TO ESTABLISH SUPPLY CHAIN DEPARTMENT IN A PHARMACEUTICAL INDUSTRY

1. BAHRIA N
BAHRIA UNIVERSITY KARACHI CAMPUS
2016
TO ESTABLISH SUPPLY
CHAIN DEPARTMENT IN
PHARMACEUTICAL
INDUSTRY
HEALTH MANAGEMENT (SUPPLY CHAIN MANAGEMENT)
NIDA NAEEM, MUNAZA BIBI, DR. HIRA SABIR AND
DR.MADIHA SOHAIL
M B A ( W E E K E N D )

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OBJECTIVE:
TO ESTABLISH SUPPLY CHAIN DEPARTMENT IN A PHARMACEUTICAL
INDUSTRY
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. The pharmaceutical
supply chain will have to be redesigned to compete with low priced generic drugs, handle higher
complexity of new sales channels, and take advantage of higher margins for critical drugs with
low demand. To establish such a supply chain, a new set of capabilities will be needed. R&D, marketing
and sales used to be the most important functions for pharmaceutical companies. However, currently,
operational capabilities and efficient cost management are the critical skills needed to succeed.
1. Improve planning capabilities. For example, prepare for the launch of a new product by forecasting
the expected demand and plan the manufacturing capacity accordingly.
2. Reconfigure the supply chain footprint. The average utilization level of assets is below 40%. This
has to be increased by producing accurate forecasts of demand, production and logistics costs and
lead time trade-offs.

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3. Make product design and packaging more flexible.
4. Adopt tailored business streams. Eliminate the one-size-fits-all approach in supply chain
management and design individual supply chains suited for each product, customer group and
market.
5. Create a network of third-party suppliers. By outsourcing their non-core activities and production
of drugs which have low demand, companies are able to adjust to demand fluctuation without
significant losses.
VISION AND MISSION
COMPANY VISION
“To be Premier health care company in Pakistan”
COMPANY MISSION
“To deliver superior products and services that significantly contributes in improving lifestyle and health
quality, ensuring interties of all stakeholders and to comply business with local laws and regulations and
to adhere corporate code of business conduct and ethics”

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MODIFIED MISSION STATEMENT:
To deliver consistently superior products and services globally through combination of R&D ( advanced
technology) and positive workforce, which contribute significantly to improving the quality of life for
consumers.
PLANNING
The pharmaceutical value chain is dependent on two major demand forecasts:
 Very long-term forecast for new pharmaceutical launches and supply chain readiness. This
includes making accurate market potential and Launches forecasts which drive the capacity
building so that it is ready for FDA approval and c-GMP compliance.
 Short to medium term replenishment forecasts that are based truly on demand plans. This is for
established products but still driven by patient demand. Consumer drives the demand in any
value chain; here the patient drives the ultimate demand. The patients can influence the
providers to write a particular choice of a branded prescription based on their knowledge or
based on the education from major marketing campaigns.
The patient and the provider jointly create the demand signal for the pharmacies to fill. So the
prescriptions filled by the pharmacies act as the ultimate driver of the pharmaceutical demand. These
could be some what influenced by marketing activities. Demand lumpiness may occur due to pricing
promotions and stocking by pharmaceutical wholesalers. Pharmaceutical companies have traditionally
developed forecasts and replenishment plans to ensure ample stock throughout distribution channels. The
hurdles to accurate forecasting are numerous, including
 lack of or delayed demand visibility,
 Complex sales channels with established wholesalers,
 Timely and accurate distribution inherently complicated by global operations and
 Compliance with the FDA’s Current Good Manufacturing Practices (CGMP).
PRODUCTANDSERVICES OFTHE COMPANY:
Pharmaceuticals: Localized
Nutrition: Worldwide Leader In Nutrition

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Diagnostics: Pioneering Medical Diagnostic
Animal Health Products
Medical Devices
MAJOR BUSINESS COMPONENTS
PHARMACEUTICALS:Arinac,Bejectal,Burnol, Cecon, Klaricid, Lucrin, Protium,
SurbexTrividox, Tronolane
DIAGNOSTICS:Assays (AIDS,hepatitis,cancer,thyroid,fertility, Clinical Chemistry, Hematology,
etc.)& instruments (e.g, AxSYM)Glucose monitoring
HOSPITAL PRODUCTS: Anesthetics,delivery systems, injectablesgenerics, IV solutions,
imaging, blood vesselsurgical closure devices
NUTRITIONALS:Similac, Isomil, Ensure, Glucerna, Pedialyte
TARGET MARKET
Diabetic patient
220 million people
Advances and Revolutionary technologies
Treatment coronary artery disease (CAD)
Heart disease
Drug-eluting stent (DES)
Designed to improve deliverability andaccess to long lesions in the artery
PARTICIPANTS INVOLVED
1. Supplier
2. Agent
3. Distributor
4. Wholesaler
5. Retailer
6. Customer
ORGANIZATIONS PRODUCT LINE:
Established Pharmaceutical Products
Diagnostic Products,
Nutritional Products,
Vascular Products

