midhin final dissertation 11111

8/2/2019 MIdhin Final Dissertation 11111

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A CASE STUDY OF RANBAXYINDIA PVT LTD SID:0925557

1 | ANGLIA RUSKIN UNIVERSITY

ABSTRACT

Indian generics pharmaceutical industry is witnessing unprecedented turbulence of globalization

as they try to expand their bases internationally. The new challenges presented to them force thecompanies to rethink at their supply chain management strategies. In this backdrop, this paper

analyses the current supply chain management challenges faced by Ranbaxy, the biggest player

in the Indian generics pharmaceutical industry. This paper finds that global demand fluctuations

and the regulatory changes are the biggest supply chain management challenges faced by

Ranbaxy. Pacer growth and acquisitions added a number of new manufacturing units to

Ranbaxys portfolio and this increased the sourcing challenges of Ranbaxy. Ranbaxys global

manufacturing units are operating sub-optimally because of these challenges. Massive adoption

of technology is the solution Ranbaxy adopted to improve the efficiency of its supply chain.

Backed by the technology, Ranbaxy rolled out two major initiatives on its systems side and

the processes sidewhich saw varying degrees of success. E-Sourcing, globalized procurement

management practices, smaller batch size production initiatives and CRUSOE Creatively

Releasing and Unleashing Substantial Operational Efficiencies became the backbone of

Ranbaxys answer to the challenges it faced. This paper finds that, while the challenges faced by

Ranbaxy remained same, Ranbaxy is able to address them to a reasonable level of success.

CRUSOE became a turning point for Ranbaxy as the initiative led to large scale cost reduction in

its operations.


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ACKNOWLEDGEMENT

This dissertation might not have been accompanied so easily had I lacked the assistance of several

people. I am grateful to my tutor Helen Benton .She provides me a valuable assistance and helped me

through the project. Moreover, I must thank my parents and my dearest friends, who were very helpful

in all the way to complete this research. I finally want to thank my sisters for their support and

encouragement.


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Table of Contents

Abstract . .............................................................................................. Error! Bookmark not defined.

Acknowledgements ............................................................................... Error! Bookmark not defined.

Introduction ............................................................................................................................................. 5

Importance of the study ...................................................................................................................... 6

Research problem and its significance ................................................................................................ 7

Industry of research and its significance ............................................................................................. 9

Objectives of the research ..................................................................................................................... 11

Background information of industry of research .................................................................................. 12

Research questions ................................................................................................................................ 13

Literature Review and theoretical background ..................................................................................... 14

Introduction to supply chain management ........................................................................................ 14

Supply chain elements ...................................................................................................................... 14

Core and extended supply chain functions........................................................................................ 16

Supply chain planning and execution ............................................................................................... 17

Role of technologies in Supply Chain Management ......................................................................... 19

ERP and SCM ................................................................................................................................... 20

e-SCM as a way to avoid Bull Whip effect ...................................................................................... 22

Integration of SCM and ERP ............................................................................................................ 23

Radio Frequency Identification technology (RFID) ......................................................................... 25

RFID systems in pharmaceutical industry ........................................................................................ 27

Supply chain in pharmaceutical industry .......................................................................................... 27

Importance of supply chain in pharmaceutical industry ................................................................... 28

Components of a pharmaceutical supply chain ................................................................................. 29

Processes in the pharmaceutical supply chain .................................................................................. 30


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Pipeline and development management ............................................................................................ 31

Capacity planning ............................................................................................................................. 32

Research methodology and hypothesis development ........................................................................... 33

Data collection, analysis and presentation ............................................................................................ 40

Components of pharmaceutical industry manufacturing and distribution chain ............................... 40

Spending distribution of generics pharmaceutical manufacturing companies .................................. 40

Overview of supply chain management initiatives in the industry ................................................... 41

Supply chain management approaches of Ranbaxy .......................................................................... 43

Interview with Girish Gupta, Director (Supply Chain) , Ranbaxy.................................................... 60

Time line of research study ................................................................................................................... 48

Limitations of the research .................................................................................................................... 49

Conclusions and recommendations ....................................................................................................... 50

References ............................................................................................................................................. 55

Bibliography ......................................................................................................................................... 59


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Chapter 1

Introduction

Globalization and rapid changes in the global business climate have increasingly made the

Operations management challenges of pharmaceutical manufacturers more and more complex.As the worldwide business climate has grown increasingly turbulent, with rapid market

consolidation, governmental regulations, protectionism, growing labour issues and financial

pressures, organizations are forced to improve their response to varying market conditions

swiftly and sufficiently. The complex nature of business market conditions are putting stress on

pharmaceutical manufacturers to enhance their supply chain management processes in order to

respond quickly to a market opportunity.

Indian generic pharmaceutical manufacturers have been struggling for decades to make theirpresence felt in the international market. With a shaken foot placed in many developed countries,

Indian pharmaceutical manufacturers now have to aggressively throw themselves at every

opportunity available. However, the companies are faced with rampant demand fluctuations and

critical supply issues that make their operations management more challenging than ever.

Previously focused more on product than process and insulated from some of the pressures felt

by other more globalized industries, the Indian drug industry has been lagging in terms of IT

utilization and operations management. The environmental changes are now putting Indian

pharmaceutical companies in a tough spot as they move to embrace global operational

management practices that are employed successful in other industries.


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Importance of the study

Supply chain management in the pharmaceutical industry is a major research topic often

undertaken as a part of process operations and management. However, most of the research in

this area is undertaken on inventory and distribution planning, capacity planning, scheduling of

operations, design of processes etc. Very rarely is the research focusing on the issues directly

addressing the pharmaceutical industries been undertaken. However, there is a pressing need in

serious research in this area owing to many reasons.

Pharmaceutical industries are facing a curious problem of demand management. Global demands

and peculiar operational environment makes the pharmaceutical industry very complex

compared to its peers. The industry is in a major need of sophisticated supply chain optimization

techniques.

At the supply chain design stage, the industry is facing a particular problem arising out of the

uncertainty of clinical tests and regulatory changes. The industry is faced with uncertainty in

demand is challenging the companies in attaining efficient capacity utilization and future

capacity planning. The ability of the company to locate important supply chain notes in tax

havens and lesser regulatory regimes are equally important and the optimized trading and

transfer price structures are becoming important part of the problem.

In the operational stage, Ranbaxy and other generic pharmaceutical manufacturers are troubled

with the challenge of responsiveness. A typical pharmaceutical product involves multiple stages

Primary Active Ingredient Production that involves multi-stage chemical synthesis and a

secondary formulation Production stage. Both these stages involve long cycle times and in order

to attain economies of scale, sufficient production numbers and longer schedules needs to beadopted. In order to survive and the provide quick responses to changing market demands,

supply chain bottlenecking and decoupling strategies together with coordinated inventory

management are crucial.


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The study is important in relevance to the industry also. Indian pharmaceutical manufacturing

companies have suddenly attained global attention because of the capability to provide cheaper

generic drugs. However, in order to sustain the global competition, these companies have to

rapidly adopt global best practices and scale up, all the while keeping themselves adaptive and

nimble to the changes happening around them. The challenges are fresh and unique and in order

to address them, a fresh look at established practices needs to be employed. This study tries to

address this gap.

