Corporate Division Supply Chain Management - Essay Example

SUMMARY Introduction Development of inventories for the Corporate Division Supply Chain Management (CDSCM), were going to be looked at by Dr. Joos who is the head of the division. The results presented seemed fair enough and there was significant improvement. This is due to the Boehringer Ingelheim company had risen higher in their ranking from 17 to 13 since 1999 to 2003, this automatically led to the rise in net sales in the same duration leading to the company making a remarkable profit of 48 million. Since Dr. Joos is a very determined man and does not settle for anything other than the best, he felt that there was more potential in the company and was pushing for tem to improve further. His target for 2006- 2007 was 12% and 11% and he hoped the trend would be observed even for the rest of the years and saving of 23 million annually on BIVA. He approached the situation by the Throughput Time of the company supply chain. Therefore a lot of energy has been placed in the Supply Chain Process Group on TPT and other concepts. The company had its vision on introducing new products in the pharmaceuticals industry and they wanted to do so in good management system so as to save on money and produce quality goods. Boeringer Ingelheim Its main focus is on health of human beings and animals as well hence focus on the production of new drugs to improve their health. Its name was due to its place of formation that is Ingelheim Germany in 1885. Therefore, giving the company the experience of being able to study the industry and business and also build on loyal consumers. The company mainly produces drugs to treat internally suffered diseases and improve their functioning such as; urology, cardiovascular and the central nervous system. Their money and revenue is invested on research projects as diseases always pick a new trend and they want to be able to face it on time. Their recent products have proved to be successful and the aid of their flexible supply chain system working on its marketing. Supply Chain Management in the Pharmaceutical industry. The industry was used to the traditional way of doing business and the effect that the economy had on inventories did not seem to receive much attention. Their main focus was to meet demand of the customers with supply and exceed their expectations. This in turn over burdened the inventory levels. All this brought the importance of the company realising the capacity and producing according to it. Currently the pharmaceutical companies want to supply according to demand and be able to satisfy their customers as well as reduce the waste supply which only leads to unnecessary losses. The company has been using the local pull system although it has also been looking into other fields, and investing in other fields so as to look at the inventory reduction from different angles as well. Supply Chain Management in Boehringer Ingelheim The supply chain management system is very important as it helps connect the pharmaceutical companies and the customers as well as other parties involved. Therefore, Dr. Joos selected a team to work on it and they introduced the pull system. This system is meant to improve the company in every possible way like covering 32% of dosage forms being produced reducing the inventories and increasing the BIVA. Although this seems to be a good project there are some risks involved that would lead to the total opposite of the intended function. TPT at Boehringer Ingelheim The company’s belief that throughput time is related to inventory is what makes them approach the situation in the manner that they do. Although time is the main factor in production and delivery while applying TPT, it is not calculated based on time but rather on the different costs. This is beneficial in that they are able to identify the most expensive products and steps that they might take for eligible optimisation. The supply chain management group was able to critically analyze using samples from different plants of the company so as to get a biased result, they were able to come up with areas that needed optimisation. Study conducted in 2005 proved that the delivery times are not being able to serve the customers fully as expected, which caused an increase in the primary materials used. The group selected is working on improving this in order to optimise waiting time. They are even considering the Lean system. The meeting with BMD and new challenges of CDSCM The meeting had no problems and it was rather peaceful. Only a few intentions were presented by the BMD of BI on reducing the inventories which would see the company meet their target of 10%. Looking at their development inventory levels of 2004, it wads agreed that there were steps that had to be implemented to reduce inventory levels. This is because they had expected better results in 2004 and with the current results their vision for 2008 was looking like a far fetched dream to them. Therefore, they had to agree that new systems had to be implemented in order to improve their inventory developments further. QUESTIONS 