Dear Colleagues! This is Pharma Veterans Blog Post #207. Pharma Veterans shares the wealth of knowledge and wisdom of Veterans for the benefit of Pharma Community. Pharma Veterans Blog is published by Asrar Qureshi on WordPress, the top blog site. If you wish to share your stories, ideas and thoughts, please email to email@example.com for publishing your contributions here.
Dear Pharma Veterans. This series of Blogs is to have a summary view of Pharma Business in Pakistan. It is a series spread over several parts covering the entire spectrum of Pharma business.
Pharma Business – OPERATIONS
SUPPLY CHAIN – PLANNING II
- Batch Size. The forecast is based on market factors and promotional input plans. However, when the planner plans, he has to take into consideration standard batch sizes of production. Over the years, regulatory agencies have put a lot of emphasis on rationalizing and standardizing batch sizes. They advise that the batch size should not be too small and that a standard batch size should be determined and adhered to. Standard batch sizes may be close to forecast or may not be. The planning however shall be based on standard batch sizes. This means that the actual production will be more than the forecast.
- Storage Space. Warehouse space for keeping raw materials, packaging materials and finished goods will always be limited. Planner has to take into consideration this factor so that warehouse space would be used judiciously. Storage space also needs to be enhanced proportionate to the growth in business, and/or addition of product types. For example, if a company is making tablets/capsules only, they will need less space. But if they add an oral syrup or suspension or infusion, space requirement shall increase greatly. Warehousing is a scientific subject now. The space can be increased several by well-designed racking. RFID devices make it easier to locate stock across warehouse. Pharma companies have generally been averse to technology. It is good time to embrace technology for better efficiency and productivity.
- Financial Impact. This is not the least important to be mentioned at the end; it is actually highly important. It was referred to in the ‘Value of Materials’ and is being discussed again for emphasis. There is a tendency in Supply Chain to accumulate more stocks to avoid shortages. Shortages hurt business, promotion and cash flow and are always taken as a pain. For this reason, safety stock is built into planning. It does not imply in any way that huge stocks should be built to prevent shortages. When you are dealing with 100 – 200 SKUs, it is not uncommon that a small percentage may be out of stock at some time. In Pharma, Stock is available at three levels; company, distributor and retailer. True shortage will occur when all three storage spaces are depleted. It would be rare and will happen only with prolonged shortage. Other shortages are mostly at the company which hurt the cash flow. Shortages must be prevented, but not with overstocking; rather with better planning and rational management.
- Support to Promotion. Planning is the biggest support to promotional activities of Marketing & Sales. That is why it is critical to have a connection between marketing and planning. Planning is partly history-based and partly future-oriented. Impact on sales of planned promotional activities should be incorporated in the planning so that the increase in business is catered adequately. It is not uncommon to see that a huge promotional activity is poorly supported by Planning/ Supply Chain leading to shortages. The business is lost, the money spent on promotion is lost and the customer trust is lost. Unilever created enough hype when it launched Walls but could not match the availability. Big brands like Walls can possibly recover from initial setback, but Pharma brands usually suffer badly.
Planning is the starting point of Supply Chain activity. The bigger Pharma companies have realized this fact and have established dedicated Planning Cells/Departments. Medium to smaller ones are still trying to make do without a dedicated planning function. Do remember! Investment in Planning is money well-spent with a decent return.