The Marketing Strategy Used In Pharamaceuticals

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Hill and Hill (2009) states that many organisations use their marketing strategies to assess the future markets in terms of both known and potential customers, competitors and products. Hill (2000), states that marketing strategy is the link between the corporate decisions and the manufacturing strategy of Rumack Pharmaceuticals. In any business, marketing is one of the core elements for the success of an organisation. Marketing helps in getting the customer aware of the products and services that the organisation is offering. Rumack Pharmaceuticals used their marketing tools and techniques to market their products. Due to various challenges that Rumack has been facing, they decided to use different strategies for marketing.

Restolvic is one of the most famous products of Rumack Pharmaceuticals. They had two identical lines for the packing of their solid products. Rumack knew that they had more capacity than they needed; therefore their aim was to identify new opportunities in order to increase their sales figures and ROI. The strategy of Rumack Pharmaceuticals was to increase their product range to sustain and also to capitalize upon the market share. Rumack Pharmaceuticals preferred to adopt a diversified approach for the range of products rather relying on a single drug. Internal capabilities of Rumack Pharmaceuticals are the driving force for the new product introduction and innovation. Rumack has continuously developed new products which also includes OTC. Hence it can be stated that the marketing strategies adopted by Rumack Pharmaceuticals is Mix, Range and Level of Innovation (Hill 2009).

1 b) Implications for Manufacturing

Data Set 1 (Attached)

Comments (Data Set 1)

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The attachment 1 represents the annual quantity (000's Bottles) distribution for a number of representative products packed on Lines # 1, 2 and 3 over the last 7 years. By analysing the data set 1 produced, it can be stated that the no of total samples increased every year which means that regular innovation was being carried out in the last 7 years. Volume of most of the products was increased in the next year and then the year after and so on. 6 years ago, Rumack had 4 products under the category of less than 500k bottles and it was 66.66% of that year's production. Next year the same category was increased to 5 and the percentage increased to 71.42%. The annual quantities kept on increasing until the current year where the volume is 15 with the percentage of 75%.

Other bigger volume categories also increased year after year. Rumack had 1 product each in 501k-1000k and 1001k-1500k bottles 6 years ago. Three years later these figures increased to 2 and 1 respectively, and also 1 product came in the category of >2001k bottles. It has been analysed that the highest quantities were achieved in the current year where 15 (75%) products fall under the category of <500k, 2 (10%) in 501k - 1000k and 1 (10%) each in 1001k-1500k, 1501k-2000k and >2001k. The maximum no of samples were produced in the current year which is 20, which is 70% increase over the last 7 years.

It has also been analysed that the new products are always produced in less quantity so that their market response can be tested. If there is success then these products can be produced on larger volumes. With reference to the attachment 1, it can be stated that Rumack Pharmaceuticals had the minimum percentage of 66.6 % in their lowest category of production where all the new products are initially launched. The maximum percentage of approx 79% has been achieved under this category two years back.

Data Set 2 (Attached)

Comments (Data Set 2)

As mentioned in the comments of data set 1 that all new products are introduced in the lowest volume category so that their market response could be tested before their high volume production. Data set 2 represents the annual quantity (000s Bottles) distribution for a number of representative products packed on lines #1, 2 and 3 in terms of the year of introduction and the 2 years following the introduction. The data set 2 helps is analysing the new products launched over the last 7 years and also their progress in the next 2 years of their introduction.

It has been analysed that 6 products were introduced by Rumack Pharmaceuticals 6 years back. 4 under the category of <500k and 1 in 501k-1000k and 1 in 1001k-1500k. After one year, production of one of the products was increased and it was moved from the category of 1001k-1500k to 1501k-2000k where as rest remained the same. After 2 years these products were analysed again and it was noted that the product from the category of 501k-1000k has been moved to 1001k-1500k. The product which was introduced 5 years ago initially came in the category of <500k, after one year it was moved to 501k-1000k and remained in that category till current year.

