NOVARTIS Suuply Chain Report Min Nizar

7/28/2019 NOVARTIS Suuply Chain Report Min Nizar

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BY

GROUP LEADER:

Nadiya Rashid 7539

GROUP MEMBERS:

Faiza Farooq 5212

Hammad Amin 5430

Hina Yousuf 5799

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Acknowledgment

We would like to thank many people specially our teacher DR. ROSHAN

SHIEKH. He has taught us all priceless lessons in hard work, confidence,

and success.Thanks also to Mr.Rizwan (Manager Supply Chain) ,

Mr.Naseer Zia (Head Of Business Development) and Tariq Nawab

(Materials Manager) for their cooperation to provide all the necessary

information regarding supply chain of Novartis. Thanks also to the other

Public. We are grateful for their patience and support.

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KEY WORDS

NOVARTIS

PHARAMACEUTICAL COMPANY

SUPPLY CHAIN MANGEMENT

SCOR MODEL

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ABSTRACT

As part of our introductory SUPPLY CHAIN MANAGEMENT course, a study has been

undertaken of the Novartis Pakistan pharmaceuticals to identify the supply chain

processes, that involve Their company profile, logistics network and their score model

and to make recommendations on how the company could make a better use of its

resources in order to provide the quality products on right time, right location and the

right quantity to the end customer. .The primary purpose of the study was to make an

analysis of the company, looking at its relevance to the health sector, including

production processes, pricing and turnover performance, and export performance. The

study also looks at the bottlenecks affecting the Novartis pharmaceutical. The study

presents a number of recommendations that could be implemented for the Novartis

supply chain process. .

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Novartis was created in 1996 from the merger of Ciba-Geigy and Sandoz Laboratories,

both Swiss companies with long histories. At the time it was said to be the largest

corporate merger in history after the merger Novartis reorganized its activities, and spun

out its chemicals activities as Ciba Specialty Chemicals. In 2003, Novartis created

Sandoz, a subsidiary that bundles its generic drug production, reusing the brand of one

of its predecessor companies. On April 20, 2006 Novartis acquired the California-based

Chiron Corporation. Chiron was formerly divided into three units: Chiron Vaccines and

Chiron Blood Testing, which now combine to form Novartis Vaccines and Diagnostics,

and Chiron Biopharmaceuticals, to be integrated into Novartis Pharmaceuticals. The

ongoing Basel Campus Project has the aim to transform the St. Johann site - Novartis

headquarters in Basel - "from an industrial complex to a place of innovation, knowledge

and encounter".

With more than 10000 associates and operations in 140 countries, Novartis offers a wide

range of healthcare products through its Pharmaceuticals, Vaccines and Diagnostics,

Sandoz and Consumer Health divisions.

The portfolio of NOVARTIS can be described as follows:

Pharmaceuticals: Innovative medicines with improved efficacy and fewer side-effects

Vaccines and Diagnostics: Products to fight vaccine-preventable viral and bacterial

diseases, as well as diagnostic tools

Sandoz: Affordable high-quality generic treatment options following the expiry of

patents

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Pharmaceuticals

The Pharmaceuticals division of Novartis is recognized worldwide for the innovative

medicines it provides to patients, physicians and healthcare organizations.This growing business develops and markets patent protected prescription drugs for

important health needs.

Novartis products are concentrated in major therapeutic areas:

Cardiovascular & Metabolism

Oncology & Hematology

Neuroscience

Respiratory

Infectious Diseases, Transplantation & Immunology (IDTI)

Ophthalmics, Dermatology, Gastrointestinal, Urinary (ODGU)

Arthritis & Bone

Novartis current product portfolio includes more than 45 key marketed products, many

of which are leaders in their respective therapeutic areas. The product development

pipeline involves nearly 140 projectsincluding potential new products as well as

potential new indications or formulations for existing productsin various stages of

clinical development. Industry experts have ranked Novartis as a leader for having one

of the best combinations of organic growth, pipeline opportunities, and low patent-risk

exposure among major companies in the pharmaceuticals industry.

