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Supply chain is the process initiated on demand of customer. It is carried out by going through processes of raw material acquisition, production controls, finished goods, warehousing and ultimately ends at delivery to customer. All business segments have to formulate their own tailor made supply chain mechanism. Supply chain method of any organization depends on type of product and nature of business activity in which it is involved. Organizations acquire raw material from different sources and convert it into finished goods. This process is essentially involves commitment of internal and external stakeholders. Supply chain management covers harmonious flow of chain of prescribed events. Supply chain management processes have become so diverse that it has to account for six sigma and total quality management programs. Accordingly, organizations compete at global level that requires world class quality standards. Thus, in order to meet these challenges organizations must explore qualified, reliable, and competitive sources of inputs found anywhere in world.
The hottest issue of supply chain management is to manage quality and reduce wastage at minimized level in order to achieve effectiveness and efficiency. First activity of supply chain management is generated from customer order and end at delivery of product at customer premises. Intermediary processes are covered by production with the help of internal chain of commands and external network of suppliers. Supply chain management accounts for corporate goals and organizational strategy that makes short terms and long term decision making. Short term decision making involves daily operational activities handling. Long term decision making is strategic decision making that analyzes overall internal and external environmental conditions. Therefore, successful organizations design supply chain management by considering strategic focus whereas account for daily operational decision making.
Environmental conditions involve marketing demands, availability of four factors of production, customer care, transport infrastructure, competition level, and supplier powers. Today's global arena is known as turbulent business environment. That is why organizations have to constantly change their practices to account for changed variables. Furthermore, organizations have to design flexible contingency plan in their supply chain management that in turn needs some alternate backup plan to meet urgent assignments. Therefore, effective supply chain handling requires reasonable estimate of product demand, distance to be travelled, and other cost elements.
Pharmaceutical industry was considered as highly profitable industry that attracted thousands of companies and aggressive marketing tactics. These competitive pressures make the supply chain management processes more difficult than ever. Pharmacy companies are delivering products to hospitals, health care institutions and pharmacies. Pharmaceutical whole sellers are considered as backbone of global supply chain as they ensure continuous availability of drugs. Global pharmaceutical whole sellers execute the various phases of supply chain management as inventory handling, information flow managing by knowledge management, transportation and logistics. The crucial challenge for pharmaceutical players is to manage efficiency and speed of delivery as it is matter of patient's life saving.
US Food and Drug Administration Authority (FDA) regulate global industry players. The Authority has made strict rules and guidelines that are barrier to entry. FDA is responsible for public health that issues directions for suppliers and producers that are binding on them. FDA enforces law through Public Health Service Act. The FDA expects from pharmaceutics to update them about changing regulatory requirements. Environmental Protection Agency (EPA) has influential powers that exercise is authorities indirectly on pharmaceutical players. Therefore, pharmaceutical and health care industry competitors have to face great legal pressures that are threatening to their sustainability.
Competitors are effectively utilizing e-commerce tools for information flow management. E-commerce is posing many opportunities and challenges for competitors. E-commerce delivers various customer care solutions as many health care practitioners are rendering online health care professional services. Online knowledge management sources are potential asset of industry to render efficient customer care. Information management tools allow health care practitioners to preserve customer data base that facilities to hospital and health care institutions as well. Thus, e-commerce and other knowledge management techniques are basic ingredients of supply chain management.
Inventory management is important issue in supply chain management. Smart businesses utilize just in time manufacturing of goods model. It aims at manufacturing of good at right time of customer demand. It erodes superfluous inventory management issues. Inventory management system covers competent supplier base to meet customer's desired standard of quality. Transportation and logistics management require strategic vision in alignment of inventory management. Transportation decision must be managed at strategic level to meet customer satisfaction and keeping cost at reasonable level. Therefore, organization can meet customer satisfaction at desirable cost by managing smooth way of transportation.
3 Research Objectives
The research project aims at critical analysis of NHS Glasgow supply chain management. Project would be accomplished by data collection from personnel involved in supply chain management. Data related to supply chain management would be collected form NHS Glasgow management interviews and collection of data from library resources. Our research objectives are as follows:
- Collect data of NHS Glasgow pharmaceutical company through interviews of company staff.
- Critically analyze the supply chain management of NHS Glasgow.
- Conduct SWOT analysis of NHS Glasgow and improve suggestions of improvements.
- Make attractive presentation of pharmaceutical supply chain by graphs, charts, and tables.
- Conduct literature review of supply chain management and specifically pharmaceutical supply chain management.
- Make comparison of studies on pharmaceutical supply chain literature.
- Conduct comparison of NHS Glasgow and other industry competitors.
4 Research Questions
- What dimensions have been emerged in supply chain management literature including historical context and evolution of literature with the passage of time?
- What initiatives have been taken at NHS Glasgow including critical review and SWOT analysis of supply chain management?
- Which competitor is better in taking supply chain management initiatives in areas as knowledge management, information communication technologies, inventory management, logistics management, and collaborative activities?
