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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.
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