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Vaccines and Diagnostics

The Vaccines and Diagnostics division is a leader in providing products to fight more

than 20 vaccine-preventable viral and bacterial diseases, as well as in sophisticatedequipment used to test blood donations for infections. This new division was formed as a

new strategic growth platform following the acquisition of Chiron Corporation in 2006.

The portfolio includes more than 20 vaccines used to prevent most life-threatening viral

and bacterial infections that were once major public health issues.

These products include vaccines against meningococcal infections, required

immunizations against childhood diseases, and vaccines to protect travelers against

diseases endemic to certain regions. Our division consists of two business units:

Novartis Vaccines, focused on creating innovative products to prevent influenza,

meningitis and other diseases

Novartis blood testing business, which retains the Chiron name, dedicated to

preventing the spread of infectious diseases through novel blood-screening tools

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Sandoz

Sandoz is a leading global supplier of generic pharmaceuticals. It develop, produce and

market high-quality medicines that compete with chemically identical, off-patentbranded drugs, often reducing the costs of treatment. Through Sandoz, Novartis is the

only major pharmaceutical company to have leadership positions in both patented

prescription drugs

and generic pharmaceuticals. It offer more than 840 compounds in over 5000 forms in

110 countries. Significant product groups include antibiotics, treatments for central

nervous system disorders, gastrointestinal medicines, cardiovascular treatments and

hormone therapies. Novartis offer a wide range of products covering many steps in the

drug production process: basic molecules, intermediates, active

substances and finished drugs. We are an important biotechnological competence center

within Novartis due to our many years of manufacturing experience in this area.

Our name stands for three related values: speed and simplicity, customer and quality

focus, trust and mutual respect. At the same time, we make every effort to stay close to

our customers in local markets with decentralized commercial operations. Ranked as the

second-largest generics company in the world based on sales, we have completed the

integration of a series of targeted acquisitions to strengthen our product portfolio,

improve technological expertise and expand our geographic presence. The acquisitions

of

Hexal and Eon Labs was completed in mid-2005.

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Novartis Mission

We want to discover, develop and successfully market innovative products to

prevent and cure diseases, to ease suffering and to enhance the quality of life.

We also want to provide a shareholder return that reflects

Outstanding performance and to adequately reward those who invest ideas

and work in our company.

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Commitment to Patients

We endorse the right to health. This is our primary responsibility. Novartis has pioneered

an array of programs to enhance both affordability and access to treatment in developed

and developing countries. In 2006, our contributions valued at USD 755 million reached

33.6 million patients globally

Commitment to Ethical Business Conduct

Strong ethical standards are essential to our drive for top performance. We have

established a high-integrity corporate culture based on trust, respect and compliance with

legal regulations. We do so because we are convinced it is the right thing to doand is

key to our business success.

Commitment to Our People and Communities

We endeavor to ensure the safety and promote the health, careers, diversity and

livelihoods of our people. We also strive to be a good neighbor in the communities

where our associates and their families live and work.

Commitment to Environmental Care

We have a clear responsibility to ensure we protect the environment by operating to the

highest standards. We adopt a risk-based approach and focus on minimizing our use of

natural resources, cutting our energy consumption and emissions, and preventing active

ingredients from entering the environment.

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SUPPLY CHAIN MISSION STATEMENT

Every second brings our customer closer to us because we know the value of time, life

and business. We want to bring our customers closer to us by providing value through

our products and services, committing ourselves to providing the quality, variety and

convenience they expect.

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Location of plant/ Warehouses & retailers in Pakistan:

Factory

Factory of Novartis is located at JAMSHORO. This factory is not only catering the

demand of Pakistan but also exporting to other countries like Afghanistan and

Philippines.

