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Drug is a medicinal goods consumed by human to streamline the health. These drugs are should be purchased from nearby medical shops with or without consulting doctors based on type of drug and consumed by "people". In the process of drugs reaching the consumers from manufacturers, it has to move 3-4 stages in the supply chain.
India is a massive market and stands 3rd in terms of number of drugs sold. According to recent estimate, Indian pharmaceutical industry will reach 50 billion USD by 2015-16. Industry is highly fragmented and regulated. It is growing in a fast pace since people are getting more awareness about health consciousness. Pharmaceutical Supply chain is facing several challenges to survive and succeed in a competitive environment which is more complicated and uncertain. Challenges are availability of counterfeit drugs, climate controlled environment to store drugs, rising cost of transportation of goods, slow response time of supply chain, bullwhip effect, uncertainty in forecasting sales. Many manufacturer realized that the real challenge lies in the delivery of drugs to the consumer from their warehouse.
In 1990s, Internet was born in world. There is a significant increase in usage of internet across several industries in fast pace for various reasons like communication, shopping, information sharing, money transactions etc. This triggered a new web-based software platforms to bridge gap between companies. There is a significant interest to look at the role of electronic medium in pharmaceutical supply chain.
NEED AND RATIONALE OF THE STUDY
The driving force for the study is to understand the electronic medium presence in pharmaceutical supply chain from manufacturers till reaching the consumers. Drugs are integral part of human health. There are several players in the supply chain stages who strive hard and keep up with competitor and customers expectation. Traditional mode of functioning is most predominantly found in the supply chain by physically orders collected by representatives, telephone calls etc.
A shift of supply chain functioning to electronic medium is analysed in the project. Important factors which are considered by companies while shifting to electronic medium like software, online websites are derived. Besides this, the reasons for not utilizing electronic medium for transactions of money are also accessed. The focus of this study is to see the electronic medium functioning and further scope in pharmaceutical industry.
PURPOSE OF THE STUDY
Understanding the electronic medium functions in pharmaceutical supply chain and knowing the relative importance of various factors for different players in supply chain are essential to provide efficient delivery of drugs to consumers effectively. Needs and wants of the supply chain players are determined through the analysis of factors which is accessed by them. Challenge lies in the improvement of supply chain can be nullified by the capabilities of technologies and their advancements.
RESUME OF THE SUCCEEDING CHAPTERS
This chapter is mainly to give introduction about Indian pharmaceutical industry. In the succeeding chapter, we will further refine the thought by literature review. Later on, we will see the functions of systems in pharmaceutical industry and the analysis of factors. Finally, the finding and suggestion for the betterment of delivery of drugs are discussed.
A literature review is to get insights from accredited scholars and researchers analysis on similar topic. The main purpose of reviewing several articles is to deepen the knowledge and ideas of what have been established on a topic, and findings will help to provide better understanding. As a piece of script, the review is described by a directing concept.
Besides knowledge widening about the topic, writing a literature review does the following:
Address key issues
Help to find better way to access information
HOW REVIEW HAS BEEN CONDUCTED
Indian Pharmaceutical companies are growing in a very rapid pace but the distribution system is not kept pace with growth. Such inefficiency is very high in the highly fragmented industry. This article also emphasis on the pharmaceutical companies must focus on improving supply chain thereby improving value to the customer.
Pharmaceutical companies have to overcome several challenges which they face today world like planning for material and capacity, procurement, manufacturing quantity and time, till the final delivery. To bring efficiency in supply chain they must follow some techniques like forecasting and planning, procurement and customer relationship management. Most important purpose in supply chain is to ensure right product at right time and right place, in the right condition to people who are suffering from the disease. Entire industry needs to improve infrastructure to improve the effectiveness. Different types of systems like warehouse management systems, transport management systems etc. can improve effectiveness. ( Singh & Arcot, 2012)
Most important aspect of pharmaceutical SCM is replenish of stocks at right time at right quantity. This will help to maintain the minimal stock level i.e. safety stock.
Aspects of replenishment to be considered to be
Reduction in time to replenish.
Forecasting will help manufacturers to plan
Better communication links between the layers of supply chain
Ensuring the availability of drugs & Service enhancements.
Recent technique called Automatic Inventory Replenishment (ARP) is adopted by many leading companies like P&G. Automatic Inventory Replenishment (ARP) technique which came to picture when global competition pushed the companies to move towards effective inventory management. It is evident through the result of P&G's result in USA after adopting Automatic Inventory Replenishment to maintain retail inventories. Three major factors required for ARP techniques are transaction cost analysis, strategic consideration of firm and organizational factors. ARP to become effective IT plays major role in linking several parts of supply chain. (Myers, Daughtery, & Autry, 2000)
Pharmaceutical Supply chain is facing several challenges to survive and succeed in a competitive environment which is more complicated and uncertain. There are several issues regarding pharmaceutical industry lies in supply chain are transport infrastructure, logistics and others. Inefficiencies anywhere in the supply chain will reduce the chances of the manufacturer success.
Four Fundamentals of SCM in Pharmaceutical industry:
Customer satisfaction and Optimize supply chain costs
Tackling barriers between internal functions
Efficient and effective management of material, money and information flows throughout supply chain.