Research problem and its significance

The research tries to address the specific supply chain problems faced by Ranbaxy Laboratories,

India. In order to put this paper in right context, it is important to understand the life-cycle of a

pharmaceutical product developed by Ranbaxy.

Ranbaxy, being a generics drug manufacturer, acquires technology to make potential off-patent

drugs or license potential new drugs created by other major pharmaceutical companies. The

company then does research on finding better components and ingredients that would effectively

reduce the cost of creation of the new drug. The drug thus created has to undergo a limited field

test including its ability to alleviate symptoms and disease removal. Once the drug has proved its

efficiency, the drug will undergo the regulatory approval before it goes into the manufacturing

processes.

Supply chain management challenges in Ranbaxy

Sourcing problemsTraditionally, Ranbaxy Laboratories and its manufacturing units across various location

employed local sourcing strategies. Ranbaxy manufacturing locations in New Jersey, United

States and Sao Paulo, Brazil has similar sourcing structures while Nigeria, Romania, India andSingapore manufacturing facilities used their own local sourcing structures. In all these locations,

compounds required for manufacturing were sourced through the primary local sourcing

channels. The direct materials sourced through the listed vendors accounts to 72% of Ranbaxys

total cost of a drug manufactured. Because of this very reason, Ranbaxy has been very rigid on

the vendor selection and once the vendor is selected and approved, they will remain as the


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primary source for procurement in that location. However, owing to the new market

requirements of change over competence and smaller batch production and rapid identification of

non-traditional components has put this strategy in question. Ranbaxy found a need to rapidly

change the production schedule to include a new drug into the market quicker than early

expected. They also found that sourcing a newly developed component through the traditional

channel is taking longer than expected time. Hence more than often, Ranbaxy started relying on

unlisted vendors for quick sourcing of the components. As the total number of projects taken by

the teams increased, this form of sourcing strategy puts the projects under strain and caused

delays in completing the project. The situation warranted Ranbaxy to sign short-term contracts

with new vendors and sometimes even spot buying certain critical compounds. This dramatically

increased the cost of manufacturing of the drugs.

Supply side challengesRanbaxys supply side challenges can be summarized by visualizing the following operational

parameters of the company.

The company runs 11 highly backward integrated Dosage Form (Generic drugs)manufacturing units and almost the similar number of Active Pharmaceutical Ingredients

(Advanced drugs) factories in the various locations in the world.

The company works with more than 40 contract manufacturers in developing Dosage Formdrugs

The company depends on more than 30 third party suppliers The manufacturing involves approximately 1000 SKUs of raw materials Packaging of the drug various according the regional requirements and the company uses

more than 15000 packaging materials.

Demand side challengesSimilar to the supply side challenges, the company also faces major complexity in the demand

side as well.

Ranbaxy has customers in 125 different countries located in 5 continents in the world. Ranbaxy

follows 6 distribution models and has a total of 7000 SKUs of drugs. Every other day, Ranbaxy

introduces a new drug that is introduced to multiple markets simultaneously


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Global manufacturing presenceRanbaxy followed a string of acquisitions in the recent past and followed an aggressive growth

approach in the international market. This left the company with a 25 operational plants in 11

countries with varying capacities and competencies. Among these 25 plants, some of them were

operated by contract manufactures, a few of them are operated as regional plants; a few of them

are operated as global plants that delivered drugs to multiple locations in the world. All these

plants operated at varying degrees of autonomy and it became apparent to the management that

there needs to be synergies across various plants to best utilize the resources.

This paper will consider the above important issues in supply chain design and operations of

Ranbaxy. The paper will draw important concepts from the literature and compare and contrast

with our observations and finding from our research. The main problems will be reviewed as will

the literature on the topics related. We will also look at possible strategies taken by Ranbaxy and

evaluate that in the light of the literature.

Industry of research and its significance

Indian pharmaceutical industry is second largest in the world in terms of volume. The industry

has shown a significant growth in the last decade and is currently growing at 10% per year. The

Indian pharmaceutical industry was virtual nonexistent till the 1960s. India was relying on

imported drugs till then and seeing the need for a health pharmaceutical industry, Government of

India started encouraging the growth of drug manufacturing. Patents Act 1970 saw a major step

in this area. The act removed support on composition patents filed by international companies.

The act also reduced the patent period to as low as five to seven years for process patents. This

move suddenly made Indian market undesirable for multinational companies and slowly one by

one, the exited or reduced their presence in India.

The vacuum created by the absence of major international players in the market carved a nice for

Indian pharmaceutical manufacturing companies. They gained expertise in reverse-engineering

the off-patent and generic drugs and subsequently they innovated new processes for

manufacturing these drugs at low costs.


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Indian pharmaceutical manufacturing sector holds just 2% of market globally. But the industry is

growing at a rate of 10% annually over the last one decade. Indian market is dominated by

companies who gained expertise in innovatively engineered generic drugs and active

pharmaceutical ingredients (API). The industry is now seeking to become a major player in

outsourced clinical research as well as contract manufacturing and research.

India has around 74 U.S. FDA-approved manufacturing facilities. This number is second only to

United States. In 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the

FDA are expected to be filed by Indian companies Generic drugs constitute 94% of overall

production in India. A recent market research found that the share of Indias pharmaceutical

companies in the generics market have risen from 4% in 1999 to 33% in 2007.

The industry witnessed a drastic change in 2005 when the amendment to Indias patent law was

enacted. This was in response to the WTO demands and the industry is being forced to adapt its

business model to this changing operating environment. With the new change, the patent law

reinstated with the product patents in accordance to the WTOs Trade-Related Aspects of

Intellectual Property Rights (TRIPS) agreement, which mandated patent protection on both

products and processes for a period of 20 years.

In these circumstances, it is inadvertent that Indian pharmaceutical companies should adopt

global business practices in both operations and innovating drug development. Many companies

are quick to reach by increasing their expenditure in business practice changes and companies

are relooking at various mechanisms to optimize their current practices. In this context, it is

highly important to look at the supply chain management practices employed by these

companies. Supply chain is the single most expensive spend item in the balance sheet of a global

pharmaceutical company. Efficiency is strategically critical for these firms as they face tough

threat from global players. These circumstances make it important for us to look at the issues

pertaining to supply chain management in this industry.


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Objectives of the research

The objectives of this research can be summarized as follows:

Critically evaluate the current and relevant literature pertaining to supply chainmanagement.

Analyze the supply chain problems the Indian pharmaceutical industry and Ranbaxy inparticular are facing.

Evaluate the supply chain management processes implemented in Ranbaxy laboratories toovercome the challenges it is facing.

To investigate the effectiveness of supply chain management processes in Ranbaxy.

Bring out possible improvements and recommendations to enhance the supply chainmanagement processes of Ranbaxy


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Background information of industry of research

Ranbaxy Laboratories Limited is India's largest pharmaceutical company. Ranbaxy

laboratories, incorporated in 1961, is a major global player in generic drugs manufacturing and

their products are exported to 125 countries and the company has ground operations in 46 and

manufacturing facilities in seven countries. 75% of the Ranbaxys sales come from international

market, with United States, Western Europe and China accounts for 75% of their total revenue.

Ranbaxys global sales alone are around $1.3 Billion in 2009.