Business Unit: Consumer HealthAddress: Novartis Pharma (Pakistan) Limited

P.O. Box 100 & 7247Karachi 74000PAKISTAN

Phone: +92 21 2313386to90Fax: +92 21 2311009Site Address: Novartis Pharma (Pakistan) Limited

15 West Wharf

Karachi 74000Regional offices:

Novartis has following regional offices nationwide

Quetta

Karachi

Hyderabad

Sakkar

Peshawar

Islamabad

Lahore

Multan

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Faisalabad

Warehouses:

Novartis has three warehouses in Pakistan which are located at:

Karachi -West Wharf

Jamshoro

Hyderabad

The Karachi warehouse is use to store raw material which directly come from othercountries or thorough local vendors.

Whereas Hyderabad warehouse is use to store material if they are facing some kind of

storage problem or incase of any problem in the mode of transportation.

They cannot directly send the material which comes through shipment but store them

until it meet the demand for the production .that usually save their transportation cost.

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The Karachi warehouse is located at WEST WHARF where it manages all the flow of

Raw material from port to the jamshoro. The Hyderabad warehouse is used to store

additional amount of finished good products or raw material. Whereas the warehouse

located at jamshoro is the factory based warehouse which stores all the finished goods

products and Raw Material as per production requirement.

Parazelsus owned 9 warehouses allover Pakistan. The warehouse locations are not

owned by Parazelsus but are hired on rental basis. Most of these depots also comprise of

the office premises for Novartis personnel.

Generally raw materials, finished products, packaging materials and expired or rejected

goods are stored in separate storage areas or separate compartments within a combined

warehouse. Temperature sensitive raw materials are stored in a separate cold storage

room, maintained at the desirable temperature.

Retailers

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They have different retailer in different cities. They didnt have much information about

retailer because they are under the control of parazelsus which is not in the control of

Novartis they do their work separately .parazelsus is only working for Novartis .their

distribution channels are divided into six cities and their total customer coverage 25431

of which 53 % are their retailer who sell their products.

Marketing Strategies

Strategies used by Novartis in introduction of their new products are as follows.

Typically pharmaceuticals companies dont use advertisement in their product

promotion. For promotions and marketing of their products, Novartis use three types of

marketing strategies.

Medical representatives

Symposium

Seminars

They usually have their sales force called medical representatives who go to different

clinics and hospitals, tell the doctors about their product and motivate them to prescribe

the Novartis products.

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They arrange seminars and symposiums to let the people aware about the diseases and

what their product offer to them in fighting against those diseases. They also sponsors

different health related programs.

AN OVERVIEW OF PAKISTAN PHARMACEUTICAL SECTOR

Pharmaceutical products in Pakistan range from all kinds of vitamins, anti-allergies, and

Alkaloids to ointments and cough syrups. Around 125 categories of medicines produced in

According to the annual government report the growth in the pharmaceutical sector of

Pakistan in percentage was:

Market growth in volume is14% per year

A majority of Pakistans leading pharmaceutical companies have acquired ISO quality

Certifications, demonstrating their quality standards and vision. Around 15 new productions

Facilities are being established to comply with FDA standards. All this reflects that the

national pharmaceutical companies are aiming at highly regulated markets, such as the

United States and Europe.

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Significance of the pharmaceutical industry to Pakistan economy

Local production US$1 billion

Local consumption US$1 billion

Number of manufacturing units 316

Share of MNCs in the pharmaceutical industry 47%

Share of local companies 53%

36 International Trade Centre

Global sales of pharmaceuticals US$317 billion

Pakistans share in the global pharmaceutical market 0.31%

Increase in exports of pharmaceuticals 17% per year

Profile of pharmaceutical industries

Number of units 316

Investment PKR 21 billion (US$350m)

Import of pharmaceuticals US$275m (2003-04)

Export of pharmaceuticals US$50m (2003-04)