5 Research Methodology
The research will involve two methods. It will comprise of primary data collection and secondary data collection. The combination of both methods will yield more accurate and relevant data for answering the research questions under consideration. The secondary research will start from the annual reports of the companies. Some data for pharmaceutical industry initiatives will be collected. This initial secondary research will help in finding relevant questions to be asked for collecting the precious data from primary research.
Data collection activities primarily involved NHS Glasgow whereas industry competitors' data would be collected in order to make comparison. Competitors' supply chain analysis would be conducted that assists in depth critics on literature review.
5.1 Primary Data Collection
Primary data collection will involve the data collection through interview and questionnaires. For this purpose the research will take time from managers of the relevant companies. The information about the nearby offices of the companies will be sought from their websites. Interviews will be conducted where it would be possible for researcher to contact managers of companies and take time from them for conducting interview. However where due to any reason, researcher would not be able to conduct interview he will administer questionnaire.
Interview will be considered as the most important and most preferable source of primary data. Interview will be structured so that most important information that is not available from secondary research can be sought through direct sources. We will start interview with some general type questions to make flow of process and then gradually more specific questions will be put forward. It would be preferred that we get time of some top management personnel from these organizations so that strategic view of organizations is delivered to us through these interviews.
Where we will not be able to conduct interview due to any reason like lack of time, financial resources, distance or any foreseen reason we will send questionnaires. Questionnaires will be designed by keeping in mind the data collected from secondary research and further needs of data to complete the research work in the best manner. The questionnaire will be sent to them through post and a return envelop will be included into the pack so that most of the questionnaire are returned to the researcher at right address without any cost of posting the questionnaire back on the organizations.
Finally, the data collected from these interviews and questionnaires will be processed separately for summarizing, and the two summaries will be combined to get a single data summary for processing and research purpose.
Interview will be designed keeping in mind the time constraints on behalf of interviewees and interviewers. Most probably, these interviews will be accomplished in average duration of 45 minutes. That would neither be too small time to collect necessary data nor too long to accomplish with interest of both parties.
Another important thing in interview will be the additional information that interviewee will confer upon us. This would be very interesting and may open new arena of data collection for us. We may get some very important information that we may be ignoring. To save all important information from the interview we will record the interviews using digital recording devices and manual notes of important points during interview. Recording will be very helpful in retrieving important information and reconciling our notes.
Interview and questionnaire will cover mostly areas of pharmaceutical supply chain in organizations along with latest trends and technologies in customer care and inventory management. These will be designed to get information about information communication technologies in supply chain management. Drugs manufacturing and management involves strict regulatory measures as it is matter of people's lives. Therefore, US FDA and other regulatory agency compulsions would be studied to know threats to industry.
5.2 Secondary Data
According to above prescribed pattern, secondary research would be done in two portions to support the research objective. At first half collected would be on following areas as:
- Pharmaceutical supply chain at NHS Glasgow.
- Ethical implications in pharmaceutical supply chain.
- Pharmaceutical supply chain at Johnson & Johnson, Glaxo smithkline, Pfizer.
- Pharmaceutical supply chain information on reports and web sites of above described industry competitors.
- Legal rules imposed by US Food and Drug Administration Authority and UK regulatory agencies.
- Voluntary safety measures adopted by pharmaceutical manufacturers.
- Ways of legal compliance and disclosures of compliance.
- Standardization of supply chain management by pharmaceutical industry.
- Any other topic relevant to supply chain management would be considered.
Preliminary research would yield enough data for interviews and questionnaires formulation. After completion of primary research execution secondary research would start. Primary data collection from interviews and questionnaires would clarify the research vision that will help in secondary research. Secondary data collection would be harmonized to catalyze the research progress. Research project would contain the combination of primary and secondary data. Whole data collected would be apportioned into particular areas of supply chain management.
In order to start the project, the areas would be defined form research work conducted on journals and reports by secondary research. Preliminary pharmaceutical supply chain management can be categorized into following areas as:
- Inventory management
- Transportation and Logistics
- Connected facilities
- Knowledge Management as Information Flow Control
- Information Technology as Collaboration Activities
- Regulatory Measures and Compliance of Industry Players
- Strategic Importance of Supply Chain Management
- Supplier-Organization Partnership
All these areas of pharmaceutical management would be considered while conducting primary and secondary research. Deep research would be done as it seems that few other areas of supply chain management may be emerged due to diversified literature on pharmaceutical supply chain management.
6 Literature Review
6.1 Historical Context
Adam Smith may be regarded as pioneer of efficient supply chain management of today's era. He wrote a book named Wealth of Nations in which he elaborated most important concept of division of labor (Rees, 2011). He argued that through division of labor efficiency of work can be achieved by specialization. He said separate the work into smaller units and devote each labor on these tasks, such process would lead to specialization. F.W Taylor further explained the division of labor concept as he argued that labor efficiency can be improved by training human resource by scientific methods (Rees, 2011). He emphasized that detailed set of instructions, supervisory work, and improved training tools by scientific methods should be devised to improve work processes. Taylor's work helped the world of industrialization largely and even today's organizations are using his principles effectively. Scientific management theory laid down principles of industrial engineering (Rees, 2011). Scientific management regards human resource as factors of production that largely influences the production.
