the ability to extend the protected life through new formulations, etc.)
Uncertainty in the pipeline of new drugs—in particular, which ones will be successful in trials, what sort of dosage and treatment regime will be optimal.
Capacity planning—long lead times to make capacity effective means that decisions often need to be taken at times of high uncertainty. Waiting for the uncertainties to be resolved might delay the time to market by an unacceptable amount.
Key issues in the pharmaceutical supply chain
Network design—often tax implications take precedence over logistics issues, these result in economic but potentially complicated supply chains
Plant design—this tends to be very traditional, with no real change in manufacturing technology for 50 years. There are significant opportunities for intensified, continuous processing.
Components of the pharmaceutical industry
primary manufacturing
secondary manufacturing
market warehouses/distribution centres
wholesalers; and
retailers/hospitals.
Manufacturing strategies adopted
Standardization of manufacturing processes Metrics Product process “toolkits”
Managing network assets Grouping plants with standard equipment and processes geared to specific
product types (e.g., dry products, freeze-dried, parenteral) Redundant facilities (security, shifting of work between plants)
Improved demand forecasting Global demand management center Centralized ownership of all forecasting tools and databases
Judicious use of contract manufacturing (e.g., packaging) Joint planning between product launch team and SCM team at least 1 year
before NDA submission to FDA Cross-functional development, marketing, clinical, SCM and regulatory teams
for each product
The Current Supply Chain: US
Five large drug wholesalers (“Big 5”) dominate the business Many smaller wholesalers – partial product lines, regional
players More than 6,500 licensed wholesalers in the U.S. Stock small target list of medications provided to a limited
customer set
Secondary wholesalers Sell to other wholesalers Specialize in discounted products
Significant aspects of logistics in pharma industry
Logistics in pharma industry is very critical for providing the right medicine to the right patient at the right time, place and dosage and most importantly at the right price.
Since business is highly competitive today, success largely depends upon the efficiency of supply chain.
Supply chain is very critical as it maintains the complex network relationship between the organisations
inventory control plays a significant role in pharma value chain as lots of inventory exists in the supply chain.
Advantages
Excellent supply chain management can yield
- 25-50% reduction in total supply chain costs
- 25-60% reduction in inventory holding
- 25-80% increase in forecast accuracy
- 30-50% improvement in order fulfilment cycle time
-20% increase in after tax free cash flows
Issues & Challenges
Managing perishable products
Degradation of medicines as they move along the supply chain which results in allowing substandard products to be dispensed
Maintaining temperature control
More focus is give on R&D
No control once pharmaceuticals are docked to wholesalers
Shipping of expiry products
Issues & Challenges
Crisis Management
In case of epidemic break out, global demand for certain medicines overshoots the demand suddenly
Product withdrawal during sales due to side effects and expiry
Issues & Challenges
Little Incentive for Reducing Inventory
- Ethical requirement of providing medicines
- Out of stock situations are unacceptable
- Patent Lifespan is low
- Exceptionally long cycle times,huge inventory
Counterfeit Drugs & Security
- High price of drugs worldwide
- Easy to fake prescription drug labeling
Issues & Challenges
Out-dated Manufacturing Sites
- Reluctant Govt bodies to approve any changes fearing product quality
Parallel Trade
- Cross trading across borders
- Black market transactions-developing nations
- No track of drugs coming in and going out
Issues & Challenges
Controlling wide supply chain with huge stock keeping units becomes very difficult
Training and Education cost to the stakeholders is high
Integration of domestic and international business Eg: Nicholas Piramal India Ltd
Bringing a consensus manufacturing, sales marketing and distribution department to agree on a forecast
Conclusion
Logistics has emerged as an important element in the pharmaceutical industry as it becomes greater part of total costs
Value chain perspective of managing process innovation through capacity and production planning is equally important
Emerging technologies like RFID can mitigate many of these issues
20Source - End-User Safety Considerations
Foremost of all the considerations in the pharma supply chain
Are the materials provided by our suppliers safe?
Are the products manufactured by our company safe?
Are all the products being manufactured reaching the distributors?
Are any of our products being adulterated or counterfeited?
