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Innovation in the Supply Chain (Distribution)

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Best practice points for all stakeholders in the pharmaceutical sector.

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Innovation in the Supply Chain (Distribution)

  1. 1. Rahul Gulrajani Innovation in the supply chain
  2. 2. project objectives <ul><li>studying the pharmaceutical supply chain, </li></ul><ul><li>identifying key stakeholders and their expectations, in order to </li></ul><ul><li>bring about improvements in the supply chain </li></ul>
  3. 3. sector overview
  4. 4. sector overview
  5. 5. sector overview
  6. 6. sector overview
  7. 7. sector overview
  8. 8. sector overview
  9. 9. research methodology
  10. 10. research methodology
  11. 11. research methodology
  12. 12. findings – manufacturer level
  13. 13. findings – wholesalers
  14. 14. findings – hospitals
  15. 15. findings – pharmacies
  16. 16. findings – overall performance Expected performance level - end user: patient Manufacturer cannot supply (% failing) Wholesaler cannot supply (% failing) True performance level - end user: patient Pharmacy/ Hospital cannot supply (% failing)
  17. 17. recommendations <ul><li>a focus on creating “best practice” for supply chain management </li></ul><ul><li>“ best practice” can be defined as systems or processes that enable tasks to be performed at the right time, in the most cost-effective way and without duplication or failure </li></ul><ul><li>a broad approach needs to be taken; whilst recognising that there is no ‘one size fits all’ solution, a number of principles can be established as a standard framework for local implementation. </li></ul>
  18. 18. recommendations - manufacturers <ul><li>In order to manage demand and supply, it was essential to draft Key </li></ul><ul><li>Performance Indicators (KPI’s). Some of the possible indicators are </li></ul><ul><li>identified as: </li></ul><ul><li>Lines fulfilment </li></ul><ul><li>Order fulfilment </li></ul><ul><li>Incorrect items received </li></ul><ul><li>Incorrect quantities received </li></ul><ul><li>Variation from contracted lead time </li></ul><ul><li>Timeliness of order placement </li></ul><ul><li>% lines returned v/s lines ordered </li></ul><ul><li>Documentation (present/complete/accurate) </li></ul><ul><li>% invoices matched 1 st time </li></ul><ul><li>% invoices paid electronically </li></ul><ul><li>% of orders sent electronically </li></ul><ul><li>Timeliness of payment </li></ul><ul><li>Stock turn </li></ul><ul><li>Line orders involving manual intervention by pharmacy staff </li></ul>
  19. 19. recommendations - manufacturers <ul><li>rigid manufacturing and sourcing capacities, coupled with inefficiencies in distribution networks, lead to additional load on the manufacturer </li></ul><ul><li>companies must look at untapped alternate sourcing options, while designing a 'differentiated supply chain footprint' for different products </li></ul><ul><li>considering the indian crams segment (progressively expanding at over 200 percent) expected to reach about usd 6.6 bn by 2013e, with major players such as jubilant organosys, and divis laboratories in strong positions, it may be worthwhile to consider outsourcing certain product lines to the contract manufacturers in order to maintain flexibility in the pharmaceutical supply chain </li></ul><ul><li>this can also tackle the issue of special product requirements, such as temperature control </li></ul>
  20. 20. recommendations - manufacturers <ul><li>the who estimates that between five and eight percent of the worldwide trade in pharmaceuticals is counterfeit </li></ul><ul><li>india accounts for 35 per cent of the counterfeits produced worldwide, followed by nigeria at 23 per cent </li></ul><ul><li>ideally, the following information to accompany each drug through all steps of the supply chain: </li></ul><ul><li>1. drug name </li></ul><ul><li>2. dosage </li></ul><ul><li>3. container size </li></ul><ul><li>4. number of containers </li></ul><ul><li>5. drugs lot or control numbers </li></ul><ul><li>6. business name and address of all parties to each prior transaction, starting w/the manufacturer </li></ul><ul><li>7. the date of each previous transaction </li></ul>
  21. 21. recommendations - manufacturers <ul><li>product anti-counterfeit technologies presently fall into two broad categories; covert or overt, and intra-formulary versus package based </li></ul><ul><li>these approaches however are static </li></ul><ul><li>after a particular anti-counterfeiting solution has been in the market for some time, counterfeiters learn ways to defeat the safeguard </li></ul><ul><li>manufacturers constantly have to remain a step ahead by either adopting new measures or mixing and matching current technologies </li></ul>
  22. 22. recommendations - wholesalers Recommended Actions Associated KPI’s (Supplier End) Design supply systems to ensure order fulfilment at the first attempt, including bar code technology for manual picks Process orders electronically using means that will notify purchasers of exceptions to order requirements, e.g. quantity, price and delays. Develop the facility to receive orders electronically. 11 – order (lines) transmitted electronically Issue invoices with goods or transmit them on despatch. Establish inventory management systems that ensure a high level of order completion at the first attempt. Wholesalers should provide regular performance data to customers. 1,2,3,6,7 and 9 Identify with pharmacy procurement managers the most economical order frequency for both parties. Review systems for handling invoices and other queries to ensure prompt resolution.