Henry Ford was pioneer of mass production in cars manufacturing. He devised T-model for mass production of cars in efficient manner (Rees, 2011). Henry effectively utilized the Taylor's scientific management in its assembly line manufacturing. Manufacturing sector started to use mass production with the help of scientific management principles. Pharmaceutical manufacturing produces block buster products by following similar assembly line organization. Japanese are inventors of modern supply chain management (Rees, 2011). After World War second, Japanese Companies devised innovative ways of mass production to initiative new wave of industrialization. Wave of industrialization generated trends of aggressive competition with best in class quality at lowest prices (Rees, 2011). Many renowned companies and even whole industries went into liquidation due to their inabilities of meeting competition. Competitive pressures make it necessary to devise innovative and improved ways of supply chain management. Pharmaceutical industry has faced mass production challenges that have to be met by modern trends and techniques of supply chain management (Rees, 2011).
6.2 Supply Chain Management Processes
Supply chain management is theme of serving customer in improved ways that satisfy it. Supply chain management literature divides supply chain methods into different camps. First camp is acquisition of goods and services for company's manufacturing processes. It requires supplier management by considering cheap and quality conscious suppliers' base that is known as purchasing management process (Rees, 2011). Second camp is called operation management that is physical conversion of raw material inventories into finished goods, which requires effective skills of planning, scheduling, and controlling of activities. It further requires managerial skills of activities management along with harmonizing of internal organization of tasks and responsibilities in meeting deadlines (Rees, 2011). The third camp involves business to business commerce and then business to customer commerce activities that is known as distribution logistics (Rees, 2011). It requires logistics and transportation across the boarders and supplier-customer relationship management. Purchasing management has to be focused on suppliers' supply chain management as it largely influences on company's own supply chain. Operations management requires handling of production control, material control, and inventory management from arrival to manufacturing process. Distribution logistics covers various steps of transportation and finished goods warehousing and delivery to customers (Rees, 2011).
6.3 Strategic Role of Supply chain management
Malaysian manufacturing enterprises are analyzed on the part of supply chain management. It has been concluded that strategic supplier partnership has direct correlation with business performance and product quality performance. Malaysian manufacturing firms have to undergo many production improvement programs to enhance overall business performance (Agus & Hassan, 2008). Manufacturing companies are facing aggressive competition challenges that require strategic supply chain management. Strategic supply chain management is necessary to survive in global arena. Organizations can retain their competitiveness by effectively managing supply chain (Agus & Hassan, 2008). Researchers demonstrate that supply chain management process is potential source for businesses to ensure sustainability at global arena. Organizations like Wal-Mart are making strategic partnerships with suppliers to enhance their competitiveness by using supply chain management tools. Different global companies are considering supply chain management as main factor of maintaining market sustainability. From 1990s, organizations are recognizing the importance of supply chain management (SCM) as strategic tool but are lacking measurement and research parameters in SCM field (Agus & Hassan, 2008). Customer satisfaction and quality of product, time taken, cost of manufacturing and other related costs, material and related resources utilization are regarded as performance measurement parameters (Agus & Hassan, 2008). Hence, time, cost, quality, and asset utilization should be considered in order to measure SCM performance.
Strategic supplier partnership chooses right mix of practices that supports to overall organizational strategy. Furthermore, smart information system supportive to SCM can enhance coordinating activities with external and internal relevant stakeholders (Agus & Hassan, 2008). Researchers argue that SCM has directly improves strategic marketing and financial performance of organization. Effective SCM strategy catalyzes return on investment and market capitalization of organization. Strategic supply chain partnership is known as hybrid organization that enhances coordinating activities (Agus & Hassan, 2008). Collaboration activities are enhanced by risk and reward sharing, elimination of intermediary costs, resource wide and organizational synergies, quick response to market and customer needs, and organizational attention on core competencies (Agus & Hassan, 2008). Global pharmaceutical industry player are seeking to leverage their influence over global market by making strategic alliances and corporate synergies. Pharmaceutical players should exploit supply chain partnership agreements to enhance market competitiveness by collaborative activities.
6.3.1 Strategic importance of supply chain management
Supply chain management has high level of importance at the strategic level of any organization. The effective management of supply chain can give the organization a competitive advantage. The organization's competitive strategy can be defined as, how the organization satisfies its customers through its products and services (Chopra et al., 2006). How easily the customer can reach to get these products and services. If the organization have a good quality products but it out of the range of customer then it may not be valuable for that organization. On the other side if the of organization have poor quality products and services and these are easily accessible it may also not enhance the value of that organization. So every organization need to manage supply chain along with production quality to increase the overall value of the firm. The value chain in any organization consist of the following stages, product development stage, marketing and sales, operations, distributions or mod of supply and finally the after sales services. And supporting activities of this value chain are finance services, Accounting services, Information system/information technology and the human resources management (Chopra et al., 2006). If any organization manages all these activities effectively then it will increase the value of the firm. If management fails to manage any single activity just like after sales service or distribution channel then it could be harmful for that organization (Chopra et al., 2006). The value chain starts with development of new product which shows the characteristics of the product for the end user. Then the next phase marketing and sales will generate the demand of that product by publicizing the product that it will satisfy the customer's requirements and the marketing also brings back the customer's input for development of new product (Chopra et al., 2006). By using the customer's specifications we moves to operation phase where the development of the product is completed. And then the distribution either takes the product to customer or brings the customer to the product. Services respond to the customer requests during or after the sales. These are the core activities these are must be performed to enhance the value of firm. This is the overall approach for any organization to be successful and its supply chain strategy and competitive strategy must be fit together (Chopra et al., 2006). All the activities that are part of organization's value chain make their own contribution in the success or failure of that organization. Thus the organization's success is failure depends on the following keys:
- The competitive strategy must be fit with functional strategy to make the overall coordinated strategy.