1. Inventories and pharmaceuticals supply chain inventories Pharmaceutical companies are a very important part of our lives as they are able to conduct researches that save lives of thousands. Therefore, inventories are very advantageous to the pharmaceuticals supply chain in various ways. The supply chain of the pharmaceutical company is able to meet demand of the customers. The inventory helps them predict the demand in the market through forecasting and are able top met the needs of the consumers in a manner that leaves the customers satisfied if the inventory was appropriate (Suen, 2010). Inventories help the companies be able to deal with the issue of counterfeiting and diversion of the supply chain. This will also benefit the company if necessary optimisation is carried out on the inventories. The inventories can have beneficial effects to a company but at the same time can also have negative effects on the pharmaceutical supply chain such as; Due to globalisation, the pharmaceutical industry is growing and most of the supply chain systems have to engage in outsourcing so as to be able to meet demand. The inventories of outsourcing may be difficult to manage and may lead to a lot of waste product causing the company to experience unnecessary losses. This also leads to lack of shared vision and coming to an agreement on the inventory may just take a lot of time, which may be used in other areas of the company. This will also cause the company to focus less attention on the supply chain of the company and in general the company looses the focus it once had as they try to deal with inventory issues in the supply chain management. The pharmaceutical companies need to have a big storage area and warehouses so that they can store the primary materials they need for research and also the ready made stock. If the inventory made by the supply chain was incorrect it might just lead to wastage of storage space with waste products. This is a case where there is more supply than demand, which mostly leads to losses. 2. TPT and reduced inventory. Reduction of throughput time results in decrease of inventories. The throughput time invested in production of a product is very important but the more time invested in TPT, the more it increases inventory. This seen in that when a product is being critically looked out in the manufacturing system, then automatically this will lead to more time being required in wait of the product in the warehouse and the inventory in production will be increased (Frankel, 2006). Therefore, if the TPT is reduced the money that was being kept for the production inventory can be successfully applied elsewhere. The storage of the goods is also released as the areas that were being used for storage of inventories can now be utilised for other equally important products that can help the company further. Reduction of throughput time will lead to more output being produced which is beneficial to the company in that the customers can receive the goods on time and they will be able to provide a quicker response to them (Sim-chi, et.al. , 2003). The rate at which the goods are usually spotted with defects is reduced and this will lead to more satisfied consumers and a good reputation for the company (Tolve, 2010). This is actually very important as the pharmaceutical companies would not want the customers suffering any negative effects from the products being produced in their companies. Therefore, throughput time relates directly with the inventory. 3 Implementation plan and detailing Implementing the “Just in Time” system in the pharmaceutical companies This is a manufacturing as well as an inventory controlling system. Unlike the throughput time system, the just in time system is able to reduce the inventory in companies. This because the materials purchased by companies that have deployed this system, are materials that are used to meet the demand of the customers only. In this system, the inventory is greatly minimized such that in some cases the inventory is not there, it is zero. The companies operating under the concept, at times purchased goods that are used in a day’s production, here the companies are manufactured and immediately shipped to the customers such that there are no surplus goods to be kept in storage (Chris, et. al. , 2009). Though this may seem to be difficult at most times and many companies are no able to achieve this goal despite the fact that they are using the concept, most companies have been able to reduce their inventory greatly by a wide margin. This has been able to reduce even the warehouse costs and other costs as well allowing the companies to invest the money in other important areas that will improve on the quality of goods being produced (Van arnum, 2009). Where in the traditional ways of business, the concept applied was the conventional manufacturing system, which entailed keeping everyone busy. In the just in time concept keeping everyone busy is no longer used and producing goods that meet the customers’ demand is the concept applied. B Problems and challenges Although the just in time concept seems to be very