Ranbaxy is a highly vertically integrated company which is focused on manufacturing off patent

generic drugs at an affordable prize. Because of the low price sensitivity and highly competitive

nature of generic drugs industry, it is highly important for Ranbaxy to be best in the class in

operational efficiency. Ranbaxy has been growing very rapidly over the last many years and in

order to sustain the growth and to improve market response, the company has been trying and

applying new ways of doing things, all looking for efficient and effective supply of product. The

fast growth and the introduction to global markets are putting strain in the supply chain

capabilities of Ranbaxy.

The introduction to global market has changed the operational management processes of

Ranbaxy. Ran baxys rigid global manufacturing with the emphasis on specialized production

equipments centred in specific geographic location because of economic reasons and the lead

time in sourcing critical drug ingredients and extensive regulatory requirements posed by the

USFDA other regulators have critically challenged the companys ability to respond to newer

global demands. As a strategic initiative, Ranbaxy is slowly moving towards New Chemical

Entities (NCE) and Novel Drug Delivery Systems (NDDS) in supporting its long term growth

prospects.

In 2008, Ranbaxy took a set of major initiatives in restructuring its supply chain management

processes. Ranbaxy identified that the companys cost profile is highly skewed towards direct

materials and they found that adding a new sourcing profile disrupts its existing profile

dramatically. This is forcing the company to enter into short term contracts and at times, spot

buying. As the total number of projects executed by the company increased over the period of


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time, the sourcing issues are delaying the projects and the cost of operation is increasing

dramatically.

Research questionsThe basic principle of research done for this project is as follows.

Evaluate the pertaining information on supply chain issues in Indian pharmaceuticalindustry.

Through Industry research and discussion with Ranbaxy senior management, understandthe context in which they operate and evaluate the key supply chain management issues

they are facing. Also look at relevant literature in the field and map the issues Ranbaxy

facing into a theoretical framework. Through industry research, understand the measures taken by Ranbaxy in addressing the

problems. Critically evaluate the problems and the solutions and understand them from a

theoretical aspect.

Based on the above listed principles, the research questions posed are below:

Are Indian pharmaceutical companies facing supply chain issues that are unique to theirnature of business?

Are the problems faced by Ranbaxy unique to it or are the inheriting the problems posedupon them by the industry and the nature of business?

Is Ranbaxy addressing the challenges these challenges adequately? Are the measurestaken are sufficient to address the challenges at least in the near future?

What additional measures should Ranbaxy look at to improve their supply chainefficiency?


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Chapter 2

Literature Review and theoretical background

Introduction to supply chain management

According to the Global Supply Chain Forum supply chain management can be defined as the

integration of key business processes from end user through original suppliers that provide

products, services, and information that add value for customer and other stakeholders. Sehgal

(2009) defines supply chain as the flow and management of resources across the enterprise for

the purpose of maintaining the business operations profitably. The resources mentioned here

can be materials, information or other resources which can be used to make a profit to the

organisation. The flow and management, which is mentioned in the definition, is central to the

success of the supply chain. The resources may flow through the supply chain, for example a

finished product to the whole sale agent (Gattorna, 1998). Some other resources enable other

resources to flow successfully through the supply chain, for instance the employees in the

warehouse. The planning and operations in an organisation is dependent on the effectiveness of

the supply chain processes. An effective supply chain can reduce the cost of goods sold and

thereby improve the profitability of an organisation (Sehgal, 2009).

Supply chain elements

The chain consists of two ends; the supply and demand end. The demand for the product

originates from the demand end, which is also called downstream. The demand end consists of

stores, customers etc, in the case of pharmaceutical industry it may be pharmacies, wholesale

distributors etc. The demand end is modelled according to the business requirements of the

organisation. For example, for a large manufacturing company, end customers may not be

modelled into its demand end but large wholesalers or dealers where modelled into its demand

end.


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The supply end consists of the sources of supplies which are required to manufacture the

products. The supply end is also called upstream in supply chain terminology. The demand

generated at the demand end is addressed by providing supplies from the supply end. The

demand end and supply end concept addresses the central issue in supply chain management;

balancing the demand and supplies (Sehgal, 2009). The demand originated from downstream

nodes which then proceeds to the upstream nodes through the supply chain whereas supplies

flows from upstream nodes to downstream nodes through the supply chain. The nodes in the

supply chain mentioned above will be typically locations. Locations may be typically

manufacturing factory, warehouse, front end stores or vendor warehouse etc. When materials

entre into the nodes, some value will be created due to the various operations performed at the

nodes. Operations in a warehouse may be receiving and shipping of the material.

The central idea of supply chain management is to apply a total systems approach to

managing the flow of information, materials and services from raw materials suppliers through

factories and warehouses to the end customer (Chopra, 2003). The phrase supply chain is derived

from an image of how companies are connected together as observed from a particular

organization.

This opens up many challenges for logistics management, like that of combining and

organizing the flow of materials from many vendors, most of them outside the country, and

handling the delivery of finished goods to customers by numerous intermediaries (Bowersox,

2002).

The firms that try to decrease cost at the expense of supply chain partners and increase

the profit margin do not comprehend that they are merely shifting the cost upwards and

downwards, and so, it is not making these firms any more competitive. This is because, these

cost will eventually be reflected in the price that is charged from the customers.

Logistics management involves managing the flow of materials within the firm, but

supply chain management, on the other hand, identifies that this is just not enough, but

connection with the external supply chain members, both upward and downwards is also

indispensible.


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Thus, supply chain management can be defined as: "The management of upstream and

downstream relationships with suppliers and customers to deliver superior customer value at less

cost to the supply chain as a whole" (Burt, 2003)

Core and extended supply chain functions

The core supply chain functions are managed by the organisation itself or in other words partner

collaboration is very limited in core supply chain functions. The core supply chain functions

include demand planning, manufacturing, optimising supply chain network, supply planning,

transportation, warehousing etc.

The extended supply chain functions involve collaboration with partners. The extended supply

chain functions are performed at both the ends of the supply chain, that is, at supply and demand

ends and thus partner collaboration is important for the success of supply chain performance.

The extended supply chain function on the supply side will be supplier relationship management

(SRM). The SRM process helps the organisation to collaborate with the suppliers by enabling

supplier performance management, enabling bidding process for suppliers, strategic sourcing etc

(Sehgal, 2009).

Customer relationship management (CRM) forms the extended supply chain management

process at the demand end. The CRM processes include customer order and fulfillment

management, enabling customer collaboration, product return and exchanges, segmentation of

customers, customer demographics etc. Apart from being an extended supply chain management

function, CRM also enables the organisation in determining pricing of products, support for

customers, providing data for target marketing campaign etc.


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Supply chain planning and execution

The planning in supply chain management refers to gathering the information from the supply

and demand ends to maintain a synchronised manufacturing and sales plan (Chae, 2009). The

planning and execution in supply chain is important since the success of supply chain

management depends on eliminating gaps between planning and execution. Successful supply

chain management processes can eliminate these gaps to minimum. Theoretically these gaps can

be eliminated, but practically it cannot be eliminated completely. This is due to uncertainty in the

future market conditions and the risks involved in decisions taken by the top level management

(Chae, 2009). Therefore, synchronisation of manufacturing and sales are important aspects a

supply chain should accomplish.