- The different functions in a organizations must appropriately structure their processes and resources to be able to execute these strategies successfully.
- The design of overall supply chain and the role of each stage must be aligned to support the supply chain strategy (Chopra et al., 2006).
6.4 Supply Chain Management
The supply chain management is hot issue in present times, which have to be managed efficiently. Many organizations are intended to manage it to enhance their sales and reduce their cost. The supply chain may involve many organizations as consumer associations, manufacturer, supplier, and procurement of raw material. Most organizations are willing to adopt it because of its preference over the traditional form of production planning and inventory control. Environment has challenged the supply chain implementation, which needs an intense and specific study for each application. Many organizations are adopting the supply chain management as key to their success. It will help the organization to reduce costs because of the better inventory control, improved delivery schedules, the JIT inventory management, shifting of our inventory to supplier's management. Therefore, organizations are adopting modern theories of inventory management that assist to supply chain management.
Technologies and methodologies adopted for management of supply chain are producing organizational change. The success of implementation of supply chain management is based on choosing right areas to focus and understanding the implications of implementation by supply chain participants. There are many difficulties and complexities in implementation. That is why we should implement it as an incremental change rather than a transformational change. Thus, organizational change management is necessary for market sustainability.
6.5 Inventory Management
In the traditional supply chain inventory management, manufacturer received the information in the form of order. Now in the modern time by using information technology manufacturer and customer can be interactive with each other and can ask about demand and share about inventory position on timely basis and inexpensively. Research by Gerard P. Cachon and Marshall Fisher the value of sharing these data in a model with one supplier, N identical retailers, and stationary stochastic consumer demand. There are inventory holding costs and back-order penalty costs. They compared the traditional information policy that does not use shared information with a full information policy that does exploit shared information.
In a numerical study they find that supply chain costs are 2.2% lower on average with the full information policy than with the traditional information policy, and the maximum difference is 12.1% (Cachon & Fisher, 2000). They also developed a simulation-based lower bound over all feasible policies. The cost difference between the traditional information policy and the lower bound is an upper bound on the value of information sharing. In the same study, that difference is 3.4% on average, and no more than 13.8% (Cachon & Fisher, 2000). They conclude the value of information sharing with two other advantages of information technology are faster and cheaper order processing. I.T leads to shorter lead times and smaller batch sizes, respectively. In their sample, Cachon and Fisher (2000) describe the way to cut lead times that reduces costs by 21% on average. Batches order processing reduces costs by 22% on average (Cachon & Fisher, 2000).
In the 1980s due to increase interest rates cost of inventory holding is also increased. It brought a new awareness of the negative effects of holding excessive inventories. At the mean time the Japanese introduces a new technique just-in-time inventory system (Cachon & Fisher, 2000). Due to high interest rates and high inventory holding cost it becomes very popular. Adoption of this type of inventory system requires efficient supply chain management quick information flow. In absent of necessary circumstances it is impossible to adopt such type of inventory system.
6.5.1 Managing Inventory Risks
Every organization in a supply chain bears supply risk. Organizations use the wholesale price contract as effective tool to cover inventory risk. Wholesale price contract can avoid inventory risk of organization. Wholesale price contract completely saves inventory risk by push contract. There is a single wholesale price and the retailer; retailer orders suppliers' entire supply before the selling season whereby retailer bears all of the supply chain's inventory risk (Cachon & Fisher, 2000). A pull contract also has a single wholesale price, but the supplier bears the supply chain's inventory risk because only the supplier holds inventory while the retailer takes that when he needed during the season. An advance-purchase discount has two wholesale prices: a discounted price for inventory purchased before the season and a regular price for taking inventory during the selling season (Cachon & Fisher, 2000). Now manufacturers allow purchase discount for retailers for the sake of inventory risk that the retailers bear on the inventory ordered before the season. If they would not order the inventory in off season then they would have to pay premium to manufacturers on the inventory produced by them in off season. It is found that the efficiency of a single wholesale price contract is considerably higher than previously thought as long as organizations consider both push and pull contracts (Cachon & Fisher, 2000). But in reality it overstate the value of implementing coordinating contracts because coordinating contracts are compared against an inappropriate comparative (push contract).If the organizations also consider advance-purchase discounts, which are also simple to manage, then it may be profitable for them. Therefore, we can conclude that how the allocation of inventory risk impact on the supply chain efficiency.