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SUPPLIER:
Chishti packaging supply cartons
ICI supply chemical for medicine
MANUFACTURING
Landhi Karachi
Korangi Karachi
Out Source Lahore.
SWOT Analysis
Strengths
Innovation in the market
Strong brand identity
Cost advantages
Weaknesses
High production cost and lack of rural penetration.
Employee re dedication (high field force turnover)
Opportunities
Increasing health care awareness
High rate of population increase in Pakistan
Threats
High inflation rate
Low prices local pharmaceutical products
Low prices local pharmaceutical products

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SEASONAL ASPECTS, CUSTOMERS, BACKLOG, AND RENEGOTIATION
There are no significant seasonal aspects to the business. We have no single customer that, if the
customer were lost, would have a material adverse effect on our pharmaceutical. Orders for products are
generally filled on a current basis, and order backlog is not material to the business. No material portion
of business is subject to renegotiation of profits or termination of contracts at the election of the
government.
FORECASTING
FORECASTING TECHNIQUE AND TOOLS
QUANTITATIVE TECHNIQUE
 Future demand is forecasted on the bases of historical patterns of demand.
 Marketing department uses ADS and provides two years aggregate demand forecast to the SC
department.
DEMAND
ROLE OF AGGREGATE PLANNING
Attempt of matching the supply of and demand for a product or service by determining the appropriate
quantities and timing of inputs, transformation, and outputs.

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Considering few things at the time of planning such as past statistical figures like what they have
achieved in the last 2-3 years.
It is not possible to make an ADS without considering the opinions of 14 Product Managers who are
responsible for projecting Aggregate demand for the next 24 month.
PRODUCTION STRATEGYLEVELSTRATEGY
As it maintains stable machine capacity and workforce levels with a constant output rate
Moreover it builds up its inventory based on forecasted demand.
SOURCING:
ROLE OF MASTER PRODUCTION SCHEDULING:
 Entire production is based on MPS
 Master production scheduling is done on the based of forecast and some times abnormal demand
as well.
BILL OF MATERIAL
 Bill of material is the list of quantities and components needed to make the product.
 It helps the company to manage its raw material issues effectively and efficiently on the basis of
information provided by MPS.
 This requirement tells the company what is the quantity required according to the Master
Production Schedule.
OBJECTIVE OF FORECASTING
The objective of forecasting is clear: To minimize inventory while meeting or exceeding customer needs.
Successfully achieving this objective requires consideration of four key components:
 Approach,
 Quality Inputs,
 Methods and Tools,
 And Structure
APPROACH
Understanding the dynamics of the pharmaceutical supply chain, how business functions work together,
leadership philosophies and skill sets all factors into defining an appropriate approach. Components of the
approach can be categorized as building proficiency, leadership support, rewards and incentives (business
and personal) and execution.

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QUALITY INPUTS
QUANTITY INPUTS:
“Junk in, junk out” applies to forecasting and planning. A significantly high level of input accuracy (a
measure of precision) and reliability (a measure of consistency) is required to ensure quality output. The
company considers a mix of quantitative, qualitative, industry-specific and economic factors such as
climate and market conditions.
METHODS AND TOOLS
Before technology assessments can begin, the level of sophistication a pharmaceutical can reasonably
and successfully execute should be determined. If the current method utilizes spreadsheets with internal
data, the likelihood of a complex modeling tool being effective is low. This is not surprising. The speed at
which forecasting capability develops depends on skill level, aptitude for advanced technology, readiness
and availability of industry information such as distributor and point-of-sale data.
STRUCTURE
An effective structure allows for the highest levels of forecast accuracy and easy identification of
dependencies among markets and products. Key components in defining a structure for forecasting and
planning require organizational and tactical decisions like:
• Which business functions will be held accountable for forecast accuracy?
• Which business functions will be responsible for replenishment planning?
• Will planning time horizons need to change?
• At what levels will the organization generate forecasts?
PRODUCTION AND MATERIAL PLANNING
The pharmaceutical company traditionally has been constrained by rigid global manufacturing with
specialized production equipment, long lead times for materials and extensive regulatory requirements.
This has led to inflexibility and an inability to react quickly to changes and facilities that are either
capacity constrained or underutilized.
What will it take to turn production into a supply chain capability worthy of future success; the following
three practices will be the defining characteristics of tomorrow’s winners: Rationalized global production
networks Changeover competence and smaller batch production Compliance management Questions that
require immediate and accurate answers include:
 Which sites to continue operating and which to divest,
 where to manufacture which products and
 How best to support long-term product strategy.
 Tactical factors such as compliance, profitability, labor skill and costs, and age of equipment are
key factors in making strategic decisions.