As mentioned, supply chain planning takes data from both ends of the supply chain. The supply

chain management execution operation takes these planning data as input and performs activities

such as manufacturing, sourcing, delivery etc which eventually generate revenues for the

organisation. The planning in supply chain management has two basic functions; demand

management and master production planning (Chae, 2009). In the present business scenario,

most of the companies use specific software packages for planning. The types of softwares used

by organisations vary according to the complexity of supply chain management planning.

The supply chain operational planning requires the coordination of a number of the process,

specifically demand planning responsiveness, customer relationship collaboration, order

fulfillment/ service delivery, manufacturing, customization, and supplier relationship

collaboration must coordinated to satisfy customers and effectively use resources . the system is

to provide this coordination is the supply chain planning system.

The supply chain planning system and the related information systems seek to integrate

information and coordinate overall logistics and supply chain decisions while recognizing the

dynamics between other firm function and process. ( Bowersox, J. D. et al, 2007)

The demand management helps the organisation to forecast the demands and sales orders which

in turn is used in master production planning. Using these forecasted sales data, the master

production planning creates production plans for the organisation depending on raw materials


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availability and production capacity. The master production plan is designed to meet the output

requirements such as available to promise for sales units, manufacturing unit production

quantities and purchase requirements plans for purchase department.

After the planning process, the supply chain execution follows. The data from the planning stage

is used to execute master production plans. The basic SCM execution is as follows; the promised

delivery to the customers or wholesales will be addressed, the targeted amount of production

quantities will be achieved to meet the requirements and the purchasing of materials required for

the production by the purchase department. In the present scenario, almost all the big players

uses sophisticated soft wares for controlling the various SCM planning and execution methods.

As mentioned earlier, in practice, there is always a gap exists between planning and execution

processes due to unprecedented events. Therefore, what was actually done may not be same as

what was actually planned. For a better performance of the supply chain, this gap should be

minimized. In order to minimize the gap, key performance indicators (KPIs) should be identified.

Using the KPIs, the demand and execution planning can be analyzed. Then the gap between

planning and execution can be identified. Thus using the KPIs, the gap can be minimized by

rectifying the problems identified.

However, for most of the organisations, identifying key metrics is often a difficult task since the

number of KPIs will be very large for a supply chain (Gunasekaran, Patel and Tirtiroglu, 2001).

Different researches and academic papers lists contrasting number of KPIs in supply chain. For

instance, the AMR research lists 45 KPIs while ASCET lists around 100 KPIs for supply chains.

Therefore, the organisations will always find difficulty in choosing the right number of KPIs for

its supply chain (Lapide, 2000). In the supply chain management perspective, choosing a less

number of KPIs is always better (Chae, 2009) which can be managed properly. The KPIs for the

supply can be formulated using different frameworks proposed by various researchers. One such

framework is Supply Chain Operations Reference Model (SCOR) which can be used to identifyKPIs. In this model, the supply chain is divided into four main processes; plan, source,

production and delivery. The potential KPIs are developed according to each process.

Today, supply network is probably a better term than a supply chain because it

probably better describes the nature of supply chain relationships today (it means non-linear


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flows, network-like systems and webs of suppliers and customers). (Rice, 2001) James Rice

claims that in future, there might be three possible scenarios for supply network competition:

Competing as SC vs. SC literally assuming that the nature of the competition will be between

groups of companies from across the supply network competing as one entity, formally or

informally.

Competing on supply network capabilities the nature of the competition will be between

individual companies competing on their internal supply network capabilities.

Competing on supply network lead by Channel Master here the nature of competition will

center on single, most powerful company of a supply network. The single most powerful

company is sometimes referred to as a channel master.

Role of technologies in Supply Chain Management

The supply chain management includes functions such as sourcing of materials, scheduling of

production and the distribution activities along with the management of necessary information

flows (Bovet and Martha, 2003). In the modern business environment, the success and failures

of the organisations can be attributed to the effectiveness of the supply chain (Godsell, Birtwistle

and Hoek, 2010). Organisations face many problems due to the ineffectiveness of the supply

chain. For example, the unavailability of products which the customer wants and the unwanted

stocks the customer does not want creates gaps between the marketing and supply chain. The

supply chain effectiveness can be therefore considered as a competitive advantage for the

organisations (Fisher, 1997).

The supply chain which is viewed as a competitive advantage by organisations has led to the

development of supply chain management theories and applications, most of which is IT related

such as enterprise resource planning (ERP) (Lenny Koh, Saad and Arunachalam, 2006). The

complexity of supply chain has increased in the present business scenario. The management of

these complexities in supply chain, collaborations with partners and managing changes in supply

chain become critical success factors for an organisation (Kearney, 2003). Therefore,

organisations are using information systems to address these issues in supply chain. Information


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system is the central technology used to coordinate divisions and collaboration with partners in

the supply chain perspective (Knolmayer, Mertens and Zeier, 2002).

ERP and SCM

When the ERP systems were first developed, its primary objective was not to enhance the supply

chain of organizations (Davenport and Brooks, 2004). Instead, ERP systems focused on

integrating internal processes of an organization such as order entry, finance, human resources,

manufacturing etc. Its only link to the supply chain was its inventory management module. These

traditional functions of the ERP system cannot address the challenges involved in a complex

supply chain which organizations view as critical for attaining competitive advantage (Chen,

2001). Therefore, the ERP systems have evolved much from its predecessors to extent its support

to the supply chain of organizations (Lenny Koh, Saad and Arunachalam, 2006). The ERP

systems can enhance the efficiency of operations and reduce costs in organizations. It also helps

the organizations to implement best practices approach and thereby consistency (Edwards, Peters

and Sharman, 2001). Thus organizations can improve its internal processes mentioned earlier

through implementation of ERP systems. The focus is now shifted to extending ERP systems to

improve supply chain processes (de Burca, Fynes and Marshall, 2005).

In the current business scenario, the ERP systems has been extended to include modules such as

customer relationship management, supply chain planning and execution, decision support,

automation of sales force etc. The pervasiveness of internet has revolutionized the way firms are

thinking about its supply chain. The internet has provided organizations an easy and cost

effective way to link the supply and demand ends of a supply chain (Davenport and Brooks,

2004). Organizations are using internet to cut costs and increase efficiency in the extended

supply chain functions.

As the information flow is vital to the efficiency of the supply chain performance, many

companies are now implementing e-SCM (de Burca, Fynes and Marshall, 2005). The e-SCM

concept concentrates on the management of information flows through a supply chain by

efficiently managing technology and processes in such a way that the information from the

supplier and the customers are optimized and deliveries and sourcing are coordinated.


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However, if the ERP system is not implemented according to the business needs of the

organization, e-SCM cannot provide an advantage to the organization. In fact, if the ERP

implementation is not proper, e-SCM can only create problems at the supply and demand end

rather than optimizing the processes at these ends (Norris, Hurley, Hartley and Dunleavy, 2001).