The supply chain begins with the material supplied for product manufacture
Key ingredients need to be covered by Supply Agreements
Price, Source, Quantity, Quality, Delivery
Quality Agreements
Defined Specification Control, Change Control, Complain Resolution
Pre-purchase Usability Tests
Toxicity Requirements
Know where starter materials are manufactured
Know who tests it and how
Define theMaterial
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Monitor the Vendor
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Source Make Deliver Buy
Foremost of all the considerations in the pharma supply chain
Are the materials provided by our suppliers safe? Are the products manufactured by our company safe? Are all the products being manufactured reaching the
distributors? Are any of our products being adulterated or counterfeited?
The supply chain begins with the material supplied for product manufacture
Key ingredients need to be covered by Supply Agreements Price, Source, Quantity, Quality, Delivery
Quality Agreements Defined Specification Control, Change Control, Complain
Resolution Pre-purchase Usability Tests Toxicity Requirements Know where starter materials are manufactured Know who tests it and how
21Source - Supplier Materials
Biologic suppliers Chemicals Farm products (plants, eggs, animals, animal by-products) Laboratory animals Growth media, cell cultures Pathogens Proteins Test organisms
Non-biologic suppliers Equipment Computers, software Databases (e.g., target molecules, DNA sequences) Clinical trial supplies Clinical trial subject population information
What materials/resources do pharmaceutical suppliers provide?
Source Make Deliver Buy
22Source - Supplier Strategies
Single source materials Reduced supplier management issues Facilitates relationship-building Risk of supply issues in the event of
Supplier raw materials disruption Supplier production issues Supplier delivery issues
Higher supplier power (Porter)
Multi-source materials Improved pricing and competition Minimizes risk of supplier issues Higher vendor management costs
Source Make Deliver Buy
23Make – Clinical Trial SCM
Requirement to manage the supplies involved in supporting
clinical trials Trial medications/”drug kits”
Multiple locations
Multiple investigators
Data collection/reporting devices (e.g., PDA’s, cell phones, remote sensors)
Need to coordinate delivery of supplies to sites that are actively recruiting and enrolling patients
Flexibility
Speed of delivery
Consideration of special packaging and handling requirements (e.g., cold shipping)
Clinical supply teams typically use the performance of older trials to understand how much material is required in a new study and to determine their supply chain requirements
Variability in the number of patients enrolled, number of investigators, geographic distribution of trials will create larger variability in inventory and distribution of drug kits
Source Make Deliver Buy
24Make – Clinical Trial SCMImportant Considerations
Drug kit pack types How many different types of drug kits are needed?
Supply logistics Local depots vs. centralized supply Need for import licenses for specific countries can delay shipments from
central depots to local depots
Subject enrollment Some study centers may need to recruit patients very quickly and begin
trials within a day or a week while others may require months
Medication management Randomization of medication administration may trigger resupply at
variable intervals, requiring safety stock
Monte-Carlo simulation being used to optimize supply chain for large (1,000 patient) studies
Source Make Deliver Buy
25Make - Manufacturing (Commercialization) SCM Strategies
Standardization of manufacturing processes Terminology Metrics Product process “toolkits”
Managing network assets Grouping plants with standard equipment and processes geared to specific product types
(e.g., dry products, freeze-dried, parenteral) Redundant facilities (security, shifting of work between plants)
Improved demand forecasting Global demand management center Centralized ownership of all forecasting tools and databases Use of ERP web-enabled global planning capabilities
Judicious use of contract manufacturing (e.g., packaging) Joint planning between product launch team and SCM team at least 1 year before NDA
submission to FDA Cross-functional development, marketing, clinical, SCM and regulatory teams for each
product
Source Make Deliver Buy
26Distribute – The Current Supply Chain
Five large drug wholesalers (“Big 5”) dominate the business McKesson Bergen-Brunswig Cardinal AmeriSource Bindley-Western 90% of the market
Many smaller wholesalers – partial product lines, regional players More than 6,500 licensed wholesalers in the U.S. Stock small target list of medications provided to a limited customer set
Secondary wholesalers Sell to other wholesalers Specialize in discounted products
Source Make Deliver Buy
27Distribute – The Current Supply Chain Models Three principal models of distributing drugs today
Source Make Deliver Buy
Model 1
Model 2
Model 3
Manufacturer
Manufacturer
Manufacturer
Retailer
Retailer