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JIT / LEAN MANUFACTURING
JIT CONCEPT: the company should buy small quantities of raw materials from its suppliers and reduce
the amount of materials that it stores as inventory. An efficient approval process must be instituted so that
materials can be brought into the production process as close as possible to the start of manufacturing.
JIT is based on pull manufacturing, which manufactures product in response to actual consumer demand.
The goal of JIT manufacturing is to create products only when they're needed, and only in the quantities
necessary to satisfy the demand.
Short setup times, an even flow of products through the factory, a high level of process control and
reliability, and the possibility of continuous improvement are also important JIT principles. These
elements help improve process efficiency, ensure product quality, and reduce costs
LEAN MANUFACTURING
 Production plan (based on MPS)
 MPS is made by the supply department which is forwarded to the MMD
 Arrange the raw material for the production department
 MMD is using MRP II
 MRP II to effectively and efficiently handle the Material issues
 Based on the information’s provided by MPS
 Transactions are made electronically into Business Planning & Control System
 Changes are made in MRP if there is an abnormal demand.
 Plan is initially made during the plan stage
 Planning production
 Made on weekly bases as well as monthly bases depending upon the availability of the resources,
which are required to make the required product.
PRODUCTION PLANNING
 Made on weekly bases as well as monthly bases depending upon the availability of the resources,
which are required to make the required product.
 Then Sales & Operations meeting is held, which do two parties one from supply side and the
other represent from demand side and production related decisions are made as per the plan.
BUSINESS PLANNING AND CONTROL SYSTEM
 It monitors the status of manufacturing department
 Batch size produced
 No random manufacturing

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PROCUREMENT
LEAD TIME
 the lead time of procurement of material of approximately 45days by Air transport and
 Approximately 75 days by ship transport which a company use to import from different
countries.
GENERAL PURCHASE
Includes the purchase of stationary, office equipment for the Office use, packaging material,
transportation trucks for the delivery purpose and different other chemicals.
ROLE OF CAPACITY PLANNING
 It is used to measure and manage the resource requirements and where appropriate, the work
through put and queue levels.
 To manage the capacity control process Abbott Pakistan uses a system known as BPCS which
stands for Business Process Control System.
 Once they got the ADS than they sub divide that plan into monthly basis and adjust the machines
capacity according to it.
DIRECT PRODUCT RELATED PURCHASES:
Direct product Related purchase includes raw material import from different countries. The company
import its raw material as classified its products according to its costs.
 Grade A Very Costly Products
 Grade B Moderate Costs Products
 Grade C Least Cost Products
LOCAL SUPPLIERS & LEAD TIMES
Designing: FP Plastics (Karachi, Korangi)
Printing:(Karachi, Malir)
Packaging: (Karachi, Korangi)
Aluminum foils: (Karachi, Gulshan -e- Iqbal)
Cartons:(Karachi,Dalmiya, Lalukhait, S.I.T.E Area)
Dextrose: (Dextrose is a sterile solution injected intravenously) (Faisalabad)
Chemicals: (Lahore)
SUPPLIERS OF IMPORTED MATERIALS
Dye Red, UK
Potassium chloride, Germany
Sodium Citrate, Taiwan

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Sodium chloride, New Zealand
Acid Citric, Austria
Aluminum Seals and PV, Holland
Artificial bubble gum, Holland
Supplier for Sugar, Malaysia
Sodium Sulphate, Germany
LEAD TIME FOR IMPORTED MATERIALS
By sea it approximately takes 75 days
By air it is approximately takes 45 days.
CENTRALIZED PURCHASING
Completely centralized
Distribution is decentralized
Quality of the raw materials and Cost
ROLE OF E-PROCUREMENT
 MRP II to effectively and efficiently handle the Material issues
 Based on the information’s provided by MPS
 Transactions are made electronically into Business Planning & Control System
 Changes are made in MRP if there is an abnormal demand
QUALITY CONTROL:
Quality control is an essential operation of the pharmaceutical industry. Drugs must be marketed as safe
and therapeutically active formulations whose performance is consistent and predictable. New and better
medicinal agents are being produced at an accelerated rate. At the same time more exacting and
sophisticated analytical methods are being developed for their evaluation. Requirements governing the
quality control of pharmaceuticals in accordance with the Food and Drug Administration (FDA)
QUALITY MANUAL:
Document specifying the quality management system of an organization. (ISO 9000:2005)
The GMP inspectorate should define and document its policy and objectives for, and commitment to,
quality in a quality manual. It should ensure that this policy is understood, implemented and maintained at
all levels in the organization.
The information contained in the quality manual and procedures should include at least:
(a) a quality policy statement;
(b) a brief description of the legal status of the GMP inspectorate
(c) a code of ethics and conduct relating to GMP inspection activities;