Implementing an ERP system in an organization is not an easy task. For instance, a typical ERP

implementation in an organization may take one to three years to complete and costs huge

amount of money (Akkermans, Bogerd, Yucesan and van Wassenhove, 2003). In order to

achieve greater efficiency in the supply chain using e-SCM and ERP as background,

management practices and business processes should be modified. The success of e-SCM can be

attributed to two main factors (Norris, Hurley, Hartley and Dunleavy, 2001). First, collaboration

among partners should be viewed as a strategic asset and trust must be developed between

trading partners. Second, the visibility of information in the supply chain should be monitored

with proper coordination.

Good business relationship is central to collaboration. One of the main challenges while

implementing e-SCM in organizations is the partnership challenge since most of the

organizations lack control over their partners systems (de Burca, Fynes and Marshall, 2005). To

achieve some amount of control, trust must be developed between various partners. Therefore,

good relationships with partners are an important factor for the success of e-SCM concept. On

the other hand, collaboration and trust exposes the internal activities and performance metrics of

an organization to its partners. This visibility of internal operations by partners increases the

pressure on the organization since its operations are now transparent. The managers should

therefore consider optimizing the entire supply chain rather than improving only their supply

chain. However, many organizations are not willing to share information with their partners.

Organizations believe that sharing of information will affect their competitive advantage

(Agrawal and Pak, 2001) as right information at right time can attain a competitive advantage.

One of the main advantages of e-SCM is that it provides organizations with various strategic

options. E-SCM improves the adaptability and long term flexibility of the organization (Sarkis

and Sundarraj, 2000). With the growth of internet and subsequently e-commerce, customers are

expecting less response time and greater degree of customization for products (van Hoek, 2001).

In order to sustain in the competitive business environment, organizations should be more


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customer centric than ever (de Burca, Fynes and Marshall, 2005). This requires a strong

relationship with the customers in order to create customer loyalty. In this perspective, e-SCM

seems to be a strategic initiative to achieve customer loyalty.

In order to reduce the cycle times and cost of inventory which are the two main concerns of the

supply chain, the entire supply chain, including the partners, must be optimized rather than

considering each one individually (Kehoe and Boughton, 2001). The information flow through

the supply chain must be integrated in all stages (Kennerley and Neely, 2001). But as the

collaboration increases, the complexity of the supply chain increases and can be considered as an

enhanced network (Koch, 2001). Traditional supply chains have been linear and fixed. But with

the introduction of electronic supply chains, supply chains are no longer linear and fixed. The e-

SCM contains multiple channels and relationships with partners and fosters an integrated flow of

information. As a result, modern firms are embracing e-SCM rather than traditional supply

chains. In the modern business scenario, organizations need to respond more quickly and

efficiently to changes in the external market and to collaborate with various partners.

E-SCM as a way to avoid Bull Whip effect

The bull whip effect can be considered as the most common problem in supply chains (Trkman,

Stemberger, Jaklic and Groznik, 2007). The bull whip effect is the result of magnifying demand

order fluctuations as they move up the supply chain (Lee, Padmanabhan and Whang, 1997).

Incorrect information originated at one end of the supply chain can cause tremendous

inefficiencies when reaches at the other end of the supply chain. Even small fluctuations in

demand in one end of the supply chain will enlarge and propagate to the other end (Trkman,

Stemberger, Jaklic and Groznik, 2007). The bull whip effect can be minimized by investigating

the underlying causes that generates the effect. One of the methods to avoid bull whip effect is to

implement e-SCM. The flow of integrated information throughout the supply chain can avoidbull whip effect (Lee, Padmanabhan and Whang, 1997). With the use of the internet, the demand

and supply capacity will be visible throughout the supply chain and therefore by the

organizations in the supply chain. This will help the organizations to anticipate the demand

fluctuations and can respond effectively (Kehoe and Boughton, 2001).


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Integration of SCM and ERP

In the present business scenario, organizations are extending their operations all over the world

in search of new opportunities. The competitive business environment and ever changing

external business environment are exerting great pressure on organizations performance. The

challenge before the organizations is how to tackle the changes in external business

environments and how to compete effectively in a global perspective. In an organization with

worldwide operations, an organizational wide information system is required to allow the

information flow across various geographic locations. Even within the same organization,

organizations are seeking to implement organizational wide information systems which allow

different departments to cooperate more efficiently (Tarn, Yen and Beumont, 2002). Functional

integration is the key to achieve this goal. Functional integration refers to integrating all business

functions in an organization, for example, logistics functions of the organization may be

integrated with manufacturing, supply management and information technology. This functional

integration inside the organization can later be extended to other partner organizations in the

supply chain (Ferguson, 2000).

In order to achieve efficiency in supply chains, continuous adjustments are required such as risk

assessment, assessment of sourcing and delivery alternatives, dynamic pricing etc. the supplychain management systems are expected to perform these issues. On the other hand, ERP

systems are not designed to perform these tasks. In the case of ERP systems, demand constraints,

capacity and material are considered separately (Bose, Pal and Ye, 2008). On the other hand,

SCM systems consider these issues simultaneously and plan quickly. The ERP systems have

various limitations in addressing the challenges of SCM such as difficulties in extending

operations beyond the organization, poor flexibility when dealing with changes in requirements

and minimal functionalities when dealing with management of transactions etc Akkermans,

Bogerd, Yucesan and van Wassenhove, 2003).

The ERP systems stores and retrieves relevant data and enhance business processes such as sales

and distribution, logistics, procurement, manufacturing, inventory management, finance etc. On

the other hand, SCM requires decisions taken within and beyond organizational boundaries. ERP

systems are basically transaction based systems. The SCM requires collaboration with partners,


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visibility, planning and management of supply chain within and beyond the organization.

Therefore, in order to achieve better results from supply chain, the ERP systems and SCM

should be integrated (Lenny Koh, Saad and Arunachalam, 2006). While implementing an ERP

system, organizations have to modify its business processes, reorder its organizational structures

and modify its management processes (Bose, Pal and Ye, 2008).

The purpose of ERP systems in organizations is to improve the internal operational efficiency

through integration of various operations. On the other hand, SCM focuses on collaboration with

various partners in supply chain. Since ERP systems are implemented in most of the

organizations, firms are expected to communicate with supply chain partners and facilitate

information flow between them. In such a situation, integration with SCM and ERP is a

necessary phenomenon to achieve a strategic advantage. In a technological perspective, ERP can

be considered as the backbone of SCM. Both ERP and SCM rely on the same technological

framework such as internet, intranet or extranet. Therefore, the integration between SCM and

ERP is feasible. The most important functionality expected from the commercial ERP packages

in the modern business scenario is its integration with the SCM.

Since it is evident that information systems can improve the performance of supply chain,

Ranbaxy has implemented SAP R/3 ERP package as the transactional backbone for SCM. By

implementing this ERP package, Ranbaxy was able to streamline its operations through a single

system. Through integration of ERP and SCM, Ranbaxy was able to identify key performance

indicators (KPI) which are significant in improving the performance of the supply chain.

Ranbaxy also initiated a cost reduction program called CRUSOE (Creatively Releasing and

Unleashing Substantial Operational Efficiencies) which was aimed at reducing the cost at supply

chain sourcing process.


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Radio Frequency Identification technology (RFID)

The reduction in costs related to the supply chain activities is the key concern for various

partners in supply chain. One of the methods employed for the reduction of costs is the radio

frequency identification method (RFID) technology (Attaran, 2007). RFID is an electronic

tagging method which can be used to identify the product in a supply chain.