6.6 Transportation and Logistics
Logistics is the movement transportation phase of supply chain management that involves material acquisition, warehousing of material and finished goods. Logistics covers acquisition of customer order and execution of same by cost effective means that enhances profitability. Logistics has to follow the prevailing market trends or it may absolutely go against current practices to deliver customer satisfaction. Logistics and transportation section of supply chain executes planning and organization of all activities. Most important part of logistics is management of relationships with customers and suppliers whereby organization has to act as intermediary party. Logistics management depends on managers' expertise in choosing most suitable mix of combination.
6.7 Information Flow
6.7.1 Impact of I.T on Coordination Mechanisms
Now it is time of competition with the advancement in technologies. At the mean time those organizations are successful and highly competitive who change them with change in technologies and adopt latest technology. In supply chain management latest technology can help the organization to respond the customers need effectively due to the integration and coordination between different parties. The recent development in information technologies has a huge affect on the whole supply cycle (Haghighat, 2008). Effective management of information flows between supply and distribution partners may be synergistic and can provide a profit to each supply chain member. Supply chain members are often separate and independent entities, key issue in supply chain management is to develop a mechanism that can align their objective and coordinating their activities to maximize the performance of system (Haghighat, 2008). The effective coordination of activities and management of supply chain can give the competitive edge to the organization that can bring additional values to customers (Haghighat, 2008). Organizations can create a mechanism with the use of information technology to manage the information and product flow. Web and internet is a major tool to coordinate the information flows between different supply chain members. Supply chain consist of suppliers, manufacturers and customers, all these members are placed on the same network for the sake of better communication and coordination with each other (Haghighat, 2008). Effective coordination can help to reduce the lead time and cost, alignment of independent decision making and finally improve the performance of all the supply chain members (Haghighat, 2008).
6.7.2 Enhancing Information Flow in a Retail Supply Chain
RFID (Radio-Frequency Identification) technology and the EPC (Electronic Product Code) enable information to flow in a Business-to-Business electronic commerce. Business to business e-commerce is necessary for industry growth and profitability. B2B e-commerce communication is considering RFID and EPC technologies. These technologies are enhancing business customer response. B2B e-commerce would also catalyze B2C e-commerce that is directly beneficial for consumers (Haghighat, 2008). Information communication technologies (ICT) have revolutionized in business world. These technologies are enabling businesses to respond to customers in better and improved ways (Haghighat, 2008). Customer is much busy of today's modern world that is demanding quick response from businesses. These ICTs are yielding competitive edge in global arena. These technologies not only enhance customer response but catalyze internal flow of information communication.
6.7.3 Collaborative knowledge management framework
The identification of goals, objectives and making policies are all the process of supply chain management. Supply chain management is the efficient integration of organizations which comprises the work group to meet the objective production and distribution exactly according to customer's requirement (Hernández et al., 2008). This is only possible by sharing the right information amongst the members of supply chain. Supply chain management comprises the activities of all organization from procurement of raw material to the delivery of the product to customers (Hernández et al., 2008). Similarly, efficient decision making about these activities at all levels like strategic, tactical and operational are necessary to deliver required product, service to add value to customers and other stakeholders (Hernández et al., 2008). The intensity of relationship between supply chain members and the extent of coordination across the supply chain are two main aspects of supply change management (Hernández et al., 2008).
6.7.4 Disruptions in information Flow
Supply chain integration as a technique of value addition that is only possible due to regular flow of real time and accurate information from customer to manufacturer. The manufacturing of ideal product according to customer's requirement is not possible if the disruption in flow of information occurs in the supply chain. This disruption in information from customer to manufacturer often causes to reduction in sales revenue due to loss of customers. Supply chain management is the coordination of organizations in a chain, a little bit disruption in supply chain causes the significant decrease in organization's performance. If the organizations fail to effectively integrating and manage the supply chain then it may causes significant reduction of efficiency. Competitive environment cannot tolerate mismanagement of supply chain that in turn increases the uncertainty in market expectation.
The loss of revenue due to incomplete orders is the significant source of loss to the supply chain which is normally unmanaged (Munoz & Clements, 2008). Computer simulation technology can analyze opportunity costs from the end customer quickly that can reduce significant cost to the overall supply chain (Munoz & Clements, 2008). Information delay is directly proportional to delay in supply chain process that in turn yields same level of loss to business. The inherent flexibility of simulation can be used to highlight the levels of opportunity costs from lost sales in complex supply chains (Munoz & Clements, 2008). By evaluating the decrease in revenue under different supply chain structures business will find a better idea of decrease in revenue on the supply chain (Munoz & Clements, 2008).
6.7.5 Measuring information distortion in real-world
Structure of information and flow of information are the basic element of supply chain management. The progress of supply chain management mainly depends on the quality of information. Distortion of information , either intentionally or unintentionally, when it flows through supply chain causes to destroy its quality of its constituent relationship. “Managing supply chains effectively is a complex and challenging task” .The information distortion is the long term problem in the supply chain management.