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(d) a description of the organization of the GMP inspectorate, including details of any governing board,
its constitution, terms of reference and rules of procedure
(e) the names,qualifications, experience and terms of reference of the senior staff and other GMP
inspection personnel, both internal and external
(f) details of training arrangements for inspection personnel
(g) an organizational chart showing the responsibility and reporting structure of the inspectorate and the
allocation of functions stemming from the person in charge of the GMP inspectorate
(h) details of the documented procedures for inspecting manufacturers under the WHO guidelines on
GMP and/or the national GMP guidelines
(i) details of the documented procedures for recommendations to the authorization holder for the issue,
suspension or revocation of marketing authorizations
(j) a list of any subcontractors used for GMP inspections and details of the documented procedures for
assessing and monitoring their competence
(k) details of appeals procedures
(l) a procedure for ensuring that complaints made to the GMP inspectorate are investigated so that any
shortcomings of the authorization holders are revealed
(m) a list of those staff members responsible for investigating complaints and those with the authority to
take remedial action
(n) details of internal quality audits
(o) details of testing of samples
(p) the control of non-conforming products
Recommended procedure
In order to keep the quality manual brief, reference may be made to other documents and/or procedures
contained in other manuals.
ORGANIZATIONALMANUAL:
The manual provides and supplements additional details to the information supplied by organization
chart. It provides information on pertinent matters about each position. The members of organization will
find it to be a readily available reference defining the scope of authorities and responsibilities of
management positions and the channels to be used in obtaining decisions or approvals of proposals. Every
manager will see clearly the responsibilities of his job and his relationship with other persons in the
organization.

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DEPARTMENTS IN PHARMACEUTICALCOMPANIES
Information Technology Department
The Information Technology (IT) Department aims to conduct the establishment’s information
management in the best possible manner by utilizing advanced data processing technologies and to meet
the information technology needs of all other departments. The goal is to use technology correctly and
efficiently and to gain a competitive advantage in accord with company strategies.
Finance Department
Finance Departments, plays a vitally important role in the growth of all establishments as well as the
achievement of business goals, is generally consists of the divisions of Collection and Client Credit,
Payments,Accounting, Production Costs, Financial Process Development, Reporting and Budgeting.
Human Resources
The Department of Human Resources focuses on such issues as planning the human resource within
companies, its hiring, development, compensation, measurement and management of its performance,
planning of careers,steady improvement of training, development and work conditions as well as
rendering said conditions more productive.
Corporate Affairs Department
In a rapidly changing world, managing an institution’s relations with all its internal and external
stakeholders in an effective and accurate manner plays an important role in achieving its business goals
and creates value for the institution. It is extremely challenging to properly manage relations under
shifting and dynamic global and business conditions and requires a specialized division within the
institution that is capable of handling such a challenge. In the pharmaceutical sector,departments of
Corporate Affairs elevate the standing of the institution via a public regulatory bodies and other
stakeholders and carry out planning and implementation in order to achieve the institution’s
communication goals as well as handle media relations and institutional social responsibility projects.
Medical Departments
The medical departments of pharmaceutical companies employ individuals with roots in the health
sciences such as medical doctors and pharmacists. Medical departments handle the coordination of
clinical studies, procedures involving the Ministry of Health, registration and pricing activities, reporting
of product effect notifications, monitoring of drug safety as well as handling relations within the medical
world and scientific studies. Medical departments are also responsible for providing basic medical and
product training to field workers of pharmaceutical companies. In addition, medical departments are
responsible for ensuring that promotional activities are carried out in compliance with the Regulations of
the Ministry of Health and the Association of Research-Based PharmaceuticalCompanies (AİFD)
Booklet on the Code of Good Promotional Practice of Medicinal Products for Human Use to Members of

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the Healthcare Profession.
Sales Department
The goal of sales departments is to provide information to physicians and pharmacists who inform and
guide patients and families of patients with regard to drugs and patients in an accurate and scientifically-
based manner and to share information regarding drugs and treatments based upon scientific research with
physicians and pharmacists.
Marketing
The goal of marketing departments is to promote new products and treatments, to present updated
information in these areas to the Turkish medical world and to raise public awareness regarding health
issues.
Corporate Strategy and Business Development
Departments of Corporate Strategy and Business Development assist in the strategic planning of their
institution for the short-, intermediate- and long-term, in the identification of business goals, evaluation of
performance and evaluation of new business areas.
Technical Department
The Technical Department is responsible for ensuring that all equipments, tools and machinery within the
establishment function accurately and efficiently.
Imports/ Exports:
Foreign Trade government office of the country is responsible to issue such authorization to become an
importer. IEC number (Import Export Code Number) must be obtained from the office of Director
General of Foreign Trade office to operate as an importer and exporter, the information on such
registration for importer – exporter is linked with customs location and reserve bank, as process of
imports and exports are online digitalized. So the importers of Pharmaceutical products is also required to
contact concerned government agencies of their importing country to verify whether such onetime
registration is necessary or not
ORDERING:
Performance criteria
The company must be able to
 accurately identify requirements for pharmaceutical stock
 confirm the order contains the correct: item, formulation, strength ,amount required
 allow for seasonal variations in use of stock when placing the order

