SCM - the buzzword for Pharma industry

Supply Chain Management is one of the leading cost saving and revenue enhancement strategies in use today. Pharma companies are increasingly using this technique to improve the whole functional process. Sushmi Dey takes a look

SCM is the management of the entire value-added chain. It involves delivering the right product to the right place, at the right time and at the right price. SCM has also helped companies enhance their efficiency in managing resources and improving relationships. Jiten Sandu, Director-Global Customer Solution Management, i2 says, “SCM aims at integrating the company’s internal systems to those of its suppliers, customers and partners, so that all inefficiencies can be weeded out and a synergy is created throughout the network.” Besides, SCM has proved to be one of the most powerful engines of business transformation. By integrating their supply chain systems with those of their customers and suppliers, companies stand to create considerable value throughout the entire supply chain. Hence, more revenue is generated with greater cost savings, asserts Sandu.

The integrating factor

SCM basically integrates the company’s internal systems to those of its suppliers, partners and customers. It primarily works with five basic components called Plan, Source, Make, Deliver and Return, to achieve three primary goals: Reduce inventory, increase the transaction speed by exchanging data in real time, and increase sales by implementing customer requirements more efficiently. Anupam Sharma, Director, Business Consulting, SSA Global, asserts that SCM helps to fuse the demand chain with the supply chain. It helps manage long product development and approval cycles for new products, handle mergers and acquisitions, meet stringent regulatory requirements and also aid reduction in inventory. “With advanced integration capabilities, SCM makes it easy to work with diverse applications with suppliers and customers. An open architecture can provide a common, modern infrastructure that unifies interfaces and standardises connectivity,” he explains.

New Technologies

“Latest toolsets and technologies are addressing the three most important aspects of the supply chain optimisation, collaboration and analytic,” said Nagaraj Bhargava, Director, Marketing & Special Initiatives, SAP India. SCM is the combination of a co-ordinated set of techniques, to plan and execute all steps in the global network. There is a wide range of developed supply chain and information management services to optimally manage the complex functioning of pharmaceutical companies.

The techniques are used to acquire raw materials, transform them into finished products and deliver both products and services to customers. According to Sharma, SCM ensures a company’s ability to forecast demand, take an order, give an accurate date, source and manufacture the right goods, position inventory properly, pick, pack and ship efficiently.

Interestingly, it includes chain-wide information sharing, planning, resource management and global performance measurements. This, therefore, helps in global procurement and supply chain processes. While many pharmaceutical companies do most of the business using electronic data interchange (EDI), experts say that e-procurement capabilities are an important consideration. According to Sharma, “In manufacturing pharmaceu-ticals, there is no room for error in product quality and government compliance. A proven e-procurement solution could provide total confidence in the decisions an organisation is making about its suppliers.”

According to Bhargava, technology is getting “refined to achieve most efficient use” of the resources by using optimisation algorithms and radio frequency identification (RFID).

Training and deployment

While Sharma explains that the deployment time and complexity depends on the solution, almost all professionals agree that training and change management reduces risks and are keys contributors to the success of technology initiatives. “We recommend that prior to implementing a solution, the company puts into place a change management plan. It helps ensure that once the solution is live and running within the organisation, there is a plan in place for users to change their organisational behaviour and adapt to using this solution,” says Sandu.

Competitive Quotient

While SCM refers to the entire network of companies that work together to design, produce, deliver, and service products, the field has become increasingly important to companies in an increasingly competitive global marketplace. Earlier, pharmaceutical companies were focused primarily on manufacturing and quality improvements, but with the efforts extended in the recent times to encompass the entire supply chain, the competition has also spread across the industry.

“Internet based SCM has made industries more competitive and with that arises an urgent need to access the right data to make informed business decisions,” informs Sandu. He further asserts that this is one reason why in the past few years SCM has evolved from a desirable cost-cutting process to an essential survival skill.

Pharmaceutical companies that mainly have to deal with distribution networks, bulk purchasers and hospitals, also need to assess current customer supply chain processes against standard and industry benchmarks to identify areas for improvement. Experts say that this is also the most metric-intensive portion of the supply chain. Hence, quality levels, production outputs, and worker produ-ctivity has to be measured.

Alternate models are evaluated against identified cost and service objectives with the use of advanced analysis and modelling tools to arrive at the optimal solution.

To sustain the competition, there are also emerging novel technologies. Companies are adopting Web-based supplier collaboration solutions, RFID, supply chain optimisation, collaboration over the Internet using ICH, reverse auctions, and collaborative product development. Web-based supplier collaboration solution links manufacturers with major suppliers. Sharma explains, “The Web-based supplier collaboration solutions provides suppliers with planned and current demand and gives feedback in the form of supplier acknowledgements to lower your inventory carrying costs and reduce out of stock situations.” Through this advanced technology, shipment documents and invoices can be easily created to accelerate shipping. Also, suppliers can gain easy access to current item information, performance details and can also submit and track invoices. This, according to Sharma, results in more accurate orders and efficient delivery schedules. He also asserts that Web-based sales solutions help to manage the sales processes of a business, efficiently and cost effectively.

Investments and the ROI

According to Sharma, pharmaceutical companies are making investments from “few hundred thousand dollars to few million dollars.” However, professionals believe that it varies with components of solutions under consideration, company size, number of users, as well as, depth and breadth of the implementation. The investments are in the form of product technology, hardware, services, training and maintenance.

Bhargava informs, “The ROI is measured in terms of the reduction in the TCO, efficiencies in the supply chain, customer service and retention, better utilisation of capital, reduction in costs and increase in competitiveness.” Sandu feels that like other sectors, pharmaceutical industry understands competition, economic pressures, and the changing patient needs that result in fluctuating demand. “They must also anticipate sudden changes that can upset carefully made operational plans,” he suggests.

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