Information communication literature does not describe appropriate definition of information distortion. Supply chain management literature is considering overcoming the problem of information distortion in communication. Harmonious flow of information is necessary in supply chain cycle. Communication of information is crucial step in supply chain, without proper communication cycle cannot accomplished in desired manner. Communication literature describes various types of distortion as technical, environmental, psychological noise. Technical distortion takes place in medium in which communication takes place. Environmental distortion or noise prevails among surroundings of communication place. Psychological distortion is perceptual bias of sender or encoder (Niranjan et al., 2011). Psychological bias is most challenging as perception cannot be changed. Environmental and technical distortion can be eliminated but psychological distortion or perceptual bias cannot. Psychological bias requires appropriate training of staff. Although information distortion can be overcome up to certain extent but it cannot be eliminated due to unavoidable circumstances (Niranjan et al., 2011). Therefore, information distortion should be handled by appropriate training of interpersonal communication of staff. Furthermore, right level of information communication at right time is important for successful supply chain management.
Example of Procter and Gamble is quoted that customer placed order to supplier higher than demand that was problem of understanding (Niranjan et al., 2011). It means that inaccurate understanding causes barrier to supply chain management cycle. Cognition is wisdom of person based on his or her previous knowledge and understanding (Niranjan et al., 2011). Cognition plays important role in information communication technology. Cognition of person improves with knowledge and understanding of surroundings. Cognitive misunderstanding causes order variance problems that in turn disturb the logistics management. Cognitive problems can arise by too much information or little than needed information. Therefore, cognitive is another important factor that exhibit information distortion in supply chain management processes. (Niranjan et al., 2011)
6.8.1 IT Adoption
IT is helping pharmaceutical manufacturers to handle all supply chain processes. Pharmaceutical companies have learnt the fact that in order to attain competitive edge they must manage inventory at reasonable level (Langer & Kelkar, 2008). Desirable level of inventory can be managed with the help of online integrated solutions. Enterprise resource planning solutions can work out integrated supply chain issues (Langer & Kelkar, 2008). Intra-organizational integration is not enough rather inter-organizational coordination is crucial in current global arena. Oracle, SAP and SAS are gaining popularity with the passage of time. Hence, these integrated solutions confirm internally and externally the coordination and collaboration of activities. (Langer & Kelkar, 2008)
Information technology facilitates in supplier relationship and integration. I.T works out the customer-organization-supplier relationship mechanism that assures timely delivery to customer. The type of collaborative networking depends on nature of business in which an organization is engaged (Langer & Kelkar, 2008). For instance, I.T industry requires high level of supplier integration due to intense outsourcing options. Today's businesses cannot succeed without internal and external collaborative activities (Simchi-Levi et al., 2003). Supplier relationship management (SRM) is necessary part of supply chain management that makes available supplier on demand. Customer relationship management (CRM) confirms or forecasts customer demands and responds accordingly. Organizations are seeking to integrate SRM and CRM to coordinate in better ways to meet customer demands.
6.8.2 Forecasting of Information Quality
SCM literature adds the dimension of forecast information quality (FIQ).forecast information quality aims at forecasting of customer demand and other connected information. Supplier forecasts customer information and also keen to ensure quality of forecasted information (Forslund & Jonsson, 2007). FIQ largely impact over supply chain management process. It we say that whole cycle of supply chain management is based on forecasting of information then it would be quite right. Therefore, quality of forecasted information assurance is necessary in information flow of supply chain management. Researchers developed the FIQ measurement instrument to encounter the quality issues. 136 Swedish companies are taken to analyze the FIQ (Forslund & Jonsson, 2007). Research surveys demonstrate that organizations conduct information forecasting but proportion of quality assurance is low (Forslund & Jonsson, 2007). Inadequate information data base acts as barrier to quality assurance. Information forecasting influences on inventory management decisions (Forslund & Jonsson, 2007). Wrong information estimates can distort harmonious inventory flow. Finished goods inventory has direct exposure of information forecasting (Forslund & Jonsson, 2007). Therefore, quality assurance of forecasted information is necessary in harmonious supply chain management that in turn influences cost and profitability. (Forslund & Jonsson, 2007).
6.8.3 ISO for supply chain management
ISO is a global network that identifies what standards are required by businesses, governments and societies (Branch, 2009).. And then develop the standards in cooperation with the users of these standards. These standards are not mandatory to adopt. The organization can adopt it voluntarily to enhance their credibility in the market (Branch, 2009).. ISO is a market leader in global supply chain management. Supply chain management includes the process of transportation of goods from the point of origin to the final destination. It incorporates a series of relationship between different types of firms, just like supplier of raw material, manufacturers, retailers and finally the end user (Branch, 2009).. ISO/PAS 2800:2005 is developed to manage the security system in supply chain management. It includes ISO/PAS 28001 best practices for custody in supply chain management it also enables the organization to comply the best practices prepared by World Customs Organization. And ISO/PAS 28004 includes the security management system for supply chain (Branch, 2009).. The most important part of supply chain management is the selection process of suppliers and responsibility of purchasing decision (Branch, 2009).. We can use ISO 9001:2000 as supply chain management too; it is the quality standard that requires the quality management system. If organization chooses ISO 9001:2000 registered supplier it means that supply claims that he comply that he meets quality standards required in the production process (Branch, 2009).. On the other side ISO 9001:2001 does not identify the requirements of goods or services that user wants to purchase (Branch, 2009).