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 check the order with an appropriate person, when necessary
 process the order with the correct supplier/location using the documentation/method required in
accordance with Standard Operating Procedures
 ensure that particular attention is paid to any special orders and the progress of any outstanding
orders
 report any issues or concerns to the appropriate person
 complete all documentation correctly
 correctly store/file all documentation in accordance with Standard Operating Procedures
Knowledge and understanding
The company must know and understand:
 how to work within the limits of own authority and when to refer to an appropriate person
 current legislation that applies to the ordering of pharmaceutical stock
 your responsibilities under current legislation when ordering pharmaceutical stock
 the importance of following ordering Standard Operating Procedures
 the health and safety requirements related to ordering of pharmaceutical stock
 local or regional pharmaceutical contracts
 the different formulation of drugs and why it is important to order sufficient quantities of the
correct formulation and strength
 the difference between branded and generic drugs
 the importance of referring to current drug alerts and company recalls when ordering
pharmaceutical stock
 the sources and suppliers of stock
 the procedures for responding to urgent requests
 the importance of taking account of seasonal variations when ordering pharmaceutical stock
 the action to be taken if stock is unavailable
 the input and retrieval of stock data
 the parameters set for the computer ordering system
 the importance of maintaining correct, accurate documentation, including back up systems to IT
failure where appropriate
BANKS:
Cash Credit
 Working capital as cash-credit facility (with charge on current assets)
 Facility for a period of 12 months
 Floating interest rate. Interest levied only on amount utilized.
 Flexibility of paying a minimum amount every month.

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Date entry process at import section under Ministry ofCommerce
Documents required
Import application document
Self commitment for import price confirmation
Usage of Medicine
Proforma Invoice
Sale Contract
Market price record for respective medicine
Bank Credit inspection and online data entry at import section under Ministry ofCommerce
Documents required for Bank credit inspection
Application letter
Original bank credit slip and two copies
Bank original passport and one copy
Process running time for bank credit inspection: One day if all documents are correct
LETTER OF CREDIT:
A letter of credit is a written commitment by a bank to make payment at sight of a defined amount of
money to a beneficiary (exporter) according to the terms and conditions specified by the importer
(applicant). The letter of credit should set a time limit for completion and specify which documents are
needed to confirm the transaction's fulfillment. • More properly called a documentary letter of credit, it is
important to remember that a letter of credit is an additional contract dealing with credit between the
applicant (importer) and the issuing bank and separate from the original grain contract.
Issuing Bank (Opening Bank) :
Applicant (Opener): Applicant which is also referred to as account party is normally a buyer or customer
of the goods, who has to make payment to beneficiary. LC is initiated and issued at his request and on the
basis of his instructions.
Issuing Bank (Opening Bank) : The issuing bank is the one which create a letter of credit and takes the
responsibility to make the payments on receipt of the documents from the beneficiary or through their
banker.
Beneficiary : Beneficiary is normally stands for a seller of the goods, who has to receive payment from
the applicant. A credit is issued in his favour to enable him or his agent to obtain payment on surrender of
stipulated document and comply with the term and conditions of the L/c. If L/c is a transferable one and
he transfers the credit to another party, then he is referred to as the first or original beneficiary.

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VENDOR MANAGED INVENTORY
Pharmaceutical supply chains are strictly regulated and require an extraordinary degree of oversight.
These necessary controls can obscure supply chain visibility, thus making it difficult to anticipate
inventory levels, and also lessens a customer’s ability to respond to fluctuating order volume. VMI
solutions offer the ability to anticipate demand in real-time and adjust supply levels accordingly. This
presents an opportunity for the pharmaceutical area, since many products are either costly or out-date
quickly.
VENDORS
 Designing –FP Plastics, Al-Ahad Plastics, Thermoplas (Korangi)
 Printing–Ammara Commercial Printing (Memon Goth, Malir)
 Packaging – Saima Packaging (Korangi Industrial Area)
 Slicing Aluminum foils - Muhammad Corporations, Gulshan -e- Iqbal
 Cartons – Sultan Packages (Dalmiya, Karachi) Cartons – King Packages (Lalukhait, Karachi)
 Cartons - Decent packages (S.I.T.E Area)
 Dextrose – Rafhan Industries (Faisalabad)
 Pseudo - Alpha Chemicals – (Lahore)
 Essential Chemicals – (Lahore)
 Bid sheet (low cost effective sheet )
VENDOR SELECTION CRITERIA
IT INCLUDES
 Vendor specification
 Testing method
 Signature of vendor
 MFG date expiry date/shelf life
 Stability data to support shelf life
 Vendor evaluation check list
 Material safety data sheet (MSDS)
 Full range of raw material
 Vendors’ certificate of analysis
 Recommended storage condition
 Technical bulletin
 List of solvent if used & other residual levels
 Is your vendor already approved in other affiliate?
 TSE/BSE statement. Transmissible Spongiform Encephalopathy’s/Bovine Spongiform
Encephalopathy
 Vendor capacity.
APPROVAL OF VENDORS
 Material Sample and vendor provides Certificate of Analysis & Form 7
 Quality Assurance test in own laboratory
 Number is assigned with a Yellow Sticker