Retailer
Repackager
Wholesaler
Wholesaler Wholesaler
Repackager
Other Sources of Drugs (foreign, private mfrs)
“Secondary Market” – Major source of counterfeit drugs
28Distribute – The Drug Counterfeiting Problem
A complex, organized crime activity with multiple distributed players – secondary wholesalers a principal mechanism
The World Health Organization estimates that 5-10% of all pharmaceuticals are counterfeit 35% in Third-World countries
U.S. Customs and Canadian Border Patrol inspected 1,153 shipments of drugs into the U.S. 88% contained unapproved, counterfeit or harmful goods
China is considered by U.S. Customs to be the worst offender in exporting counterfeits
More than 200,000 bottles of counterfeit Lipitor have been found in the U.S. in the past 3 years
The total economic impact is estimated at $1 billion - $12 billion Low risk of being caught or punished
Source Make Deliver Buy
Source: FDA Consumer Magazine, March-April 2005
29Distribute – Types of Counterfeit Drugs
Identical copies Least common
Made with same ingredients, formulas and packaging but not by the same manufacturer
Look-alikes: High-quality packaging and labeling; very convincing appearance
Little or no active ingredients
Rejects: Drugs rejected for quality reasons by the manufacturer
Re-labels: Authentic drugs that have passed their expiration dates
Distributed by foreign sources
Source Make Deliver Buy
30Distribute – Supply Chain Security
FDA Counterfeit Drug Task Force created July, 2003 "FDA will not rest until we have strong protections in each link of the drug supply
chain ... ." Mark McClellan, Former FDA Commissioner
Increased number of counterfeit drug investigations Average of 5/year through late 1990’s Now averaging 20/year Most recent cases involved fake Lipitor and Procrit
Recent support for new technologies to ensure drug “pedigrees” RFID tagging of all prescription and OTC drug items by 2007 Authentication technologies (color-shifting inks, invisible bar codes
Tougher criminal penalties 10 years in prison for counterfeiting the drug label 3 years in prison for counterfeiting the drug
Increased demands on pharma companies for scrutiny of business partners
Source Make Deliver Buy
Source: FDA Report, “Combating Counterfeit Drugs”, February 18, 2004
31Distribute – Pharmaceutical Pedigree
Pedigrees track product flow from regulated entity to regulated entity
Major concerns are how (electronic or otherwise) and cost
Source Make Deliver Buy
Source: FDA Report, “Combating Counterfeit Drugs”, February 18, 2004
PharmaceuticalManufacturer
Distributors Providers
1,500 (Top 30 = 80%) 100 (Top 3 = 85%) 100,000+
80%
20%
2-3%
Simplified US Pharmaceutical Supply Chain
32Distribute – Pharmaceutical Pedigree
Some states are not waiting for a national solution
Florida has enacted a Pharmaceutical “Pedigree Papers” law that goes into full effect in 2006
A paper pedigree must be maintained through the entire supply chain back to the manufacturer
Eleven states are using the Florida statute as the template for proposed legislation
Required information includes: product identity, lot number, quantity and distribution or pharmacy licensure for each change of possession
Estimates on the distribution side alone indicate that pick efficiency will be reduced by 85%
Source Make Deliver Buy
Source: FDA Report, “Combating Counterfeit Drugs”, February 18, 2004
A paper solution will be very costly to the industry
33Distribute – Product Diversion
The diversion of licit drugs for illicit purposes 99% price differential between price charged by manufacturer to wholesaler
and price charged to the retailers
Prescription drugs account for 30% of the U.S drug abuse problem – 6.2 million people over 12 years of age (2002)
Common methods of diversion Theft of drugs from the manufacturing plant Theft of drugs in transit from plants to distributors Theft of drugs from distributors warehouses Call-ins of fake prescriptions to pharmacies Forged prescriptions, “doctor shopping” Health care professionals (doctors, nurses, hospitals, pharmacists)
Most commonly diverted products Vicodin, Lortab, Lorcet, Norco, Tylenol #3, Diazepam, Xanax, Stadol (NS),
Valium, Phenergan with codein, Tussionex, OxyContin, Ultram, Ultracet, Soma
Source Make Deliver Buy
Source: Task Force on Drug Diversion Through Institutional Outlets, Council of State Governments
34Distribute – Product Diversion Source Make Deliver Buy
Source: National Drug Intelligence Center
Number of emergency-room treatments for opiates other than heroin
35Distribute – Product Diversion Source Make Deliver Buy
Source: National Drug Intelligence Center
Thefts of pharmaceuticals from pharmacies, manufacturers, distributors, manufacturers and importers/exporters in dosage units; 2000 - 2003
Drug 2000 2001 2002 2003
Codeine 569,425 1,223,205 596,972 622,132
Dilaudid 37,531 22,647 23,072 41,668
Lorcet 100,548 540,997 126,451 360,115
Lortab 686,197 451,091 340,325 738,584
OxyContin 260,688 519,597 587,168 464,312
Percocet 421,063 127,525 193,085 278,581
Percodan 14,646 12,704 9,151 34,102
Ritalin 117,408 123,720 74,541 67,751
Valium 171,883 176,280 145,070 146,683
