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Dear Pharma Veterans. This series of Blogs is 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 – MANUFACTURING
Manufacturing – Own and Contractual
Manufacturing is a large function. Though it is part of supply chain, but it is not uncommon to see it being treated as a separate, stand-alone function.
There are around 700 Pharma manufacturing units in Pakistan currently. There was a time when Pharma manufacturing was concentrated in Karachi. However, now several places have emerged as hubs of Pharma manufacturing; Lahore, Islamabad, Rawalpindi, Peshawar have fairly large clusters of manufacturing units. Nutra manufacturing units are spread more diffusely, ostensibly due to relatively lax regulatory considerations.
DRAP does not grant registration or MA (Marketing Authorization) to companies who do not have their own manufacturing. Due to this constraint, Pharma businesses are forced to set up manufacturing units, albeit compromised ones. In several countries of the world, MA holders may not be manufacturers; they could apply for product registration in collaboration with a manufacturer. Similarly, registration for imported, finished products used to be granted to distributors or even individuals, but now even that is restricted to manufacturing companies. This is good actually. If an MA holder does not have a mechanism for marketing the registered product, it will sublet the business part, leading to pricing and ownership issues.
DRAP allows ‘Toll-manufacturing’ under certain conditions between two manufacturing companies. The conditions apply to products requiring dedicated areas for manufacturing.
Another form of business arrangement is ‘Contract Marketing’ where a ‘Marketing Company’ acquires registered-but-yet-not-marketed products from a manufacturer and starts business. Some fairly large-scale businesses have been built around this arrangement already.
Supply Chain deals with all of these models. The SC feeds and delivers from own manufacturing, toll manufacturers and contracted manufacturers.
This is the most straight forward form because everything happens inhouse. It does not necessarily mean that it is by far the easiest also. Having everything under one-roof actually increases expectations of delivery even when other related departments do not perform efficiently. As a process though, it is easier to handle.
The Planner would plan and prepare the demand and forward it to SC. The SC runs the process, as discussed in the previous blogs, and ensures on-time delivery of products. Following challenges may be identified.
- Generalized Sense of Non-Urgency – In an organization where business is based on a combination of own and contract manufacturing, it may be a bigger problem. It is considered that own manufacturing means everything is happening in your backyard and can be done in a more relaxed manner. This leads to a generalized sense of non-urgency, from approvals to finance allocation to processing. It has the potential to create expected/ unexpected delays in deliveries which cause frustration at all levels. SC should be alert to this phenomenon and follow up accordingly.
- Heightened Expectation for Delivery – Contrary to the above, there is generally an expectation from own manufacturing to be more agile, more flexible, more efficient and more robust even in difficult conditions. Granted that these are not entirely misplaced expectations, the disconnect with reality is commonplace. Production processes have to follow the same route everywhere and cannot be made flexible. The agility can only be achieved in maneuvering production scheduling and/or extending work hours.
- Competition for Production Slots – The OSD (Oral Solid Dosage) is usually among the busiest sections in any Pharma manufacturing unit, unless the business is built specifically on liquid or sterile products. In a medium size manufacturing unit, over a million units (SKUs) are produced every month. There will be several SKUs for Tablets and Capsules and the competition for production/ packaging slots may be intense. Any time lost for any reason may only be compensated for by adding time (through overtime). Overtimes are undesirable because these increase the cost and may be less efficient. If at all overtime is to be done, it should be fully justified to begin with and closely monitored during execution.
- Competition for Finances – Demand for finances is always a little more than supply in all growing companies. Only large, stagnant companies sitting on many cash cows are cash-rich usually. There is always competition for finances despite the allocation which might have been done already. In the own manufacturing model, the SC is one of the biggest money-consumers. Obviously, it competes with its counterparts in marketing and elsewhere. No one always wins. Finance is the Achilles-Heel of Supply Chain and is mostly the reason for missing delivery deadlines. Having said that, SC must follow up consistently and handle suppliers effectively to minimize the impact.
- Just-In-Time, or So – Some SC professionals are very fond of trying JIT (Just In Time) and end up facing JIT (Joint Investigation Team). Jokes aside, JIT is a great concept, but it needs working through the entire chain and making every connection work on time and seamlessly. It is a tall order for several reasons. I shall take it up later, separately. At this time, it should be understood that JIT is not workable in patches and should not be tried
These are some areas which may be identified as ‘conflict zones’ which may pose challenges for own manufacturing. Effective planning and diligent follow up can greatly reduce the possibility of misses and delays.