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 Quality Assurance department do the Stability Testing
 Issues a Green Sticker
 Materials are sent for Batch Manufactured and then End Product is made
Supply chain executives struggle with five primary challenges: inventory visibility; risk (such as
contaminated or expired inventory); cost containment (such as paying only for consumed inventory and
not for supplied/expired inventory); internal customer demands; and globalization. In order to address
these challenges, the pharmaceuticals industry needs a supply chain with the following attributes: •
Transparency:
The latest technologies (e.g., RFID) are used to digitally track and gain greater visibility into goods
across the supply chain.
• INTEGRATION: All supply chain actors (such as vendors and customers, either internal or
external) can share information and make decisions collaboratively.
• INTELLIGENCE: Based on the latest advanced analytics, simulation and modeling tools,
pharmaceutical companies can evaluate increasingly complex and dynamic risks and constraints
and manage the supply chain more scientifically
Pharmaceutical companies are increasingly realizing that VMI is critical and, given the aforementioned
attributes, can help them transform their supply chains into lean, efficient and value inducingmachines,
Moving from the traditional purchase order process (which offers minimal information exchange) to a
full-blown vendor collaboration model that involves digitally transmitting accurate forecast and stock
information to vendors that then facilitate just-in-time replenishment. To do this, they must arm vendors
with the requisite value chain visibility and trust them to flexibly supply inventory within agreed-upon
threshold levels.
 REDUCE UNNECESSARYOVERSTOCK OR STOCK OUTSITUATIONS
Overages and shortages hurt the bottom line. By constantly monitoring order volume and projecting
anticipated demand, supplier can mitigate these costly inefficiencies.
 EFFICIENT PRODUCT ROTATION
Careful inventory oversight allows providers to quickly move product that will soon outdate, while
keeping stock levels fluid and responsive to demand.
• MINIMIZING RISK
Precision is a key when handling sensitive and expensive pharmaceuticals. Through transparency and
carefulanalytics, providers utilizing VMI maximize order precision, thus preventing unnecessary
handling and overstock of these expensive pharmaceuticals.VMI implementation benefits both the
pharmaceuticals company and its vendor(s) equally. For pharmaceuticals companies, benefits include
increased inventory turnover, decreased liability and improved inventory availability, while their
vendors can expect increased customer loyalty, differentiated customer service and better operational
performance through inventory forecasts

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COMPONENTS OFTHE PHARMACEUTICALINDUSTRYMANUFACTURING
A typical pharmaceutical supply chain will consist of the one or more of the following nodes:
 PRIMARY MANUFACTURING (possibly including contractor sites);
The manufacturing process is characterized by long task processing times, often rounded to
multiples of shifts. Where multistage processes are operated, considerable inventories are often
held between stages. Furthermore,material from an intermediate stage must often pass some form
of quality control check before being approved for use downstream in the process. It is not
unusual for 1 year’s production of a product to be produced in a single campaign, and the material
produced being stored until the next campaign in the following year. Since most complex
pharmaceuticals are produced through multistage processes, the same often holds true for the
stable intermediates (stage products).Process of outsourcing is a growing one, as research-
oriented companies concentrate on the discovery and development activities and rely on third
parties’ manufacturing competence. This gives rise to extended supply chain co-ordination
problems.
 SECONDARY MANUFACTURING(possibly including contractor sites); This is concerned
with taking the active ingredient produced at the primary site and adding “excipient” inert
materials along with further processing and packaging to produce the final productsWholesalers
play a significant role in this sector. They tend to be large and few
 For example, a product that is sold in pill form would undergo:
 granulation: with addition of all the materials;
 compression: forming the pills;
 coating;
 quality control; and
 Packaging.market warehouses/distribution centers;
 wholesalers; and
 Retailers/hospitals.
GMP (GOOD MANUFACTURING PRACTICES):
Good manufacturing practice (GMP) ensure that products are consistently produced and controlled
according to quality standards. It is designed to minimize the risks involved in pharmaceutical production
that cannot be eliminated through testing the final product.
The main risks are: unexpected contamination of products, causing damage to health or even death;
incorrect labels on containers, which could mean that patients receive the wrong medicine; insufficient or
too much active ingredient, resulting in ineffective treatment or adverse effects. GMP will cover all
aspects of production; from the starting materials, premises and equipment to the training and personal
hygiene of staff. Detailed, written procedures must be provided for each process that could affect the
quality of the finished product. There must be systems to provide documented proof that correct
procedures are consistently followed at each step in the manufacturing process - every time a product is
made.

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OPERATIONAL ISSUES IN THE PHARMACEUTICAL SUPPLY CHAIN
Although the processes will vary between companies, all major pharmaceutical companies will
operate ERP systems and follow a business process along the following lines:
DEMAND MANAGEMENT
In each geographical region, forward forecasts (e.g. 3–24 months) are developed, based on historical
data, market intelligence, etc. Tenders for manufacture may also be evaluated and possibly accepted
at this stage.
INVENTORY MANAGEMENT and distribution requirements planning the demands determined
are aggregated and imposed on the appropriate warehouse/distribution centre. The impact on finished
goods inventory is assessed and if necessary, orders are placed on upstream secondary manufacturing
sites.
INVENTORY MANAGEMENT
TECHNIQUES