6.9 SCM in Pharmaceutical Industry
Customer is curious to rising health care costs that largely constitute of pharmaceutical supply section. Quality assurance of health care supply chain is necessary for saving lives of people. Health care suppliers have to supersede health of people and subordinate to financial concern. Health care organizations are keen to lower down increasing costs by effective utilization of resources at optimum level. Organizations are using decision support techniques to better organization of pharmaceutical supply chain. This particular study aims at satisfying issues of hospital industry supply chain. The main problem in supply chain of pharmacy is lack of collaboration among different stakeholders. Pharmaceutical supply chain needs to make effective goals that should be acceptable to everyone. Decision support information system is preferable at all levels of organization. Decision support tools address strategic, tactical, and operational management in accordance with nature of operations. These decision support tools enhance quantity and quality of information. Automated system in pharmaceutical supply chain ensures desirable flow of information. Decision support tools help managers to conduct quantitative assessment of objectives and devise solutions.
Operational inventory management utilizes minimum and maximum points of pharmaceutical inventory that helps in effective inventory management (Woosley, 2009). Automated controls steadily manage the inventory re-ordering, warehousing and production management issues at operational management (Woosley, 2009). At operational management decision support I.T tools manage the safety stock and warehousing of same (Woosley, 2009). Tactical management is able to manage order size, reorder point, and costing and rates allocation. Strategic decision support tools account for tradeoffs and opportunity cost of considering from alternatives. Decision support system facilitates the top management in choosing best profitable options of inventory supply chain (Woosley, 2009).
6.9.1 The Need for Standards
Pharmaceutical supply chain management needs institutionalization. It would ensure quality standards to govern pharmaceutical supply chain. GSI and EPC global are making standards for supply chain management. These comprehensive standards would consider unique items, storage issues of unique items. These practices and policies would ensure technology involvement in packaging and storage (Veri Sign Inc., 2006)
Standardization should formulate areas of supply chain management; make standard for these areas separately and coordinate these activities (Veri Sign Inc., 2006). Substantial research and development is needed to recognize item-level data sharing along with supplier business relations management. Data integrity needs to be confirmed when pharmaceutical industry has to handle multi-tier supply chain. Therefore, standardization of data integrity and item-level data recognition should be executed to harmonize the supply chain management cycle. (Veri Sign Inc., 2006)
6.9.2 International Competitiveness and Cold-Chain Management
Indian pharmaceutical companies are combating at global level to enhance their market share. Well established cold-chain management system needs to establish to compete at global arena (Langer & Kelkar, 2008). Indian pharmaceutical supply chain management is striving to devise cold storage and supply chain to ensure quality during shipment. Eli Lilly has implemented well known cold supply chain management that is carried out by company's own fleet of vehicles equipped with cold storage facilities (Langer & Kelkar, 2008). World Courier has sophisticated cold-chin supply management for pharmaceutical items carriage. (Langer & Kelkar, 2008)
6.9.3 Mexican Pharmaceutical Markets
18.104.22.168 Pharmaceutical Consumers
If we compare pharmaceutical expenses of the Mexican with USA and Germany we got that in pharmaceutical expenditures by one person is 60.6 USD per annum for Mexicans as compared with in Germany it is 275 USD per annum and in USA it is 553.9USD per person in one year. Reason of this huge difference is unequal distribution of income and of high poverty rate in Mexico. It is also valuable that public financing in health expenditures is less than the private financing. Average 72% of health cost should be covered by public financing as standard set by OECD. Mexico is one of three OECD member countries where private financing is the major source of health cost that should be covered by public financing. The Mexican pharmaceutical market is divided into two parts. One is to serve rich peoples known as “state of the art” and the second is to serve poor public known as “Similares”. One huge difference between US and Mexican market is the control on prescription at consumer level. People prescribe medicine for themselves instead of going at the physician's clinic. That's why use of the generic medicines is norm in the Mexico. On the other hand in USA pharmaceuticals are only sold on prescription of physician (Lutz Kaufmann, 2005). Therefore, Mexicans pharmaceutical supply chain is severely disturbed by unequal distribution of wealth, lack of public financing, and backward infrastructure.
There also not a good control on supply of pharmaceuticals because the major share of market is in the hand of few peoples. 60% of market share is in the hand of just three retailers having a large number of distribution outlets across the Mexico (Lutz Kaufmann, 2005). It may create a sense of monopoly to control the trend of market. It may create a threat to independence of pharmaceutical market. Common practice of these retailers is to increase the market share by offering discounts (Lutz Kaufmann, 2005). The retailer of Similes is a different type of market with their own retailing system. The supply to public is also controlled by few suppliers. Overall it can be concluded that there is no good control over supply of pharmaceuticals in both public sector and private sector.