Even though RFID is not a new technology, its application in the supply chain perspective is

new. For an insignificant price, the RFID tag can be included with the product within the

manufacturing stages. The RFID tag moves with the product throughout the supply chain until

the product reaches its destination, typically customers. At this stage the product can be scanned,

which is still at a box or crate. The scan reveals all the necessary information about the product.

In RFID technology the data about the product is captured automatically and has the potential to

revolutionize the way organizations conducts their business. The RFID tag is made of a silicon

chip along with an antenna which enables the tag to communicate with the reader. The tags

attached to the products transmit radio frequency signals. The reader reads the transmitted

signals and decodes it. The decoded information is then fed to the host computer and matched

with the recorded information.

The RFID system consists of three major components (Attaran, 2007); the tag, reader and the

computer. Tags are silicon chips which are attached to the products. Tags can be either passive or

active. The passive tags do not have a battery attached to it. It takes power from the reader and

has unlimited life span. The reader transmits and receives radio frequency signals from the tags.

The reader captures the signals from the tags and fed the information to the computer. In the case

of passive tags, the reader sends a wake up signal for the tags which activated the passive tags.

The computer interprets the data received from the reader ad takes the necessary action.

RFID system which uses radio waves for automatic identification of objects, information is

stored in a microchip in an RFID Tag or in RFID transponders. Which are affixed to the object to

be identified? This enables the transfer of identification information to the reader, which converts

the radio waves from the RFID tags in to format which can be relayed to computer for further

processing.( Jonsson, P. 2008)


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The RFID can be useful for all the partners in the supply chain in different ways (Thangamuthu,

2008). In the case of manufacturers, with the inclusion of RFID technology, the various

components can be monitored as they move through a production facility. RFID helps to identify

the faulty components at the production plants as well as after being sold. In the case of

distributors, RFID tags helps to manage inventory and fleets. This will reduce the manual tasks

to be performed while reducing time and shipping errors. In the case of retailers, RFID tags can

update stocks level, tracks the history of the products, and prevents theft of products and

decrease checkout times.

The traditional bar coding system requires individual scanning of products and the bar code must

be visible. On the other hand, RFID readers can read hundreds of tagged products simultaneously

and the tag is not required to be visible. For example, the tagged products must be inside a crate

which can be read from outside using the reader. Furthermore, traditional bar coding system can

identify only the type of product identified whereas RFID scanners can identify individual

products with all the attributes of the product.

The RFID system helps organizations to improve operational efficiency by increased visibility of

the inventory (Attaran, 2007). As mentioned earlier, SCM needs tight integration with various

applications. The RFID system can track unfinished materials, manage inventory, timely

shipments, avoidance of out of stock etc. These issues have increased the adoption rate of RFID

in many organizations. The predecessor to RFID, the bar coding system, can only store limited

amount of information. The increased information storage by RFID system allows organizations

to synchronize its inventory levels.

The availability of information is central to the effectiveness of the supply chain. This

information is the basis for decision making. The RFID system enables the organization to

capture necessary information from the supply chain as the tagged product moves through the

supply chain. The out of stock impact is very high for fast moving products. RFID can providebetter information about the products and inventory thereby reducing the chances of out of stock

impact.


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RFID systems in pharmaceutical industry

One of the major problems in pharmaceutical industry is the threat from counterfeit drugs.

Counterfeit products are always a problem for the pharmaceutical companies. These counterfeit

drugs affect the image of the brand and the counterfeit products do not satisfy the required

standards. In the pharmaceutical industry, these products are very dangerous for obvious reasons.

Traditionally, the counterfeit products are more common in under developed markets. But in the

present situation, the counterfeit drugs are a global concern (Nand, Singh, Vashist and Drabu,

2010). The RFID technology can be used to tackle the problem of counterfeiting. Since the RFID

system records all the details of the genuine products, if a counterfeit product enters at any stage

of the supply chain, it can be easily identified by comparing with the data.

Taking advantage of the RFID technology, Ranbaxy has implemented Acsis RFID in its products

(Business wire, 2004). This is also to comply with the Food and Drug Administration (FDA)

standards in the pharmaceutical products issued on February 2004. The experience of Acsis on

the implementation of RFID systems in pharmaceutical industries were the basis for selection by

Ranbaxy.

Supply chain in pharmaceutical industry

The pharmaceutical industry refers to a complex of processes, operations and organizations

involved in the discovery, development and manufacture of drugs and medications (Shah,

2004). The World Health Organization (WHO) defines a drug as any substance or mixture of

substances manufactured, sold, offered for sale or represented for use in the diagnosis, treatment,

mitigation or prevention of disease, abnormal physical state or the symptoms thereof in man or

animal; [and for use in] restoring, correcting or modifying organic functions in man or animal.

Since the definition of drugs is very wide, clearly large number of players of varying size and

structure plays in this sector. This project aims to study the supply chain initiatives at Ranbaxy, a

pharmaceutical company based in India. Ranbaxy has excellent research and development

facilities and operates almost all over the world.

In the past decade, high returns on investment and huge sales revenue from successful products

have changed the way the industry operates (Booth, 1999). The huge turnover has resulted in


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investing huge amounts of money in research and development activities which created drugs for

treating incurable diseases which were previously thought to be impossible. The patent periods

for these drugs developed were longer and these patents create a technological barrier for other

companies to follow. These technological barriers can provide a competitive advantage for the

organization. Also, the number of substitutes for a given product in a specific area was less. The

products were also less sensitive to price. Therefore, firms in the pharmaceutical industry

invested heavily on research and development projects.

The recent conditions in the industry have changed a lot. The research and development

productivity is decreasing in terms of new chemical entities (NCE) per unit. The patent lives of

the products are now less. Because of this shortening of patent lives, the technological barriers

existed earlier is decreasing which will affect the competitive advantage of the organization. The

number of substitute products has increased in each specific area. The industry is experiencing

strong price sensitivity from its customers. The big players in this sector are traditionally

depends on blockbuster drugs. But reports suggest that this dependence of blockbuster drugs

may not sustain in the future (Butler, 2002). These conditions are very challenging for the

players in this sector.

But, on the positive side of things in this sector, the market liberalization has opened new

markets for the players and it increased the competition between the players. But governments

are intervening more on the pharmaceutical industry. Several measures are in practice to control

the prices of newly developed compounds and governments are encouraging the use of

alternative if possible.

Importance of supply chain in pharmaceutical industry

In the pharmaceutical perspective, the time to market will be the single most important driver

(Shah, 2004). A successful drug will yield huge profits in its early life cycle since the

competition will be very low at that time. But now this competition free period is decreasing.

Since the products in this industry are very sensitive due to health hazards, the regulations

existing in this sector is often very strict. The regulations often investigate the safety and efficacy

of the compounds, the manufacturing processes involved and the design of plants. Each country


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has its own regulatory bodies for monitoring the production of drugs. On the other hand, this

excessive monitoring will hinder the innovation in this industry. The regulatory process is often

time consuming and expensive which is also not good for the industry. The monitoring process

of a complex drug with complex manufacturing process can take lot of time.