Following is the list of top ten pharmaceutical companies in Pakistan

1. GSK

2. Pfizer

3. Abbott Laboratories (Pakistan) Ltd

4. Novartis Pharma (Pakistan) Ltd

5. Merck Marker (Pvt.) Ltd

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6. Roche Pharmaceuticals

7. Bristol-Myers Squibb

8. Pharmacia and Upjohn (Pvt.) Ltd

9. Parke-Davis

10. Wyeth Pakistan Ltd

0%

5%

10%

15%

20%

25%

30%

35%

GSK PFIZER ABBOT NOVARTIS

Series1

ORGANIZATION STRUCTURE OF NOVARTIS PAKISTAN

Formal Structure:

Novartis Pakistan has a formal organization structure where Head is the person in charge

of Novartis Pakistan who actually acts as a CEO. There are two main departments, one is

the supply chain department and other is the technical operations department. The head

of these departments are called General Managers. Under operations departments there

are sub departments of solid, liquid, injectibles, quality control, warehouses etc. Supply

chain is further divided into sub departments of Procurement and material management.

The structure overall is centralized. Each decision involves a lot of paper work and

documentation and everything has first to be approved by the General managers.

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The general hierarchy of Novartis in Karachi is as follows:

1. CEO

2. General Manager (Operations and supply chain)

3. Manager (Solid, Liquid etc)

4. Manager procurement and Material management.

The sales structure for Karachi is as follows:

Regional sales manager

Sales manager

.

Head injection

Head

Supplychainmanager

Head technicaloperations

Head procurement Head MMHeadEng.

Head solid

Head liquid

Head semisolid

Head QC.

Head warehouse

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Logistics Network

Distribution arrangements:

For distribution of its products, Novartis has a separate entity called parazelsus.

Parazelsus distribution network is made up of two components: warehouses that stock

the pharmaceuticals at various points around the country and the trucks that move the

stock where and when it is needed. The table below is the statistical view of the

distribution network of Parazelsus.

National Statistics

Population 150 Million

# of pharmacies (approx) 35,000

Hospitals/Institution (approx) 1000

Distribution Key Figures

Warehouses 9

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(in all major cities of Pakistan)

Pharmacies covered (approx) 25,000

Hospitals/Institution 740

Towns Covered 962

Order Bookers 221Calls / Day 35 40

Invoices per day 2,700

Sales per day PKR 12.4 mio (USD 0.21 mio)

Vans 84

INBOUND LOGISTICS NETWORK

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The inbound Logistics network of Novartis can be described in following steps.

The raw material arrived at port via sea and air which normally transferred to the

factory located at jamshoro.

Sometimes the raw material is of lesser quantity so its not feasible for Novartis

to send it to the factory because it would result in higher transportation cost. To

INBOUNDLOGISTICS

VENDOR

F

A

CTORY

WESTWHARF

WAREHOUSE

PORT(Air/Sea)

VENDOR

VENDOR

VENDOR

HYDERABAD

WAREHOUSE

JAMSHORO

150km

Hauling approx. 3500 tons annually

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make sure that their raw material would not get damaged they store it in Karachi

warehouse.

They wait for other shipment of raw material and than collectively send the

previous and the new raw material either to the Hyderabad warehouse or to the

factory.

The vendors can also ship it from Karachi warehouse to Hyderabad depending

upon the situation. If enough raw materials are available in plant warehouse, they

store excess raw material in Hyderabad warehouse.

From Hyderabad warehouse the vendor send it to factory depending upon the

requisition of raw material.

Outbound Logistics

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The outbound logistics of Novartis can be described in following steps.

The parazelsus has 11 warehouses and premier depots all over Pakistan which

are used for the effective and smooth supply of products all over the country.

The finished goods are transported all across the country form the Jamshoro plant

and warehouse.

Novartis also export the finished goods to Afghanistan and Philippines.

Philippines is their major export market. Shipment of product takes place from

the Hyderabad warehouse via Karachi airport.

The total dispatch is approximately 66 million annually.

The export to Afghanistan takes places from the Quetta and Peshawar route.

