Inventory Management and Logistics Control at Pfizer - Research Paper Example

?Inventory Management and Logistics Control at Pfizer Established in 1849 and operating in majority of the countries all over the world, American pharmaceutical company Pfizer is currently the world’s largest research based pharmaceutical company. Even though recent financial crisis affected many of the prominent American companies, Pfizer seems to be unaffected by it. “Pfizer Inc. (NYSE: PFE) on Tuesday, May 4, 2010 has reported that the first-quarter 2010 revenues were $16.8 billion, an increase of 54% compared with $10.9 billion in the year-ago quarter” (Pfizer Reports First-Quarter 2010 Results; Reaffirms 2010 Financial Guidance, 2010, p.1). Moreover, Adam (2011) pointed out that “The company profits has gradually been improved from $48.2 billion in 2008 to $50 billion in 2009 and then jumping directly to 67.8 billion, which means that its sale has increased from 16.02 to 22.89 %” (Pfizer: Swot Analysis). Even though many of the products from Pfizer are world famous, no other products catch the attention of the world recently as Viagra did. Since Pfizer is operating in all over the world, inventory management, supply chain management or logistics operations are challenging for them. Strong sales and marketing infrastructure is one of the major characteristics of Pfizer. In order to support these sales and marketing team properly, Pfizer needs to maintain good track records in logistics operations and inventory management. This paper analyses how Pfizer is able to manage inventory and logistics operations successfully. Pfizer Global Manufacturing (PGM) supplies products to Pfizer’s businesses. PGM is being transformed into a global strategic supply network, consisting of major plants located in Belgium, France, Germany, Ireland, Japan, Puerto Rico and the U.S” By the end of 2008, Pfizer had reduced our internal network of plants over a five year period from 93 to 46. In 2008, as part of our Plant Network Strategy productivity initiative, eight plants were sold or closed in Canada, Germany, Italy, Sweden, Puerto Rico and the U.S. Pfizer plan to continue reducing our internal network of plants worldwide to 41 by 2010. It should be noted that often facilities are divested to other companies with an agreement to supply Pfizer for several years. This allows the acquiring company to develop additional business to make the plant sustainable (Pfizer: Manufacturing and Supply Chain, p.57). Pfizer has an effective supply chain system to reach even the remote corners of the world. Pfizer is currently implementing a new supply chain management strategy all over the world. Instead of increasing internal networks, Pfizer is currently trying to reduce it. However, this strategy doesn’t mean that Pfizer’s logistics operations are causing problems to it. Pfizer is trying to reduce its own internal networks; at the same time it increases its cooperation with local partners to maintain better records in logistics operations. It should be noted that globalization brought many changes in business management principles. Since Pfizer is operating globally, it needs the cooperation from the domestic partners to operate successfully in overseas countries. Since local partners have better knowledge about the local markets, it is better for Pfizer to give the responsibility of supply chain operations to local partners instead of doing it in its own ways. Pfizer is an American company which knows American business climate, culture and environment properly. However, same thing cannot be said about Pfizer in other countries. For example, being the most heavily populated countries in the world; India and China are huge markets for Pfizer. It is impossible for Pfizer to manage supply chain operations in these countries using its own capabilities. Since these markets are extremely diverse geographically and culturally, Pfizer needs the support from local partners to maintain good inventory all the time. For example, India is a country with around 28 states. Majority of these states are different culturally and geographically. The languages and the transportation facilities in these states are extremely different. Some states may have better rail transportation facilities and others may have better road transportation facilities. Based on these differences, logistics operations in these states should be adjusted regionally. It is difficult for Pfizer to adjust logistics operations in these states based on such differences because of their lack of knowledge about these markets. So, Pfizer is trying to give more responsibilities to local partners in order to utilize the regional infrastructure properly and to maintain a good supply chain system in these diverse regions. Global Contract Manufacturing (GCM) is part of PGM, responsible for managing approximately 150 contract manufacturers (CM) around the world. The GCM team is organized geographically with teams based in Brazil, Belgium, Singapore and the U.S. These teams are regarded as “virtual” sites and manage all aspects of CM performance in their respective regions. GCM leads a well-defined vendor selection process that includes due diligence inspections by Quality Operations and Environment, Health and Safety teams, as well as financial and legal evaluations. Negotiations on product supply terms and conditions result in formalized Supply and Quality agreements. Once a CM becomes a supplier to Pfizer, GCM engages in a comprehensive oversight process, driven by risk assessments that focus on compliance with quality and environmental standards, product supply, and cost management. As the level of outsourcing increases, GCM is expanding the scope of due diligence and oversight activities with a focus on business continuity and supply chain reliability (Pfizer: Manufacturing and Supply Chain, p.57). International business or cross cultural business is extremely different from domestic business. Even for the same product, different marketing strategies are necessary at different parts of the world. The above business principle is applicable in the case of logistics operations and inventory management also. The demands of the products in different markets could be different. For example, Viagra may be a big success in America and other western countries; however, same thing cannot be said about it in India or China. Even though Viagra users are increasing in these countries, the rate of increase seems to be slow. Pfizer needs to maintain an inventory based on such market trends. It should be noted that in some countries, some medical products may not be allowed to sell legally because of health concerns. Only the regional partners are aware of the rules and regulations in a specific market and therefore partnership with local partners is beneficial to Pfizer to avoid such legal disputes. “As the level of outsourcing increases into emerging, lower-cost regions, the pharmaceutical industry as a whole faces certain challenges in securing the supply chain in those regions” (Van Arnum). It should be noted that labor costs in America is extremely higher than that in other parts of the world because of the scarcity of manpower. Under such circumstances, it is difficult for Pfizer to rely the services of Americans alone to manage its supply chain operations all over the world. As part of cutting down the expenditure, Pfizer is trying to outsource many of its inventory and logistics related jobs to overseas countries. Because of the huge developments computer and internet related technologies, it is easy for Pfizer to outsource its inventory and logistics related jobs to cheap labor oriented countries. To conclude, Pfizer is one of the largest pharmaceutical companies in the world which has operation in all over the world. Pfizer is currently trying to reduce its direct participation in inventory management and logistics operations in overseas countries. It is trying to establish meaningful business relationships with local partners to manage its supply chain more efficiently. Outsourcing is another business strategy recently incorporated to Pfizer’s logistics and inventory management operations. Works Cited “Pfizer: Swot Analysis”.2011. Web. 19 March 2012 “Pfizer Reports First-Quarter 2010 Results; Reaffirms 2010 Financial Guidance”.2010. Web. 19 March 2012. “Pfizer: Manufacturing and Supply Chain”. 2009. Corporate responsibility report. Web. 19 March 2012. Van Arnum, Patricia. “PTSM: Pharmaceutical Technology Sourcing and Management”. 2009. Web. 19 March 2012. Read More