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It has been analysed that products were initially introduced in the lowest volume category and with time when their demand was increased, their production volume was also increased significantly.

Overall Comments (Data Set 1 & 2)

By analysing data set 1 and 2, it has been observed that Rumack Pharmaceuticals have been increasing their production volumes each year and new products have also been introduced continuously. This shows that there product demand is high in the market and it has increased the work load within the organisation. Processes and infrastructure has been designed and improved continuously in order to cater the high demands of the market and meeting the schedules.

Batch Size Quantities on Line 1

CHART 1

Comments

Current Year Minus

Average Batch Size

5

141.9

4

86.7

3

70.9

2

68.3

1

64.3

0

64.3

Chart 1 has been produced by using exhibits 4 and 5. Values have been derived by using the calculations as attached in Appendix (a). It has been observed that there is a constant decrease in the average batch size every year. The graph line is declining every year as it can be seen in the chart 1 above. The average batch size values in each year are:

The reduction in the average batch size is directly affected by the necessity of Rumack Pharmaceuticals for producing a broad range of products. According to Hill (1991), decrease in the average batch size could also mean that there has been increase in the set up at the same time and hence it has affected the production volumes in Rumack Pharmaceuticals. Small batch sizes will have greater set up times as it is necessary for the change of the product type.

Process Arrangements and Market Fit

Capacity

Various strategies have been used in the case study of Rumack Pharmaceuticals for their production lines. Line 1 is used for two products i-e Restolvic and Hedanol, for filling and packaging. The two products have same bottle sizes and hence that is the reason for the selection of these products for line 1. Three different types of bottles are being used in line 2 where the difference is only in the height of the bottles. Rumack Pharmaceuticals using line 3 for their liquid products only. There are five different sizes of bottles being used in line 4 which involves twelve different product types. Hill and Hill (2009) states that, if processes are not highly utilized for one product, they need to be chosen so that they can be used to meet the needs of the other products. According to Hill (1985), an organisation mostly a manufacturing organisation, need to distinguish between the technologies required to make or develop a specific product. As Rumack has a large variety of products, hence the company is facing the following.

High level of technology to be implemented within the processes

High expenditure of production.

Products in line 1 and 2 are of the highest demand and therefore priority is given more to line 1 and 2 so that Rumack can maximize their capacity to meet the required schedules. Whereas line 3 and 4 has spare capacity and the current requirements can be met easily. Additional equipment will be required if OTC products are to be packed on line 4. Capacity can be seen as an organisational success and therefore Rumack can use their spare capacity effectively and efficiently by:-

Getting highly skilled workers

Adequate machines

Broadening Product Range

In the current situation, broadening product range could be very critical for Rumack Pharmaceuticals. Critical analysis would be required in order to forecast the future requirements of the market. Broadening product range can affect the current processes and production volumes and hence could eventually affect the customer demands. It can also be stated that enhancing the product range will require more changes in the existing equipment for the processing and packaging of products. The change in the processes will be highly expensive and will also result in the increase of set-up times. However it can also be stated that broadening product range can also result in success in the market and could eventually result in high sales and profits. Therefore critical analysis is required by the higher management of Rumack Pharmaceuticals in order to forecast their future requirements and comparing it with their current processes and infrastructure. Hill and Hill (1995) states that by enhancing the product range, production volumes can get affected as there will be increase of set-up times which will cause lower production volumes. Hence the ultimate goal of Rumack Pharmaceuticals should be to:

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Increase in productivity by using bigger batch sizes

Reduction in set up and changeover times.

    Source of Problems

According to the given case study, Rumack Pharmaceuticals have been able to utilise their marketing and manufacturing strategies in order to meet their organisational goals. However one problem which has been noted in the case study was the inability of the management of Rumack Pharmaceuticals who could not foresee the quick boost in the demand of Restolvic. Due to this rapid increase, Rumack relocated Restolvic to the new plant in Bakersfield. According to Jim, the Bakersfield plant was planned 9 years ago with sufficient floor space and facilities to their future growth. However by the transfer of Restolvic and the rapid development in demand, Rumack started facing problems related to absorbed floor space and rapidly full production of the plant. These resulted problems to the organisation but one of the key problems was related to packaging.