Total 2,379,389 3,197,766 2,095,835 2,753,928
36Distribute – Institutional Diversion
Manufacturers are not required to, and often do not, verify that a pharmacy is actually servicing the population they claim to be servicing in order to receive a discount
“Closed door” pharmacies (since they do not service walk-in patients), resell discounted pharmaceuticals at a significant profit to secondary source wholesalers who resell them at a significant profit to other secondary source wholesalers, or even to primary wholesalers, who purchase them for less than they can purchase the products from the manufacturers
Experts have estimated that between 50% and 80% of “closed door pharmacies” are participating in these diversion schemes
Inconsistent state laws prohibiting this practice, and Federal regulations have a loophole that defines “medical entity” in ways that allow this
Federal requirement that a “drug pedigree” be established and RFID may address much of this form of diversion along with strengthened Federal and state laws limiting resale of products by closed-door pharmacies
Source Make Deliver Buy
Source: Task Force on Drug Diversion Through Institutional Outlets
37Distribute – Addressing Diversion
DEA’s Automated Reports and Consolidated Order System (ARCOS) Requires manufacturers to track specific drugs from plant to distributor and to
ultimate end-user DEA analyzes data and provides it to state agencies at no cost Looks for doctors and pharmacists who receive unusually large quantities of certain
drugs
Controlled Substances Act Requires any medical professional, manufacturer or distributor who works with any of
the substances listed by the DEA to register with them Five schedules (I – V) of substances DEA authorized to prevent diversion of drugs identified under schedules II through V
National All-Schedules Prescription Electronic Reporting (NASPER) Proposed national database of all patients consistent with HIPPA Practioners can access for all patients National monitoring of all Schedule II-IV drugs
Source Make Deliver Buy
38Distribute – DEA Drug Schedules Source Make Deliver Buy
39Distribute – Continuous Replenishment
What is it? Automated replenishment of pharmaceuticals driven by utilization
Just-in-time inventory
An end-to-end automated process for pharmaceutical procurement
What’s so different about distribution to pharmacies? Pharmaceutical products are dynamic (contract pricing, brand/generic,
package size)
Product is used in a different unit of measure than acquired (unlike POS)
Many products are interchangeable
Product availability changes constantly
Source Make Deliver Buy
Source: Cardinal Health
40Distribute – Continuous Replenishment
Distributors are integral to this SCM concept: They perform order fulfillment
Five core components Site-level perpetual inventory system
Automated inventory replenishment engine
Store level inventory management and reporting
Central office inventory management and reporting
Dispensing transaction Interface (non-HIPAA)
Source Make Deliver Buy
Source: Cardinal Health
Rx Data
Summary
Auto
Replenishment
EngineProduct
Sales
History
Store
Perpetual
Inventory
Co
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un
icat
ion
s
Inte
rfac
ePharmacy Mgmt & Reporting Central Mgmt & Reporting
DistributorDC
OrdersPharmacy
CIM
Shipments
41Buy – The Retailers
Pharmacy Group Purchasing Organizations (GPOs) Alliances of pharmacies, hospitals and other healthcare systems Leverage buying power to obtain manufacturer discounts
Often turn to secondary distribution channels when manufacturers or major distributors cannot supply critical drugs when needed Drugs often stockpiled by secondary distributors for economic reasons Drug markups can be 500 – 1,000% during shortages (e.g., a vial of flu vaccine
purchased by a wholesaler for $23.65 was resold to an end-user for $147 in 2003)
Temperature-sensitive products, when diverted, are often not kept at the appropriate temperatures
Retailers attribute 48 percent of pharmaceutical inventory loss to employee theft Emerging requirements for secondary distributors to provide a drug pedigree that
can be tracked back to the original source (manufacturer) Clear “chain of custody” Cost of maintaining custodial information will fall on manufacturers
Source Make Deliver Buy
What the Pharmaceutical Industry Can Teach Us about Supply Chain Security Best Practices
Over the last few decades, increasing globalization and supply chain complexity have posed risks to pharmaceutical safety, ultimately impacting businesses and, most importantly, patients
Today, materials are procured from multiple countries, manufactured somewhere else, potentially packaged in yet another country and distributed and sold globally
To successfully protect against these risks, proactive supply chain security must deliver actionable intelligence to mitigate those risks
Once implemented, this decision-based approach, utilizing information delivered in real time, allows for efficient business practices that not only protect a brand but also the many partners and people connected to that brand.