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DETERMINATION OF SAFETY STOCK:
Safety stock is a buffer to meet some unanticipated increase in usage. Abbott maintains a safety stock
of six week dependent and independent demand items in order to minimize the risk of shortage due to
any uncertain demand.
RE-ORDER POINT:
When the inventory is depleted to lead time consumption, the order should be placed.
In case of Abbott, Lead time of imported material is 45 to 75 days while local material is 7 to 30 days
depending on the nature of the material.
A.B.C ANALYSIS
They classifies its materials according to the values or the cost of materials; basically they have
allotted three grades or types to their materials:
* Grade A (very costly materials, e.g. erythromycin)
* Grade B (moderate cost, e.g. clathromycin)
* Grade C (least cost, e.g. bubble gum and artificial flavors like mint)
PARETO MANAGEMENT:

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SECONDARYPRODUCTION PLANNINGANDSCHEDULING
The orders placed on the secondary sites are planned (typically using MRP-II type tools) and then
scheduled in detail (typically using APS tools). The impact of production plans on active ingredient
raw material stocks is evaluated and if necessary, orders are placed on the upstream.
AGING SCHEDULE OF INVENTORY:
This technique helps to classify the inventory according to the life of material.
Abbott categorizes the inventory of a particular material/Finished product according to its expiry date.
LOT SIZING TECHNIQUES
Abbott Pakistan uses POS (periods of supply) technique for its dependent and independent demand
items.
In POS technique, Lot size will be equal to the net requirements for a given number of periods (e.g.
weeks) into the future.
Abbott maintains six weeks stock in warehouses of dependent demand items and independent items
which named as FO and MO respectively.
PRIMARY MANUFACTURING CAMPAIGN PLANNING
The demands placed by secondary manufacturing are satisfied by careful management of inventory
and production planning. An interesting feature of this process is that the customer-facing end is
effectively a “pull” process (driven by orders) but the primary manufacturing stage has long cycle
times which make it difficult to ensure end-to-end responsiveness. This means that primary
production is effectively a “push” process, driven by medium- and long-term forecasts.
LOGISTICS
TRANSPORTATION NETWORK
 Lahore Naulakkah Transport
 Bashir SiddiqueTrasport
 Fast Track Cargo Service
 Leopard Courier Services
 Courier Per emergency They also have their own vans with Abbott monogram and they are
generally used for distributing to local customers (distributors and institutions) within
Karachi and nearby areas.

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TYPES OF TRANSPORTS
Cold refrigerated vans
INBOUND LOGISTICS: Inbounding logistics is one of the primary processes of logistics and it
concentrates on purchasing and arranging the inbound movement of materials, parts, and/or finished
inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores.
OUTBOUND LOGISTICS: Outbound logistics focuses to the storage and movement of the final
product and the related information flows from the end of the production line to the end user.
WAREHOUSING
Own warehouse with their manufacturing plants
Depos at major cities of the country. Like Lahore Multan and Islamabad.
Distribution
DISTRIBUTION:
DISTRIBUTION OF PRODUCTS
 Outsource
 Depots in various cities
 6% commission scenario for distributors
 Linking distributors to Abbott through satellite systems.
DISTRIBUTORS OF THE COMPANY
 Premier Agency Muslimabad, Karachi.
 Babar Medicine, Lahore.
 Nadeem Traders, Peshawar.
 Baloch Enterprise, Multan.
 D.S Pharma, Rawalpindi.
DISTRIBUTION STRATEGY
 Since in majority of the cases drugs are not purchased by choice of the consumers- the
distribution is to some extent selective.
 Most pharmaceuticals products require special storage conditions to be maintained at
manufacturer’s warehouses, channels of distribution, and the point of sale.
 Many products need not supply at the pharmacies but to the hospitals only like cancer
medications.

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DISTRIBUTION CHANNEL
Abbott Pak Abbott truck Hospital Distributor Cent. Depot Abbott truckWholesaler
RESTRICTIONS
 Distributors can’t go out of their area for sale.
 Discountpolicy should be followed according to company’s instructions.
 Distributors should carry 6 weeks inventory at their side.
RETURNS
Product Returns
Controlling temperature
Humidity: When product labels say “protect from moisture,” store the product in a space with no more
than 60% relative humidity. To reduce the effects of humidity consider-
Ventilation: Open the windows or air vents of the storeroom to allow air circulation. Ensure all windows
have screens to keep out insects and birds, and either have bars or are not open wide enough for anyone to
climb in. Put boxes on pallets and ensure there is space between pallets and the walls of the storeroom.
Packaging: Secure alllids. Never open a new container unless necessary.

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Circulation: Use a fan to circulate fresh (outside) air. In bigger storerooms you may need a ceiling fan.
Standing fans are more useful in smaller storerooms. This requires electricity and some maintenance.
Air conditioners: If possible, use an air conditioner. This is costly, depends on a constant supply of
electricity, and requires regular maintenance. Depending on climatic conditions, a dehumidifier may be a
less costly option. However,they also need a constant supply of electricity and require regular attention to
empty the water containers.
Sunlight: Some health products are photosensitive and will be damaged if exposed to light. These include
multiple vitamins, furosemide, chloropheniramine maleate, hydrocortisone, latex products (such as male
condoms), and x-ray film.
To protect products from sunlight-
Shade the windows or use curtains, if they are in direct sunlight.
Keep products in cartons.
Do not store or pack products in sunlight.
Use opaque plastic or dark glass bottles for products that require them.