The remaining major customers of pharmaceutical are the private hospitals and public institutions. Public institution includes the hospitals of ministry of health, oil producing companies, and social security institutions (Lutz Kaufmann, 2005). One most surprising thing is that only two pharmaceutical companies amongst all others exports to US. On the other hand NAFTA has led to the significant increase in Mexican exports to the North America in general, but this is adverse case with the with pharmaceuticals. The reason behind this is that the Mexican subsidiaries have to be licensed with the US Food and Drug Administration, which may not be very expensive (Lutz Kaufmann, 2005). Therefore, demand of supply chain is headed by few monopolies that are exploiting the rights of general public.
22.214.171.124 Pharmaceutical Suppliers
The pharmaceutical market of Mexico is one of nine biggest markets of the whole world with 6.2 billion sales. Mexican market is not only recognized just because of its domestic market it also has signed NAFTA and other free trade agreements which about 30 countries. In the Mexican market there are 390 manufacturers of pharmaceuticals products (Lutz Kaufmann, 2005). Out of 390 manufacturers only 9% have the share of 80% of total sales. And no any company has more than 9% share of market. The 10 biggest manufacturers represent 40% of total sales revenue (Lutz Kaufmann, 2005). That's why all the global pharmaceuticals producers are intended to invest in Mexico. The manufacturers should hold a sanitary license that can register pharmaceuticals products for import and sale in Mexico. Most multinational pharmaceuticals have their subsidiaries in the Mexico and furthermore lower wages and free trade agreements with other countries attracts to multinational pharmaceuticals manufacturers to invest in Mexico. Multinational pharmaceutical companies in Mexico have to do limited operations like production, marketing and distribution products. Core department in pharmaceuticals manufacturers is the research development department which may be in their home countries (Lutz Kaufmann, 2005).
The production of generic medicines is reducing. Now less than 3% of the total market is held by companies producing generics products. Now just 100 companies are manufacturing and supplying of generics to the government sector (Lutz Kaufmann, 2005). Therefore, on supply side monopolies are holding substantial market share to exploit high profitability. Although Mexican pharmaceutical market is attractive to pharmaceutical MNCs but this situation is not desirable to consumers. Monopolies are exercising their undue influence unethically.
7 Implementation Program
Implementation schedule is presented showing collection of secondary data to get know how about necessary variables. Questionnaires and interviews are prepared based on initially collected data. Primary research conducted would formulate vision of research project. Then secondary research would be conducted based on guidelines rendered by primary research data tools. Compilation of secondary and primary research data would make research project effective. In report preparation phase, data would be sequentially ordered to make it visually attractive and understandable.
Gantt Chart for Research Report
Collection of Initial Secondary Data
Preparation of Interviews and Questionnaire
Compilation and Summary of Collected Data from Primary Research
Secondary Research Second Phase
Arranging and screening of data for Preparing Report
Review and Presentation
Adam Smith pioneered the supply chain management concept by division of labor. Fredrick W. Taylor laid down the idea of scientific management. His scientific management concept became so popular that it gave birth to industrialization. Scholars argue that today's organizations are also exploiting the scientific management principles. Taylor said that make innovation in organizational processes by scientific management rules. Japanese are founders of modern supply chain management mechanism. They implemented just in time manufacturing in their production processes. This theory aims at producing goods at right time when customer just demands it. It revolutionized the industrialization; organizations curtailed their manufacturing expenses by eliminating extra inventory burdens. It also supports the total quality management theory as organizations update their inventory whenever trend changes that in turn enhances quality.
Supply chain management has attained strategic importance due to globalization and regional trade agreements that in turn attract foreign direct investment. Globalized forces are shaping business and economic trends. These trends have generated huge competition that created threat to survival. Survival is possible by virtue of corporate synergies and strategic alliances. Supplier versus organization partnership agreements are known as corporate synergies and strategic alliances that are catalyzing collaborative activities. These collaborative activities are necessary for organization's sustainability. Wal-Mart example is ideal for supplier partnership collaborative activities. Wal-Mart shares risks and rewards with suppliers that harmonize supply chain management processes by eliminating redundancies and extra costs. Organization and supplier both get satisfied form strategic partnership.
Supply chain management has important constituent of knowledge management that smoothes out the information flow. Organizations are concerned to eliminate information distortion that acts as barrier to information communication technologies. Information communication technologies have become so challenging acting as opportunity as well as threat. Information technology era has made it difficult to retain confidentiality of information that is competitive edge of organization. However, inventory management is another challenge for organization that accounts for information forecasting. Information forecasting needs quality assurance of forecasted information. In contrast, transportation and logistics is not less burden on organization as part of supply chain management. International logistics are essential part of organizational strategic management. Moreover, logistics management has to ensure execution of customer order at optimum profits.
Organizations should start initiatives of strategic collaborative activities to ensure synergy. Global level sustainability can be ensured by information sharing and coordinating activities. Organizations can attain integration of efforts by enterprise resource planning systems that can act as bridge between customer relationship management (CRM) and supplier relations management (SRM) systems. Supplier-organization partnership agreements can act as great motivators for internal and external stakeholders in retaining competitive edge. NHS Glasgow has to utilize online communication tools for customer care as it would facilitate customer in better way. Customer becomes satisfied by gaining on demand health care consultancy solutions. NHS Glasgow can render global level health care services. Crucial step for company is to control health care costs that comes in the form of drug supply chain.