The logistics cost in the industry is relatively high some time ago. Traditionally in the

pharmaceutical industry, more attention was given to research and development and sales and

marketing activities. In the supply chain point of view, sales and marketing are only the extreme

ends of the supply chain. As mentioned earlier, the effectiveness of the supply chain can be

improved by optimising the entire supply chain. Therefore, in the recent past more and more

organisations in the pharmaceutical industry are concentrating on optimising supply chain.

Organisations are now viewing supply chain optimisation as a way to create value to the

stakeholders of the business rather than concentrating on specific parts of the supply chain.

The life cycle of a drug (Shah, 2004) starts from the research phase in which hundreds of tests

were conducted using test compounds. For a new drug to be developed and registered it takes

almost ten years. The patent process is carried out after this stage. The new drug must be tested

rigorously for safety and efficacy. The tests involves, testing for toxicity in the first stages and

later on the drugs ability for curing diseases. After the tests, the manufacturing processes are

modeled and this stage is called development activity and usually talks some years to complete.

The distribution process is the last process to follow.

Components of a pharmaceutical supply chain

A typical pharmaceutical supply chain contains the following nodes (Shah, 2004); primary

manufacturing, secondary manufacturing, warehouses or distribution centers, wholesalers,

retailers or hospitals.

Primary manufacturing: this site is where the manufacturing of active ingredient (AI or API)

takes place. It is usually situated at the organizations premises. The process usually involves

several chemical synthesis to obtain the complex molecules required and purification if

necessary. The actual manufacturing process involves long task processing times. As in the case


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of pharmaceutical industry, intermediate products are often send for a quality test before

promoted to the next stage in the manufacturing which is very unusual in many other industries.

Some organizations outsource the primary manufacturing process to contractors. The level of

primary manufacturing is often varying; with some organizations outsource completely the

manufacture of active ingredients. The main reason for outsourcing to contractors is to

concentrate on research and development activities rather than concentrating on manufacturing

processes. But this will increase the complexity of the supply chain as the supply chain is further

extended and involves a new partner.

Secondary manufacturing: in this stage, the active ingredient produced at the primary

manufacturing site is added with excipient inert materials. The further processing and

packaging is done at this site. The final product will be ready for shipping to wholesalers or

hospitals. The secondary manufacturing sites are often separated from the primary manufacturing

sites geographically. The number of secondary manufacturing sites will be higher than the

number of primary manufacturing sites. For instance, many secondary manufacturing sites will

exist for a particular market. Since this manufacturing site is connected to the wholesalers, they

play an important role in this stage. Almost eighty percent of the demand flows between

wholesalers and this site and large part of remaining products going to hospitals.

Processes in the pharmaceutical supply chain

The processes in the pharmaceutical supply chain are almost entirely run by ERP systems. Since

the complexity of the supply chain is ever increasing, only an organizational wide information

system like ERP systems can address the various issues effectively. The following were the

various processes at the pharmaceutical supply chain;

Demand management: the demand forecasting is done geographically and are based onhistoric data, market surveys etc. The tenders for manufacturing may be issued and

accepted at this step.


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Inventory management and logistics planning: after the demands have been forecasted,the appropriate warehousing and distribution processes must be planned to meet the

requirements. The finished products stock will be evaluated and if requirements still

persist, order is placed on the upstream secondary manufacturing site.

Secondary production planning and scheduling: the placed orders are scheduled andexecuted. If the requirements are high, further orders are placed upstream to increase the

active ingredient stock levels.

Primary manufacturing planning and active ingredient inventory management: the orderfrom the secondary production sites will be satisfied with required inventory level and

production planning.

Pipeline and development management

The pipelining or sequencing of tests was carried out where unlimited resources are assumed to

be available (Schmidt and Grossmann, 1996). In the context of pharmaceutical industry, large

number of tests has to be carried out. In this testing method, each test has been assigned a

probability of failure which is different from the consideration of project scheduling. The failure

one test will affect successive tests and successive tests will be formulated. If the tests are carriedout in parallel mode, the effect of failures on successor tasks are not considered and thereby

increases the expenditure.

But in the real time situations, resources may be often constrained. A different testing

methodology when the resources are limited should be considered at this situation. In this

approach, each product is tagged with specific tasks (Jain and Grossmann, 1999). Each task has

specific duration, cost, resource requirements and success probability.

The development phase selects the potential drugs and runs series of tests and process

development. This process as mentioned earlier is lengthy and risky. Therefore the problem of

risk must be addressed at the development stage (Blau, Mehta, Bose, Pekny, Sinclair, Keunker

and Bunch, 2000). This consideration supports the process selection and test plans while

considering the risk factors. The activities in the development stage are modelled as probabilistic


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activity network. Each activity is tagged with specific resource requirements, time and success

probability.

The risk taken to achieve a reward must be considered against the potential reward. The potential

reward in the developmental stage is the expected revenue generated from successful drugs in the

developmental stage. The amount of risk taken can be weighed against the rewards reaped. This

ratio will help to classify different drugs. According to the classification, unwanted and

unprofitable drugs can be removed and the successful candidates can be put into the

developmental pipeline.

Capacity planning

The capacity planning under clinical tests uncertainty problem was addressed by Papageorgiou,

Rotstein, and Shah (2001). The capacity planning describes the allocation of new manufacturing

sites to existing or potential sites where capacity has to be increased. The taxation policies of a

particular location will play a major role here as low taxation can reduce the production costs.

Therefore, location decisions will mostly based on taxation of that particular region. Rotstein,

Papageorgiou, Shah, Murphy, and Mustafa (1999) have considered capacity planning under

uncertain conditions. Their study was based on three products. The need for present and future

capacity planning is considered based on these three products.

In capacity planning, when to invest in increasing the capacity is a key issue. When the

information from the market is not sufficient, deferring capacity planning is an option. Even

though, this strategy decreases the chances of various risks, the time to market of the product

increases. So there is also a trade off between when to invest in increase in capacity planning.


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CHAPTER 3

Research Design and methodology

Saunders et al. (2007) says the term research philosophy connects to the development of

knowledge and the nature of that knowledge. The research philosophy accepted by the

researcher includes the assumptions about the way in which the researcher sees the world. These

assumptions can influence the research strategy and the methods chosen in the research strategy.

The practical considerations can affect the philosophy the researcher adopts. But, the important

influence may be the researcher specific view of the connection between knowledge and the

method by which it is created (Saunders et al., 2007). Three main ways of research philosophy

are epistemology, ontology, and axiology. They contain valuable differences that can affect the

method in which researcher thinks about the research process.

RESEARCH PARADIGM

The research is an investigation to find out something. The term paradigm is usually used in

social sciences, but one that can lead to confusion as it tends to make multiple meanings. The

paradigm is a way of examining social phenomena from which particular understandings of

these phenomena can be gained and explanations attempted" says Saunders et al., (2007).

Research methodology deals with identifying various research methods that is suitable for

conducting the research. The research methods take consideration of the research aims and

objectives. The availability of resources often affects the selection of research methods (Gill and

Johnson, 2002). The research methodology is important in the sense that improper research

methods will affect the quality of data collection and subsequent stages.

When selecting the research methodology, practical considerations should be followed. The

selection of research methodologies will reflect the researchers skills and knowledge. The

relevance of the research methodology should be given prime importance rather than selecting

some methodologies.


