Logistics and Distribution - Chain reaction
Most industry sectors consider themselves to be unique. But in truth, the pharmaceutical industry has a better claim than most to that distinction. And quite apart from the rigorous quality and traceability standards that apply, the very diversity and complexity of pharmaceutical supply chains means very clearly that ‘one size does not fit all’. More than most, there are no supply chain ’magic solutions’ for the pharmaceutical industry, and many of its supply chains are different.
So if its supply chains are so different, how can one make recommendations on how to improve them? A useful analogy is that of a medical doctor. All patients are different, but at the same time there is commonality: they all have a heart, lungs and brain and we are all told certain things to do to keep healthy. The same is the case with supply chains: although all are different, there are commonalities, and all have customers and suppliers and resources are moved. Keeping the supply chain healthy requires certain issues to be addressed.
So as a ‘doctor’, I find that when working with organisations’ supply chains it is possible to very quickly identify potentially useful areas of focus.
A good starting point for all businesses is ‘Does a supply chain strategy exist?’ And is it written down and readily communicated across the organisation?
Understanding the development of an effective supply chain strategy is critical to success. This needs to start with the corporate strategy of an organisation, which then helps to define the competitive strategy for different products in different markets.
The competitive strategy in simple terms gives direction as to how value is going to be created in the market place. Consequently, it is very much focused on how ’demand is created’ for the product or services in question, and involves understanding in detail what it is that actually creates ’value’ in the final market place for the various stakeholders that the product or service impacts upon. Taking a simplistic example, the competitive strategy behind a commodity pharmaceutical product for a European market might be focused on high levels of availability and innovation in the packaging design. In contrast, if the product were to be sold in a less well-developed nation, the competitive strategy might be focused around affordability, and on how to make and distribute the product as cheaply as possible.
This then requires us to define the supply chain strategy, which in turn defines how ’demand is fulfilled’. And clearly, the supply chain strategy needs to align with the competitive strategy if we are to deliver value in full. So, logically enough, the supply chain strategy considers and impacts on four main elements: the supply chain process design, the supply chain network and infrastructure design, the supply chain information system design and finally, the supply chain organisation design. All of these elements need to be tailored to the products and organisational specifics that are involved, in order to enable the desired value to be created in the marketplace—a task that is complicated by the fact that each of these four elements interacts with the others. Moreover, it also needs to be recognised that if we do not have the relevant infrastructure, then we may not be able to support the desired competitive strategy. And so, each of these elements needs to be fed back to those involved in the competitive strategy development process, to provide opportunities to adjust the strategy accordingly.
Which then raises the next important question: “Who is responsible for developing the competitive strategy, and who is responsible for developing the supply chain strategy?” and perhaps more importantly, “Do they actually talk to each other and collaborate in the development of each element?” In short, collaboration is critical within the organisation if we are to ensure the successful execution of our supply chain strategy.
Importantly, it also requires individuals to occasionally be prepared to take time away from the daily pressure of running the business in order to reflect on the strategy. And that’s because what creates value today is not necessarily what creates value tomorrow. We define supply chain management at Cranfield as “the management of upstream and downstream relationships with all stakeholders, in order to achieve greater final customer value-added at less cost to the supply chain as a whole.” Managing relationships and relational intelligence both internally and externally to the organisation is clearly critical to the success of this.