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Maintain trees on the premises around the facility to help provide shade, but check them regularly to
ensure that there aren’t any branches that can damage the facilities.
Heat
Remember that heat will affect many products. It melts ointments and creams and causes other products
to become useless. Following the guidelines listed earlier for protecting products from humidity and
sunlight will also help protect products from heat.
It is important to have thermometers in various parts of the storeroom to monitor temperature (see section
on monitoring temperature). But, even if you do not have thermometers, you can still monitor the heat. If
you feelhot, your products are probably hot, too.
Monitoring
Consistently monitor the temperature of the different areas within the storeroom.
Keep thermometers in various places for monitoring.
Keep the storeroom well ventilated (see section on humidity). For better ventilation, store boxes on
pallets and leave room between rows of stacked boxes (see section on arranging products).
Keep direct sunlight out of the storeroom.

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Refrigerators and freezers
Refrigerators that open on the top are more efficient than vertical ones, because hot air rises while
cold air falls.
The coldest part of vertical refrigerators is at the bottom.
Store products that are sensitive to freezing or very low temperatures on the upper shelves.
Always have enough frozen icepacks to transport items requiring cold storage in cold boxes and/or
vaccine carriers. Use only icepacks filled with water. Do not use icepacks prefilled with other liquids,
which are usually blue or green. When ordering cold chain equipment, larger facilities should reassess the
needs for icepacks and icepack freezer space.
If there is enough space,place a few plastic bottles of water in the refrigerator. This will help maintain
the temperature for a longer period of time if the power is cut off.
Place refrigerators and freezers with space between and about an arm’s length away from the wall.
This will increase the air circulation.
Under ideal conditions, rooms with multiple refrigerators and/or freezers should have air conditioning.
Refrigerators and freezers generate large amounts of heat,which can damage the equipment over time.
If it is not possible to have air conditioning, install fans around the equipment to increase airflow. If
installing fans, remember to place the fans so the air also flows in the spaces behind the refrigerators.
Ideally, larger facilities should have a cold room rather than numerous refrigerators.

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Power supply
Arrange for a solar panel generator or alternative supply of electricity for cold rooms and refrigerators if
the main source of electricity is not reliable. If the generator is not solar-powered, maintain a stock of fuel
sufficient to run the generator for at least a few days (see section on storing flammables). Run the
generator on a regular basis (at least once a month) to ensure the system is working properly. Larger
facilities may want to contract out the maintenance of the generator and electrical system.
If your electricity supply is unreliable, use kerosene or solar-powered refrigerators. Kerosene appliances
require frequent maintenance. Trim the wick regularly so the flame is not too high, clean the chimney
monthly, and keep a backup supply of kerosene (see section on storing flammables). Place the refrigerator
away from the wall on a balanced and level surface. The appliance must be placed on a level surface or it
will not function properly. Monitor the temperature regularly. The flame on a kerosene appliance should
always be blue; if it is yellow, trim the wick.
Commonterms
The following terms relate to temperature and medical supplies. It is important to follow the
manufacturer’s recommended storage conditions for all products.
Store frozen: Some products, such as certain vaccines, need to be transported within a cold chain and
stored at -20°C (4°F). Frozen storage is normally for longer-term storage at higher-level facilities.
Store at 2°-8°C (36°-46°F): Some products are very heat sensitive but must not be frozen. These are
usually kept in the first and second part of the refrigerator (never the freezer). This temperature is
appropriate for storing vaccines for a short period of time.
Keep cool: Store between 8°-15°C (45°-59°F).
Store at room temperature: Store at 15°-25°C (59°-77°F).

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Store at ambient temperature: Store at the surrounding temperature. This term is not widely used due to
significant variation in ambient temperatures. It means “room temperature” or normal storage conditions,
which means storage in a dry, clean, well ventilated area at room temperatures between 15° to 25°C (59°-
77°F) or up to 30°C, depending on climatic conditions.
Medicines with stability problems under tropical conditions:
Oral solids (tablets)
acetylsalicylic acid
amoxicillin
ampicillin
penicillin V
retinol
Oral liquids (syrups)
paracetamol
Injections/injectables
ergometrine
methylergometrine
adrenaline
reconstituted antibiotics
CONCLUSION
The pharmaceutical supply chain used to be seen as a tool to supply products to market in an
effective way, where the emphasis was on security of supply. Recent changes in the operating
environment mean that companies are revisiting the components of their supply chains and
identifying ways of extracting additional benefits from them. In this sector in particular, the
supply chain of interest is not simply the physical processes of conversion and distribution of
materials. Equally important is the “value-chain” perspective of managing the innovation and
development processes through to capacity and production planning. There are still several
exciting research challenges in this value chain, many of which the process engineering/process
systems engineering community are well placed to address.