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RESEARCH DESIGNANSWERING METHOD

According to Robson (2002), research design is changing the research question into research

project. Research philosophy and approach influence the way the researcher intends to answer

research question. Saunders et al., (2007) says that "your research design will be the general plan

of how you will go about answering your research question(s)." The three methods in which

questions are answered are descriptive, exploratory, and explanatory.

Descriptive study

Robson (2002: 59) says that descriptive study is to portray an accurate profile of persons, events

or situations. This can be first part to or an extension of, a exploratory research or a explanatory

research. It is required to have an accurate picture of the phenomena on which the researcher

wishes to gather data before the collection of the data. Whisker (2001) explains a descriptive

study as one that designs to find out more about a phenomenon and catch it with deep

knowledge. Usually, the collection and description is only true for that moment of time.

Exploratory study

An exploratory study method helps to find out what is happening; to seek new insights; to ask

questions and to assess phenomena in a new light (Robson, 2002: 59). It is especially useful if

the researcher wishes to clarify his/her understanding of a problem. The three principal methods

of exploratory study are 1) interviewing 'experts' in the related subject, 2) a search of the

literature, and 3) conducting focus group interviews. Adams and Schvaneveldt, (1991) says

"exploratory research can be likened to the activities of the traveller or explorer". The main

advantage of exploratory study is its flexibility (Saunders et al., 2007).

Explanatory Study

Saunders et al. (2007) says researches that create casual relationship between variables is known

as explanatory studies. The emphasis of study is to study a problem or a situation to describe

relationship between variables. The researcher can carry on and subject the topic to statistical test

like correlation to make a clearer view of relationship. Alternatively, the researcher may gather


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qualitative data to describe the causes of relationship between the variables. In another words,

the researcher can answer the questions why. Wisker (2001) says it is a simple exploratory

study.

For this research, exploratory and explanatory studies have been employed. As the descriptive

study is not enough wide to choose, it was rejected. Here, the researcher used exploratory and

explanatory study.

RESEARCH STRATEGY

As described by Saunders et al. (2007), the research design is the general idea of how the

researcher will go about answering the research questions. It includes the research strategies,

data collection and analysis methods and the research project timeline. According to Yin (2003),

each strategy can be used for descriptive, exploratory, and explanatory. Some of these strategies

are clearly come under deductive approach and others come under inductive approach. The most

important thing is whether the strategy enables the researcher to answer the particular research

and meet researchers objectives. The choice of research strategy is decided by research

questions and objectives, researchers philosophical underpinnings, the extent of existing

knowledge, and the amount of time and other resources available. According to Saunders et al.

(2007), the different research strategies are experiment, survey, action research, grounded theory,

archival research, ethnography, and case study. These strategies are not considered of being

mutually exclusive. For example, it is possible to use survey strategy as part of a case study.

Experimental study: According toSaunders et al. (2007), it is a classical way of research that

belongs much to the natural science although it uses in much social science research, especially

psychology. Experimental studies are carried out in structured and carefully controlled

environments and enable the relationship of phenomena to be analysed and identified. The main

purpose is to study the casual links; whether a change in one independent element makes change

in other independent element, says Hakim (2000). So this study is discarded here for the

proposed research. In addition to this, it is the favoured research strategy for testing hypothesis

(Dul and Hak, 2007). Here, the researcher does not test a hypothesis. So it is discarded for this

research.


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Action Research: The term action research is first used by Lewin in 1946. It includes an

intervention by the researcher to influence change in any situation and to watch, and evaluate the

results. Here, the researcher has to work with a client to identify a particular objective. The

active co-operation between researcher and client and a continual process of adjustment to the

intervention in the light of new information and responses to it from the participant is very

important in action research.

Surveys: Surveys include selection of a representative and unbiased sample of subjects drawn

from the category, the researcher wishes to study. The main methods are asking questions (face-

to-face or telephone interviews, by using questionnaires, or mixture of the two. Two main

categories of survey: a descriptive survey (identifying and counting the frequency of a particular

response among the sample group) and analytical survey (analysing the relationship between

different variables in a sample group). As the survey strategy is generally associated with the

deductive approach, is not suitable for the proposed study, which contains an inductive approach.

Case study: According to Robson (2002:178), case study is a strategy for doing the research,

which includes an empirical investigation of a specific contemporary phenomenon within its

actual life context using multiple source of evidence. Walsh (2001) says case study as involving

a systematic investigation into a single situation or individual event, that is, the researcher studies

a single example or case of some phenomenon. Yin (2003) emphasises the importance of context

and adds that within the case study, the borders between the phenomenon being searched and the

context within which it is being studied are not accurately evident.

As described by Robson (2002) a case study is a strategy for doing research which includes an

empirical investigation of a specific contemporary phenomenon within its actual life context

using multiple sources of evidence. This definition points the fact that a case study is the

effective approach for this research. This requires a deep understanding and focus into the

research context. Here, the views of all participants related to the research context are examinedto gather in-depth understanding of the subject matter under investigation. In addition to this, the

research objectives and situation most certainly suit to this strategy. Yin (2003) classifies four

types of case studies: single, multiple, holistic and embedded. This research comes under the

single case category where a unique case is researched, providing an opportunity to investigate a


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specific situation which almost none have investigated before. Secondly, the research also can be

considered as a holistic case since the company is taken into consideration as a whole.

THE ETHICS OF THE RESEARCH

The ethics explains the appropriate behaviour of researcher towards the rights of individuals who

become the subject of study, or are influenced by it. Blumberg et al. (2005) says the research

ethics is moral principles, norms or standards of behaviour that guide moral choices about our

behaviour and our relationship with others. Research ethics concerns questions about how the

researcher formulate and clarify research topic, design research and gain access, gather

information, process and store data, examine data, and write up research findings in a responsible

and moral way. Saunders et al. (2007) says the common ethical issues are 1) consent and

possible deception of respondents, 2) privacy of possible and actual respondents, 3) maintenance

of the confidentiality of information provided by respondents or identifiable participants and

their anonymity, 4) voluntary nature of participation and the right to withdraw partially of

completely from the process, 5) reactions of respondents to the way in which the researcher

wants to gather information, including embarrassment, stress, pain, discomfort, and harm, 6)

effect on participant of the way in which the researcher use, analyse and report the data,

especially the avoidance of discomfort, embarrassment, pain, stress, and harm, and 7) objectivity

and behaviour of the individual as a researcher. The avoidance of harm (non-malfeasance) can be

considered as the cornerstone of the ethical issue.

Hypothesis:

The hypothesis is developed based on the basic research done on the supply chain management

aspect of Indian pharmaceutical industry and Ranbaxy in particular. In order to develop an

understanding of the important issues the industry and the organization has been going through,

this research went through various academic and news sources that cited the problems. The

problems stated are then cross verified with the internal sources in Ranbaxy and materials are


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collected to make sure that the right questions are asked in the research. Based on these

evaluations, the following hypothesis are developed.

Indian pharmaceutical industry face unique supply chain management problems owing to

their unique nature of business

Supply chain management problems in Ranbaxy are similar to that of Indian

pharmaceutical generics drugs manufacturers.

Steps taken by Ranbaxy are necessary and sufficient to address the present problem and

they will provide them adequate for the immediate future as well.

midhin final dissertation 11111

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