helpful, there are some areas that may be prove to be difficult in its implementation. It may take time for it to be fully implemented given the fact that the workers are used to their old ways and other people involved especially the supply chain management. Abandoning their old ways may take a lot of time and confusion in the process for it to eventually work as the new concept may even meet resistance from some of the people who believe in their old ways, therefore, making its implementation rather difficult (Anon. , 2001). There may prove to be some minor disruption in the supply chain system as there will be no extra stock to fall back on. Disrupting the supply chain may lead to significant losses in the company (Yue, 2008). The company will be forced to work extra hard in its implementation so that the supply system remains strong and there will be no misunderstandings and disputes in between. The production system will also have to change as some of the workers will not have to deal with the same work load they used to due to the production to meet demand only concept applied. C. other concepts Other concepts applied will have to be the pull system as its concepts seem to meet those of the just in time system. They will also have to change their production system and apply the Lean system or the Six sigma as they relate tot h e same concepts. 4. Lean manufacturing system and six sigma The lean manufacturing system is a manufacturing system mostly used by many companies as it focuses on the expenditure used on resources but not on the end product. This manufacturing system can help Boehringer Ingelheim reduce its inventory costs as it mainly focuses on production to meet demand of customers. The manufacturing system helps companies work on eliminating waste in their production as it is a waste of time and space for companies (Akin, 2008). This way there will be more storage space and reduced inventory. Waste is eliminated as it only oppresses the company’s resources and does not add any value in its production (Yue, 2008). The system also works on improving quality of the product but still cutting on production costs. The total costs are greatly reduced which is very beneficial to the company. Since the lean system aims at eliminating waste they focus on production according to demand from the customers, this way they are able to eliminate excess production. The six sigma is more or less like the lean system as it consults from the lean system in its production activities. The six sigma programs aim at improving the relationship between the customers and the company and the shareholders as well (Koch, 2008). Therefore, with improved relationship the communication between demand and supply is clearly defined and production is improved cutting on inventory costs. Reference List Akin, O. , 2010. Thinking of lean manufacturing systems. [Online] Available at: http://www.sae.org/manufacturing/lean/column/leandec01.htm [Accessed 24 May 2010]. Chris, E. , et. al. , 2009. Managing risk in pharmaceutical global supply chain outsourcing : applying analytical hierarchy process. Annual Conference, [Online]. 16(1), n. pag. Available at: http://asbbs.org/files/2009/PDF/E/EnyindaC.pdf [Accessed 24 May 2010]. Express Pharma. , 2001. Logistics issues in Indian pharmaceutical industry. [Online]. Available at: http://www.expresspharmaonline.com/20080330/loggedon04.shtml [Accessed 24 May 2010]. Frankel, R. , 2006. The role and relevance of refocused inventory: supply chain management solutions. Science Direct, [Online] 49(4), pp. 275- 286. Available at: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6W45-4K23YF9- 4&_user=10&_coverDate=08%2F31%2F2006&_rdoc=1&_fmt=high&_orig=search&_s ort=d&_ [Accessed 24 May 2010]. Koch, T. , 2008. Lean Business Systems And Beyond: First IFIP TC 5 Advanced Production. New York: Springer. Seun, O. , 2010. Inventory management and control in a pharmaceutical company. [Online]. Available at: http://ezinearticles.com/?Inventory-Management-And-Control-In-A- Pharmaceutical-Company&id=3642017 [Accessed 24 May 2010]. Sim-chi, L. , et.al. , 2003. Designing and managing the supply chain: concepts, strategies, and case studies. New York: McGraw Hill.   Tolve, S. , 2010. Forecasting and total supply chain inventory. [Online] (Updated 23 April 2010). Available at: http://social.eyeforpharma.com/story/forecasting-and-total-supply-chain- inventory [Accssed 24 May 2010]. Van arnum, P. , 2009. The evolving global pharmaceutical supply chain. [Online] (Updated 1 September 2009). Available at: http://pharmtech.findpharma.com/pharmtech/The- Evolving-Global-Pharmaceutical-Supply-Chain/ArticleStandard/Article/detail/622980 [Accessed 24 May 2010]. Yue, D. , 2008. RFID application framework for pharmaceutical supply chain. Logistics and Information, [Online] 1, pp. 1125- 1130. Available at: http://ieeexplore.ieee.org/Xplore/login.jsp?reload=true&url=http%3A%2F%2Fieeexplore .ieee.org%2Fiel5%2F4657348%2F4686329%2F04686568.pdf%3Farnumber%3D468656 8&authDecision=-203 [Accessed 24 May 2010]. The graph indicated the development of inventory in the company BI. Read More