  23. 23. recommendations - manufacturers <ul><li>the combination of rfid (radio-frequency identification) and pki (public key infrastructure) technologies in the ‘authenticated rfid model’ is an immediate and vital step forward in securing the pharmaceutical supply chain </li></ul><ul><li>radio-frequency identification (rfid) is the use of an object (typically referred to as an rfid tag) applied to or incorporated into a product, animal, or person for the purpose of identification and tracking using radio waves </li></ul><ul><li>the authenticated rfid solution advances rfid beyond track and trace visibility to true, transaction-based security of each product at every stage along the supply chain process </li></ul><ul><li>working independently of a connection to a networked system, offline between the tag and the reader, the model assures item-level authentication to determine product legitimacy </li></ul><ul><li>both track and trace, and drug verification are feasible through the implementation of such technology </li></ul>
  24. 24. recommendations - hospitals
  25. 25. recommendations - hospitals
  26. 26. recommendations - hospitals
  27. 27. recommendations - hospitals Recommendation Action Related KPI’s (Supplier End) Ensure hospital procurement systems are designed to minimise manual intervention, duplication and the chance of failure. Implement interactive electronic trading systems that support order transmission, acknowledgement, and invoicing. 11 – order (lines) transmitted electronically 12 – invoices (lines) reconciled electronically Avoid duplication of effort involved in processing invoices – invoices should be passed by Pharmacy Ensure that invoices for pharmaceuticals are paid at frequent intervals and on time. 5 – timeliness of payment Ensure responsibility for each stage of invoice processing is clearly defined together with standards for timeliness. Work with finance managers to review urgently the invoice generation system in those pharmacies that act as suppliers to other hospitals.
  28. 28. recommendations - hospitals Enable electronic archiving of orders placed electronically. Paper copies should not routinely be produced for archive or internal audit purposes. Review the range of products managed through pharmacy systems and remove products for which no value is added by pharmacy procurement. Review short line stores trading arrangements. Understand computer re-order calculations methodology. Implement effective inventory management tools such as the Pareto 80/20 rule. Profile stocks of medicines held in all hospital locations periodically and take steps to reduce excess stock. 4 – stock turn
  29. 29. recommendations - hospitals Set order quantities for medium to high turnover items as multiples of outers. Establish the most efficient re-order parameters for stock, recognising the total cost of order placement. Establish the most efficient re-order times for wholesalers and other suppliers Establish electronic systems to ensure correct order price Establish systems to monitor and manage outstanding orders. Understand their local marginal costs of placing orders. Ensure that pre-notified contract price changes are acted on before orders are placed. Ensure invoices are cleared within 2 working days of receipt of invoice. 2 – invoices matched first time Ensure staff processing invoices are fully aware of the impact of process delays. Establish a control system to ensure outstanding invoices are routinely identified and followed up. Review current systems against the supplier preferences and implement systems for optimum efficiency. Benchmark inventory with comparable trusts. Not print electronically processed orders simply to provide an audit trail.
  30. 30. recommendations - pharmacies Recommendation Action Related KPI’s (Supplier End) Implement interactive electronic trading systems that support order transmission, pricing, expiry date tracking, acknowledgement, and invoicing. 11 – order (lines) transmitted electronically 12 – invoices (lines) reconciled electronically Agree and implement standard reason codes across industry for both returns and invoice queries 8 – lines returned Ensure that a range of procurement performance indicators are used regularly within the procurement. Indicators 1-12 Understand computer re-order calculations methodology and establish the most efficient re-order times from suppliers. Establish the most efficient re-order parameters for stock, recognising the total cost of order placement. Understand their local marginal costs of placing orders. Pharmacies should provide regular performance data to pharmaceutical companies. 1,2,3,6,7 and 9 Be sure to generate electronic and physical invoices which are despatched with every single sale.
  31. 31. recommendations - pharmacies <ul><li>pharmacy employees need to be told about the importance of maintaining all the relevant details with regards to the customers and prescribing practitioners </li></ul><ul><li>it can provide a great source of insight for not only the pharmacists themselves, but also marketing departments of the manufacturers </li></ul>
  32. 32. conclusion <ul><li>development of draft kpi’s help in bringing changes in systems and processes, policies and practices, and improvement in relationships between stakeholders, resulting in achieving and sustaining improved performance in the pharmaceutical supply chain </li></ul><ul><li>other benefits include improved order efficiency with lower delivery discrepancy rates, and a supply chain partnership with common measures </li></ul><ul><li>strategic product sourcing may be the answer to maintaining agility in the pharmaceutical supply chain, and in the near future, rfid solutions may go beyond track and trace visibility to true, transaction-based security of each product at every stage along the supply chain process </li></ul>
  33. 33. conclusion <ul><li>stock categorization in hospitals results in a clear policy for stock management, with manual intervention for products that do not need it, and helps establish a formal review programme for inventory management. </li></ul><ul><li>it helps in reduction on order frequency and emergency orders, with significant cost and inventory reductions </li></ul><ul><li>pharmacies need to be more involved in maintaining databases, electronic or otherwise, with regular feedback to their suppliers as well as the manufacturers </li></ul><ul><li>this kind of information flow will go a long way in improving supply chain policies and processes, as well as stakeholder relationships. </li></ul>
  34. 34. thank you