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The Indian healthcare sector is expected to become a US$ 280 billion industry by 2020 with spending on health estimated to grow 14 per cent annually, according to a report by an industry body. "Healthcare has emerged as one of the most progressive and largest service sectors in India with an expected GDP spend of 8 per cent by 2012 from 5.5 per cent in 2009. It is believed to be the next big thing after IT and predicted to become a US$ 280 billion industry by 2020," the report said.
At present the sector is estimated to be around US$ 40 billion and will grow to US$ 78.6 billion by 2012.
As per a study by an industry body and Ernst & Young, India would require another 1.75 million beds by the end of 2025. The public sector however is likely to contribute only around 15-20 per cent of the required US$ 86 billion investment. The corporate India is therefore, leveraging on this business potential and various health care brands have started aggressive expansion in the country. Some of the companies that plan to increase their footprints include Anil Ambani's Reliance Health, the Hindujas, Sahara Group, Emami, Apollo Tyres and the Panacea Group.
Sahara Group is planning several healthcare projects such as a 200-bed multi-specialty tertiary care hospital at Gorakhpur in Uttar Pradesh, a 1,500-bed multi super-specialty, tertiary care hospital at Aamby Valley City and 30-bed multi-specialty secondary care hospitals across all the 217 Sahara City Homes Townships.
Meanwhile, Artemis Health Sciences (AHS), a health care venture of the Apollo Tyres Group, is also planning to establish four to eight multi-specialty hospitals in Punjab, Uttar Pradesh, Madhya Pradesh, Rajasthan and Haryana over the next three years.
The rural healthcare sector is also on an upsurge. The Rural Health Survey Report 2009, released by the Ministry of Health, stated that during the last five years rural health sector has been added with around 15,000 health sub-centers and 28,000 nurses and midwives. The report further stated that the number of primary health centers have increased by 84 per cent, taking the number to 20,107.
The size of the Indian medical technology industry may touch US$ 14 billion by 2020 from US$ 2.7 billion in 2008 on account of strong economic growth, higher public spending and private investments in healthcare, increased penetration of health insurance and emergence of new models of healthcare delivery, according to a report 'Medical Technology in India: Enhancing Access to Healthcare through Innovation' released by PwC and an industry body.
The Indian health insurance market has emerged as a new and lucrative growth avenue for both the existing players as well as the new entrants. According to a latest research report "Booming Health Insurance in India" by research firm RNCOS released in April, 2010, the health insurance market represents one the fastest growing and second largest non-life insurance segment in the country. The Indian health insurance market has posted record growth in the last two fiscals (2008-09 and 2009-10). Moreover, as per the report, the health insurance premium is expected to grow at a CAGR of over 25 per cent for the period spanning from 2009-10 to 2013-14.
Overview of the company
Background of the company
Piramal Healthcare Ltd, a Piramal Group company, is a globally integrated healthcare company that fulfills unmet medical needs across the world. It has a growth track record of above 29% CAGR since 1988. Piramal Healthcare had consolidated revenues of US$ 656 million in FY2009. PHL is currently ranked 4th in the Indian market with a diverse product portfolio spanning several therapeutic areas. It is also one of the largest custom manufacturing companies with a global footprint of assets across North America, Europe and Asia.
At Piramal Healthcare, core values of Knowledge, Action and Care are propelled for improving the quality of lives by democratizing healthcare. Aim is to attain leadership in market share, innovation and profits by:
Partnering the medical fraternity
Building strong capabilities to deliver product and process innovations
Attracting and developing the best in class talent
Â Nicholas Piramal India Limited is one of India's largest companies with an unmatched record of managing JVs/Alliances/Partnerships, and a proven commitment to IPR. With strong brand management and sales capabilities, a US FDA site-approved plant for on-and-off patent APIs and Intermediates, Basic Research, Process Innovation, Custom Chemical Synthesis, Formulations R&D, NDDS, and a world-class, accredited Clinical Research Organization, NPIL is poised to emerge as India's pharma powerhouse.
With growth fuelled through a strategy of partnerships, quality acquisitions, brand building, focused selling and manufacturing, NPIL's consolidated net sales turnover was US$ 313 million (INR 14.1 billion) in 2005-06 (April to March)".
NPIL has emerged among the leaders in Indian pharma with a unique mix of inorganic and organic growth fuelled through a strategy of acquisitions, brand building and focused selling, and manufacturing. The company has one of the widest product portfolios in India, spanning nine key therapeutic areas, including the Cardio-vascular, Neuro-psychiatry, Oncology, Diabetes Management, Respiratory, Anti-infective, Gastro-intestinal, Dermatology and NSAIDS.
The company was formed when the Piramal Group acquired Nicholas Laboratories, a small formulations company in 1988 from Sara Lee. It has followed a multi-pronged strategy to integrate and maximize synergies with the planned acquisitions and develop and consolidate its major strength in marketing to therapeutic niches.
Managed by a team of highly proficient industry professionals, NPIL's key strengths come from its strong brand building, selling and distribution, manufacturing and alliance/partnership management skills. The last, especially, are quite unique in the Indian context - few Indian Pharmaceutical have exhibited such a strong and consistent record in successfully and ethically managing JVs/Alliances and Partnerships as NPIL has.
Its policy of respecting IPR and managing partnerships, in keeping with both the letter and the spirit of written agreements, has been widely respected and commended by its partners.