Parazelsus/PremierParazelsus/Premier

DepotsDepots1. KSD

Karachi2. HSD

Hyderabad3. SSD

Sukkur4. MSDMultan

5. FSDFaisalabad

6. LSDLahore

7. ISDIslamabad

8. PSDPeshawar

9. QSDQuetta

Premier DepotsPremier Depots10. NWB

Nawabshah11. MIR

Mirpurkhas

12. LARLarkana

13. GUJ

Gujranwala14. JHE

Jehlum

JAMSHORO

Outbound Logistics

KSD

HSD

SSD

QSDMSD

FSD

LSD

ISDPSD

GUJ

JHE

MIR

NWB

LKR

EXPORTTO

PHILIPPINES

EXPORT TOAFGHANISTA

N

EXPORT TOAFGHANISTA

N

Dispatch approx. 66.0 miopacks annually

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SUPPLY CHAIN ORGANIZATION CHART

Supply Chain

25

Head ofSupply Chain

MaterialsManager

FactoryWarehouse

Manager

WWWarehouse

Manager

ProcurementManager

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Hyderabad warehouse

Novartis

SUPPLY CHAIN

Patient

Wholesaler

DoctorsPrescription Order

Doctors

Prescription Order

Retail Pharmacies

Other Hospitals

International

and Local

vendors

Wholesaler

Wholesaler

Hospital Pharmacy

Emergency

Only

R

x

Karachi warehouse

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Finished Goods Ware House(Imported + Locally Manufactured

Goods)

Locations / Depots (9)

Consumer / Patients

Retail /Chain

Pharmacy

Wholesalers DispensingDoctors

Distributors

HospitalsOthers

(Institutions)

Retail /Chain

Pharmacy

53% 8%7%32%

100%%

100%2% 6%

100% 100% 100%

Raw material import

Karachi port

Production

Local vendors

Karachi warehouse

Hyderabadwarehouse

Bottlenecks

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This is the overall supply chain process of Novartis pharmaceutical company .this shows

how finished good after passing through production process can be deliver to their final

customers. The distributors which are parazelsus can also deliver product to hospital for

their pharmacy and other institutions

The warehouse locations are not owned by Parazelsus but are hired on rental basis. Most

of these depots also comprise of the office premises for Novartis personnel.

We can describe the supply chain process of NOVARTIS in following steps.

1. The Raw material arrived at Karachi port via sea-route and than directly

transferred to the plant at jamshoro for the production

2. If the Raw material is lesser in quantity than it is deposited in Karachi warehouse

and than either shifted to Hyderabad warehouse or at manufacturing plant.

3. Than this raw material is used in the production of medicines and other products

4. The finished good is than moved to the plant warehouse or to Hyderabad

warehouse depend upon the quantity.

5. Now after Finished goods the parazelsus take the charge and moved the products

to the 9 different locations and depots.6. From these 9 locations and depots 53% of the products are distributed through

retail/Chain pharmacy, 32% to wholesalers, 7% to dispensing doctors and 85

through distributors.

7. From wholesalers it moved 100% to the retail/chain pharmacist and from

distributors it moved to hospitals and other institutions.

8. From all these distribution channels the end product reaches to the end customer.

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This process flow diagram shows their exchange process as well as the documentation

process of their goods

First they receive orders

Then they prepare invoicing

In third step goods segregation takes place

Then the segregated good will be loaded into vans to deliver into market place

Finally they receive cash in return of goods.

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SCOR Model

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PLAN

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Planning is the most important part in production as well as success of product in

Novartis the supply chain department organizes meetings on weekly and monthly basis

where different teams are assigned their tasks and they review that whether the tasks or

previous goals were achieved or not. In Novartis, they usually make a plan for 1 month

and for the proper accomplishment of goals and meeting targets they arrange weekly

production meetings. Usually athe accomplishment percentage of targets and goals is

less than 100% but they strive their best to get the maximum achievable targets.

We can describe the planning process in following steps.

This process is base on marketing plan which they develop through past years sales as

well as current demand.