The lessons learned in both identifying risks and improving pharmaceutical supply chain security can be applied as best practices for a variety of industries.
Key Trends Driving the Need for Supply Chain Security
83% of healthcare companies surveyed rank tapping into new global markets as a top strategy for the next three to five years. Today, up to 40% of the drugs Americans take are manufactured outside the U.S., as well as up to 80% of the active pharmaceutical ingredients in those drugs.
This rapid expansion of the global market opens companies up to an exponential increase in the number of vulnerability points, coupled with decreased visibility to them, due to insufficient supply chain information
At any stage in this long, multi-faceted journey from raw source materials to finished products to consumers,
products can be contaminated from four primary risks: Intentional adulteration, due to contamination in the manufacturing, storage, or distribution process, or
from ingredient substitution for economic gain, is more prevalent with global supply chains. Cargo theft is up due to the sluggish economy and security measures that rely too heavily on expecting
people to consistently follow prescribed procedures. In the U.S. alone, cargo theft produces an annual loss of $35 billion and in 2011; the average loss per incident in pharmaceuticals due to cargo theft was $585,000.
Counterfeiting, which is fraudulently mislabeling a product in identity or source, is another significant risk to supply chain security, as well as diversion of products from the intended authorized market to another.
Risks Have Serious Consequences
In pharmaceuticals, the most serious consequences of these four primary risks are those that impact patient safety.
Adverse patient reactions can range from minor to as severe as death. Other consequences include drug recalls, and – because drugs are tracked by lot and not units – stolen drugs can compromise volumes that are multiples of the actual drugs stolen.
In general, businesses can also incur daunting costs, such as revenue loss, recall costs, legal costs for damage to health or life and regulatory fines.
Ultimately, complications in any supply chain impact a brand’s reputation and require time and investment to rebuild trust among customers, partners and patients.
So while the opportunity to tap into the global market can generate greater revenue and efficiency, it’s important to be mindful of these risks so that appropriate security measures can be implemented to protect a business’ supply chain.
Move from a Reactive to a Proactive Security Program
An organization can protect against these risks by implementing an end-to-end proactive pharmaceutical supply chain security program that takes advantage of key advances in technology including cloud-based services, location sensors and real-time intelligent monitoring.
For example, cloud-based services enable remote video audits to ensure compliance with operational and regulatory standards.
Advanced truck security and control solutions with location sensors combined with an onboard system can detect trucks that are off route and remotely shut down a truck to prevent cargo theft.
There are also Physical Security Information Management solutions that automatically link disparate monitoring devices like video, access control and equipment sensors to minimize the risk of manual oversight and allows for real-time alerting.
This type of technology correlates relevant information and incidents from multiple systems and can apply corporate policy to enforce consistent actions across the enterprise.
Value Proposition of Proactive Supply Chain Security
In addition to protecting people and assets, a proactive supply chain security program provides the following benefits:
Product traceability Early detection of derailed shipments Compliance with corporate and regulatory group standards Beyond these tactical rewards, proactive supply chain security
programs can help a business retain its customers and partners and better protect its reputation. And in the case of pharmaceuticals, it can save lives.
What’s Next?
Industry supply chains beyond pharmaceuticals will continue to face challenges with cargo theft, government regulations and import/export security as market demands evolve.
To stay ahead of these threats, businesses must stay in tune with emerging technology, consumer and market trends, collaborating with partners and peers and engaging in industry-wide associations to share best practices, lessons learned and new ideas about the future of supply chain security.
Above all, organizations must utilize this developing technology to arm their businesses against increasingly sophisticated criminals.