Rumack Pharmaceuticals has already identified a potential solution to the above mentioned problem. Rumack has planned to invest and change their existing equipment i-e portable filling station, lines etc and enhancing their capacity in the packaging area by adding more floor space which is almost 50% of the existing floor space required for each packaging line. This would lead in continuous broadening of their product range and getting high profit returns.

Exhibit 7 relates to the set-up / change-over arrangements within Rumack Pharmaceuticals. It shows the no of hours it takes to change the product and packaging in different lines and also change in bottle sizes. It explains the approach to complete the necessary set-ups and change-over on the four packaging lines. It states that it takes 4 hours to change the product/packaging in each line, whereas bottle-size change takes 5-8 hours.

The correlation between run size and output per hour based on the representative sample of products packed on line 1 is illustrated in the below chart 2.

CHART - 2

The above chart explains that big batch size is used for the production in big quantities. It also explains that the run sizes are big when the average numbers of bottles produced per hour are big. It can be stated that Rumack Pharmaceuticals seek to diversify their products by producing in high volumes at the same time.

Order Winners and Qualifiers

Hill (1995) states that qualifiers refer to the criteria of getting the product into the market and provide the opportunity to compete with its competitors, whereas winners are those products who have gained a competitive advantage over its competitors who have also qualified to be in the same market. Order qualifiers and winners are both time and market specific and hence they are different from market to market and can change with time. Hence the market would require Rumack Pharmaceuticals to continue enhancing their product types and keep increasing their production volumes. After opening plant in Bakersfield, Rumack decided to use three identical processes for their three packaging lines which resulted in adequate benefits for engineering, support and maintenance. This resulted in better quality and technical support in Rumack Pharmaceuticals. Thus by keeping high quality standards, product range, technical competency and support lead Rumack Pharmaceuticals to order qualifier and winner (Hill 1993).

Product Profiling

According to Hill and Hill (2009), product profiling is a tool and approach which is used by an organisation to assess the level of fit between needs and provision or check the future level of fit in the light of changes. It also states that product profiling enables a company to test the current or expected level of fit between the demands of the market and the characteristics of its existing or proposed processes and infrastructure investments.

According to Anderson (2010) Product profiling will allow Rumack Pharmaceuticals to see their manufacturing strategic feedback in their market. Product profiling is an appropriate tool for Rumack Pharmaceuticals as according to Hill (1991), it will enable Rumack to:-

Evaluate the inconsistencies within the processes and improve the level of fitness between the way Rumack wins order in the market and ability of manufacturing to sustain the market demands.

The product profile of Rumack Pharmaceuticals has been created by considering the different variables (Jobbing, Line, Batch and Continuous processing) as mentioned in Anderson (2010) for the better understanding and analysis.

As mentioned in the case study that Rumack has been introducing new products over the last many years which have resulted in high demands and profit margins. It can be stated that there is a correlation between the new products introduced and the order size. Product profile states that with the increase in demand over the last few years there has been no change in the technology and process flexibility which has created problems at the operational level. Due to wide product range, the set-up times have been increased resulting in lower production volumes. There is an increase in the costs and decrease in process efficiency as the rapid growth and demands cannot be catered by the company effectively and efficiently.

Some relevant aspects for this company

Typical characteristics of process choice

Jobbing

Batch

Line

Products and markets

Product type

unique

standard

Product range

broad

narrow

Order size

small

large

Rate of new products introduction

high

low

Order-winners

high

Quality, range, brand name,

Manufacturing

Process

Technology

general-purpose

dedicated

Flexibility

high

low

Production Volumes

high

low

Ability to cope with change

Product

complicated

easy

Schedule

complicated

Easy

Set-ups

Number

many

Few

Expense

high

Low

Key manufacturing task

response to specification and lead-time changes

low-cost manufacturing

Infrastructure

Engineering-orientation

product introduction

process improvements

Manufacturing management's key task

setups, packaging and meeting deadlines

low cost, increased efficiency

Company's original position on each of the chosen aspects and the resulting profile

Company's current position on each of the chosen aspects and the resulting profile

Conclusion and Recommendations

The strategy option that can be suggests for Rumack Pharmaceuticals is technical, process change and market. All these strategy options are closely related to each other and play a vital role in the success of an organisation by meeting their objectives (Anderson, 2010).