Both internal and external customer/supplier relationship.(Sweeney, 2006)
Proper investigation is done to find the relationship between key business drivers, supply chain infrastructure, and business practices to assess the effectiveness of the supply chains. In addition to the differences in the demand characteristics, there is a very unique problem of incentive alignment between the manufacturer and the distributor. (Singh M. , 2005). Managing supply chain of pharmaceutical industry is done through technology. Technology will always has a significant influence on the ability to provide and deliver health care services. Monitoring the targets and compare with the targets. It can improve the healthcare environment and change the way healthcare is delivered, making delivery better, faster, cheaper and more accessible to an ever-greater population. Technology roadmap for visualizing the technology capability and its outcome both depends on success of the platform. IT platform would help to reach vision of improving the delivery of service and reduce burden also. Possibilities are endless but triggers and target are important to bring change in supply chain. The roadmap for the products which is reaching the customer by promotions and awareness. Addition to all the issues, growing trend in e-commerce technologies will also improve the satisfaction & efficiency of supply chain. These technologies will help in reducing supply chain costs. (Whewell, 2009)
TITLE OF THE STUDY
3.2 RESEARCH PROBLEM
The research problem identified for the study is the shift of players in supply chain are moving from traditional way of doing business to electronic medium.
3.3 OBJECTIVES OF THE STUDY
Understand the major factors considered by players in supply chain when they are shifting or upgrading electronic medium for interactions.
Find the reasons for not using electronic medium for transactions of their money.
3.4 OPERATIONAL DEFINITION OF THE VARIABLES UNDER INVESTIGATION
3.5 VARIABLES OF STUDY
3.7 DATA COLLECTION METHOD
3.9 STATISTICAL TOOLS
3.10 PILOT TEST AND RELIABILITY OF THE INSTRUMENTS
INDIAN pharmaceutical industry
Indian pharmaceutical industry is a billion dollar industry. 95% of domestic demand is met by Indian companies itself. It has many products, process and intermediaries. According to data provided by Department of pharmaceuticals, the total turnover is 21 billion USD. Indian exporters are selling their drugs over 200 countries in the world & the export market is worth 8.47 billion dollars.
CHART 4.1: Revenue generated by Indian pharmaceutical industry
Source: (Technology in the Pharma supply chain, 2011)
In India, there are 250 big players and more than 8,000 SMEs which form the core of pharmaceutical industry. Indian market is highly fragmented with stiff competition among players and government price control. Indian players produces bulk drugs belonging to all major curative groups ranging from complex molecules to simple technologies.
Finished formulations are different forms like capsules, tablets, lotions, injectable etc. Most of them require different mode of packing and storage to make these drugs safely reach the market and consumable state. As mentioned earlier, it is growing around 20% and it will reach 50 billion USD by 2015-16.
Supply chain in India composes more than 550,000 pharmaceutical stores in the country. According to bio plan Associates, though the number of distributors have been raised by 4 times from 1980s.
CHART 4.2: Players in Indian pharmaceutical industry
Source: Secondary data
Tier 1- Manufacturers:
Drug Manufacturers are major art of supply chain in managing resources properly to provide better resources. Companies hugely invest in R&D to be competent enough to provide better health care services. If a drug is getting delayed to reach the market, it costs the company around 1 million USD per day. Indian pharmaceutical industry is mostly known for generic drugs manufacturing at low cost. Key challenge lies for manufacturers are presence of counterfeit drugs, managing inventory etc.
Tier 2- Carry and Forward agents:
After 1990s, Indian pharmaceutical industry saw a huge shift in terms of delivery of drugs. Manufacturer did not want to take whole burden from getting chemicals from suppliers to the delivery of drugs to consumer. Hence, CFA came to picture. Main role is to maintain storage of drugs of particular company and delivering to the stockist on request. Each company will have 1-3 CFA based on the company's product portfolio and market size.
Tier 3- Stockists:
Stockists are wholesale distributors of drugs from CFA to next tier. They interact with more than 30-40 CFA to get drugs and deliver to stores and hospitals. They will pay bills within a week to few months to CFA which depends on the percentage mark-up.
Tier 4- Hospitals, Big pharmaceutical outlet, small stores:
They are front end of pharmaceutical supply chain who directly interact with consumers and make the drugs delivered to consumers. In India, nearly 33% sales revenue are coming from Non-prescription based drugs.
PURPOSE OF THE STUDY
Pharmaceutical industry in India is witnessing changes in terms of delivering better way of reaching consumers. Recent entry of MedPlus has created a huge threat for traditional players in pharmaceutical supply chain to be efficient as others to sustain in business. This study would like to grab the issues regarding the EDI and EFT in pharmaceutical industry.
SIGNIFICANCE OF THE STUDY
The topic is decided upon the consideration of present scenario. For this it is very important to study the knowledge level of EDI and EFT from players in supply chain. It is also important to understand the factors considered by them while considering EDI and the reasons for not utilizing EFT. So the survey helped understand the supply chain and based on that I was able to make inferences and give suggestions on what steps could be taken to digitalize pharmaceutical supply chain.
LIMITATIONS OF THE STUDY
This study is limited only to Chennai zone. The result will bound to change for other zones across country.
The study has only 62 respondents which is small due to the time frame allotted for it.