Case Study : Eli Lilly and Co.
INTODUCTION:
Eli Lilly and Company (Lilly) founded on May 10, 1876 is best known for its widely popular antidepressants Prozac and Serafem
Invest heavily in research and development to bring innovative drugs to the market for areas with unmet market needs, such as cancer, diabetes, pain, cardiovascular disorders, psychological problems
Lilly's product portfolio consists mainly of patented drugs, commonly known as Branded drugs
Manufacturing Infrastructure:
Eli Lilly SCM Function
The supply chain function falls under the purview of the manufacturing division.
Key Manufacturing Strategy and Supply Chain Organizational areas are as follows:
Strategy
Strategic Facilities Planning and Sourcing (SFP)
Supply Chain Management (SCM)
Demand Management Center (DMC)
Global Logistics
Global Procurement
Operational Standards for Supply Chain Excellence auditing (OSSCE)
Operational Objectives and Supply Chain Network The main objective of the supply chain management
Balance customer service level, cost, flexibility, and risk management to fit the marketplace needs of each product by 'pulling the right levers.‘
A distinguishing characteristic of the pharmaceutical supply chains is that its efficiency and performance are constrained by the design decisions taken a few years before the actual launch of the drug.
Supply Chain Design
The key objective of the supply chain design phase is to manage the inherent risks by designing robust supply chains.
The biggest challenge at this stage arises due to the uncertainty resulting from a long horizon of around 4 years.
Deciding about the capacity requirements, additions, and sourcing poses a significant challenge when the probability of success of a drug is only 20% -40%.
Lilly uses an effective approach to address this problem in an objective manner by following a 3 step process:
Step 1 - Capacity Strategy and Sourcing - Global Capacity with Contingency
Step 2 - Sourcing Optimization using quantitative analysis techniques
Step 3 - Final decision: Can revenue be increased by using TPO?
Supply Chain Design
Step 1: Capacity Strategy and Sourcing - Global Capacity with Contingency
The key idea is to find a portfolio of potential drugs that can be pooled together to develop capacity targets.
Supply Chain Design
Step 2: Sourcing optimization using quantitative analysis techniques:
Goal: Maximize the value of manufacturing by selecting the best product mix for Lilly Networks
Supply Chain Design
Step 3: Final decision: Can revenue be increased by using TPO?
Excellent pharmaceutical supply chain design implies optimized capital investment and maximized revenue over the life of the product.
Keeping this in mind, the viability of using a Third Party Operator (TPO) is also considered before finalizing the capacity plan.
The steps involved in this process are:
manage capacity in standard technology networks
source new products from robust and flexible sites
utilize reliable TPOs for late lifecycle products
Supply Chain Operation
The key objectives of this phase are to maintain 100% customer service level and profit maximization.
The main processes involved in this phase are shown:
Demand Management
Demand Management: Supply chain operations are anchored by sales and marketing commitment to forecast accuracy.
Mission: To ensure a complete and accurate statement of demand exists for all manufacturing plants.
Inventory Management
Inventory Management:
Pharmaceutical financial realities demand a revenue based approached to API and finished stock inventories.
Inventory targets developed from a supply chain perspective establish the foundation for an operations plan that ensures 99% CSL in any given circumstances
Supply Chain Planning
Supply Chain Planning: Lilly runs several detailed multi layered centralized planning processes to plan supply in order to match the forecasted demand.
Planning Processes: In the first quarter of each year a Long-range business plan covering the next five years is generated.
Plan is based on the demand picture for new and existing products, the supply picture, the capacity utilization targets for new and existing facilities, and financial plans including expense budget and variance plans.
A formal long-range capacity analysis is also run at this time, which is used as the basis for a 5 year capital investment plan.
A formal inventory plan is also established at this time based on the Global S&OP (GS&OP) analysis.
The various planning processes run in parallel
Supply Chain Planning
Input data to this planning process include
sales data in dollars and units,
manufacturing finance figures (expenses, depreciation),
COGS and variance,
capital investment, production quantities
Inventory in dollar and unit
In addition to the long rage plan, a central plan is also generated for each quarter during GS&OP.
The horizon for this plan is typically from 6 months to 30 months, leaving each site to do the detailed scheduling inside of 6 months.
Inventory plans are developed one product at a time and the site operational plans are built for many products
Supply Chain Planning