Currently Rumack Pharmaceuticals has adjusted its market to high volume and wide range of products. The strategic approach of the company should be focused on the organisational goals. As the company requires technology to make their products as per required standards, hence adoption of high tech machines could be one of the approaches. Rumack has been using simplified process for their production of products as same bottles have been used to produce different products. Some products have the same bottles but different heights. This approach plays a vital role in reducing costs and overheads in the organisation. Hence Author suggests these simplified processes to be carried forward in future. Manufacturing constraints can be used as a platform for the choice of processes as it will assist in overcoming the existing issues. Likewise order winning and qualifying characteristics are the main factors for choosing an appropriate process. Author also suggests the use of batch process in Rumack. Hill (1991) states that organisations choose an appropriate process based on volumes. It also states that batch process are often found in manufacturing organisations which provides different products and services as it helps in utilizing the plant in different ways. Therefore Rumack should continue using the batch process for their wide range of products through same set of processes.

According to Hill and Hill (2009), strategic options can help identifying the market objectives and the appropriate marketing strategy. Currently as shown in the case study that Rumack has a wide range of products with huge volumes as they are in high demand in the market. The current strategy of Rumack is to produce as many derived products of the popular Restolvic as possible in high volumes. However it has also been observed in the case study that there is a delay in the delivery of the products as Rumack is experiencing difficulties in maintaining their schedules. Therefore one short term change that the Author would suggest is that, Rumack Pharmaceuticals should focus on their main objectives and products and hence should improve their manufacturing processes effectively and efficiently in order to improve their current delivery schedules rather producing wide range of products. Author also states that by utilising the capacity efficiently, Rumack would be able to produce their best products in higher volumes which will eventually result in high return on investment.

The long term change author would suggest for the manufacturing strategy, is to invest in high technical machines to cope with the current and future requirements. Also increase in the floor space is another major requirement at the moment for Rumack. As recommended before that Rumack should focus on their main products as this will help in utilizing their resources more effectively and efficiently. According to Hill and Hill (2009), marketing strategy plays a vital role in developing a well structured manufacturing strategy. Hence this can result in lowering the set-up time, reduce costs, uniform processes for different products and high capacity. Cooke (2010) suggests some other strategies which can also be implemented to Rumack Pharmaceuticals and these are:

Provide maintain and improve existing facilities

Focus on process improvements to increase the run length.

Detect and eliminate faults and problems

Can focus on increase in capacity to decrease transitional period.

Establish, monitor and improve process effectiveness

Provide and improve maintenance systems to support the facilities

Analyse the impact of installing a new packing line to relieve the bottle neck

Minimum resources should be utilized

References

Anderson, R. (2010), Engineering Strategy Module Notes Coventry University. Coventry: Coventry University

Cooke, G (2010) Management of Quality Module Notes Coventry University. Coventry: Coventry University

Hill T (1993) The essence of Operations Management. Hemel Hempstead: Prentice Hall

Hill, T. (1985) Manufacturing Strategy. Macmillan: Basingstoke

Hill, T. (1991) Production/Operations Management. 2nd edn. Prentice Hall: UK

Hill, T. (1995) Manufacturing Strategy. 2nd edn. Macmillan: Basingstoke

Hill, T. (2000) Manufacturing Strategy: Text and Cases. 2nd edn. Palgrave: Basingstoke

Hill, A. and Hill, T (2009) Manufacturing Operations Strategy. 3rd edn. Palgrave: London