NPIL is the flagship company of the Rs. 2500 crore (US $ 550 million) Piramal Enterprises (PEL), one of India's largest diversified business houses.
Establishing supply chain excellence
Starting the Supply Chain Journey
Piramal Healthcare Limited, one of India's largest pharmaceutical companies, embarked on and ambitious mission to streamline its supply chain. The company's domestic formulations business was witnessing strong competition due to issues around lower brand loyalty and product differentiation. Piramal was also challenged by an increasingly complex supply chain and a rapid growth period. It required tools for handling geographical expansion and product diversification, new product launches and also ongoing cost pressures.
Some of the core goals of this strategic initiative were: effective and accurate supply and demand management, proactive supply chain planning for the short and long term, reduction of working capital, improved customer service levels and more effective utilization of resources.
Choosing the Tight Partner
A rigorous selection process was undertaken by Piramal and after thorough analysis they selected the SAP Advanced Planning and Optimization (SAP APO) component. The key reason for selecting SAP APO was tight integration between planning, execution, and performance monitoring processes, also because of the applications robust, best practices- based fucntionality and ability for supporting growth. The decision was taken by them for implementing this functionality firstly fir supply network planning, production planning and detailed scheduling, and the global available-to-promise process. It chose "Bristlecone as its implementation partner.
Transforming the Business
In the phase one, the project team members- comprising business users, IT staff, and Bristlecone consultants- worked together on setting up the key performance indicators(KPIs) that would monitor progress. This gave result to greater degree of ownership across the organization. Implementation of SAP APO was done using the ASAP methodology by the team thereby reengineering Piramal's business processes- such as annual budgeting and ales and operations planning- in order to meet company requirements. One of the major challenges faced was linking of the complex processes involved in active pharmaceutical ingredients with formulations.
Nonetheless, quick decision making by the senior level management along with the collaboration between Piramal and Bristlecone, helped in ensuring a swift and successful implantation. Other success factors included a strict sign-off policy for introducing enhancements and the involvement of cross-functional teams for ensuring data integrity. Also decision was made to implement standard SAP APO functionality in reducing customization costs.
Establishing of a performance management system for the company supply chain using the SAP Net Weaver Business Warehouse Component was another aspect of Piramal's transformation. The team also developed a very strong framework of KPI's which included a mix of lead and lag indicators and qualitative and quantitative measurements. Also a KPI diagnostic tree was designed so that Piramal could analyze and conduct root cause analysis for eliminating inefficiency and for ensuring continuous improvement
Siddhartha Pahwa, President of supply chain and trade management for domestic formulations at Piramal, confirmed that with SAP APO they have integrated all the planning processes which enabled in lead time reduction. And that they also expect to improve further in customer service, cost optimization, and the cash-to-cash cycle.
Already benefits are being experienced by the pharmaceutical company. The company is enjoying the enhanced visibility of its supply chain end to end which has enabled them to react more quickly to demand along with other measurable KPI's like customer service levels, raw material and finished goods inventory. Still the transformation of supply chain is a continuous process for Piramal. Since presently it has a core SAP business software running in the Indian, UK, and Canadian sites, Piramal plans to follow up its successful implantation of SAP APO at the Indian sites with a full global rollout.
Future of ERP systems in healthcare sector
Piramal Healthcare limited is one of India's largest pharmaceutical companies. Due to its immense distribution network in multiple geographies and 12 manufacturing facilities in India, the United Kingdom, and North America, Piramal needs the right IT for supporting its complex supply chain processes and continued growth while keeping costs down. The solution: the SAP Advanced Planning & Optimization component.
Some of the key challenges faced by the company were as follows:
Elimination of multiple legacy systems
Elimination of manual planning processes and dependency on spreadsheets- for accelerating planning cycles and response times
Improving data accuracy and completeness
Accommodating a complex supply chain
Streamline of processes for contact research and manufacturing services.
Improve ability for meeting increasing and changing customer expectations and demands.
Why SAP was selected
For selecting SAP as a system following are the reasons:
Robust, best-in-class, integrated IT meeting core business as well as industry-specific needs
Tight integration between planning, execution and performance monitoring processes
Simplification of the IT landscape
SAP's market leadership and commitment to the pharmaceutical industry
Implementation of Best Practices
The implementation steps included the following:
Detailed tracking of implementing progress using key performance indicators
Alignment of business objectives with IT
Use of ASAP methodology during business blueprint, testing, integration and operational phases.
Strict sign-off policy for introducing enhancements
Involvement of cross-functional teams to define data integrity and master data management strategy
Low Cost of Ownership
Simplification f existing IT landscape, enabling the IT team to work more efficiently
On-time, within budget project
Elimination of high-maintenance legacy application, improving productivity of IT personnel
Tightly managed, well-defined project scope
Financial and Strategic Benefits
Implementing good practices led to many befits both financially as well as strategically. They are as follows:
Greater visibility or order and fulfillment data
Elimination of redundant data
Greater ability to react to changes in demand
Streamlined supply chain processes
Common platform for collaborative forecasting
Out of the many benefits obtained by its implantation it also included operational benefits which are illustrated below
Key Performance Indicator
Manual to automated
Raw material inventory
-15% to -20%
Finished goods inventory
From macro (groups equipment) to micro level( single piece of equipment)