2 years plan segregateon monthly basis

Then it is subdivided into weeklyschedule

Schedule forecast forweek Current schedule Tentative schedule

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Procurement process:

MATERIAL MANAGEMENT FUNCTIONAL FLOW CHART

Marketing demand

MPS plan according toForecast

Imports drug demandforward to

procurement

Then local MPS demandforecast

Marketingstrategy

Marketresearch

Sales forecast

Productionmanagement

Budgetaryplanning

Product requirementplanning

Productionschedule

Material requirementplanning

Inventory planningcontrol

Procurement

VendorQuality

assurance Production

RM/PMWarehouse

Distribution

FGwarehouse

Sales tocustomer

Salesanalysis

Information flow

Material flow

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Material management functional flow is not stand alone activity, it is tightly integrated

with Market Demand and sales forecast.

Production schedule is fully dependent on market demand and budgetary planning

Product requirement planning is depend on sales forecast and then based on that

planning MRP department may able to create production schedule.

Material requirement planning for that production schedule is another parallel

activity which is performs by MRP department.

MRP department forward their material requirement to procurement so that

procurement can make sure the availability of required material on right time from

appropriate vendors. The integration of this information reduces the unnecessary

delays and lead time.

When raw material comes, its received in warehouse for inspection and approved

material forward to production as per requirement.

Finally, Finished Goods subsequent to quality assurance, stored in FG warehouse

and ready for distribution where Parazelsus start distribution through out in country

and at the end, product is available for end user.

Sales analysis helps production management to forecast the sales for next year.

Whole Cycle is repeated in the similar approach.

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Make

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Major equipment used for production of different pharmaceutical products include:

Mixing & Blending Vessels

Granulating machines

Drying Chambers

Autoclaves and Ovens

Tablets Compression Machines Tablets Coating Machines

Capsule Manufacturing Machines

Encapsulation Machines

A variety of purpose-built automatic or semiautomatic filling machines forliquids in bottles,

liquids in ampoules vials, powders in bottles and creams &ointments in collapsible tubes

Process order

Manufacture dispensing(Issue of all raw materials & packagingMaterial)

Manufacturing

Compensation/capsulefilling

Coating

(Tablets coating)

Final packaging

Final release by QA

Transferring to different

depots and F.G

WWAREwarehouses

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A variety of purpose-built automatic Printing Machines

The Make process of Novartis can be described as follows

Raw materials or ingredients, including solvents, used to produce the intermediate orbulk substances are charged into the reactor vessel. Once the reactor vessels are charged

with the raw materials, the reaction takes place.

Several separation mechanisms are employed by the Novartis including extraction,

decanting, centrifugation, and filtration. These mechanisms may be employed jointly or

individually, in multiple stages, to separate the intermediate or bulk substance from the

reaction solution and to remove impurities

After the reaction takes place, the intermediate or final bulk substance (which is usually

in solid form) can be separated from the reaction solution by crystallization.

Crystallization is one of the most common separation techniques and is often used alone

or in combination with one or more of the separation techniques described above. In

crystallization, a supersaturated solution is created in which crystals of the desired

Reactor

Separation

Crystallization

Purification

Drying

Extraction

Decanting

Centrifugation

Filtration

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compound are formed. Super saturation depends on the solubility of the desired

compound. If the compounds solubility increases with temperature, super saturation can

be achieved by cooling the solution.

Once the intermediate or the bulk substance has been separated, it may need to be

purified. In vitamin production, for example, there are at least three to four purification

steps. Purification typically is achieved through additional separation steps such as those

described above. Purification is often achieved through recrystallization.

The final step in the chemical synthesis process is drying of the intermediate or final

bulk substance. Drying is done by evaporating the solvents from the solids.

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Sourcing

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Raw materials for medicines include active pharmaceutical ingredients, excipients (like

sugar and lactose) and solvents (such as ethylene chloride, dichloride ethane, ethyl

acetate and methanol). Most of the requirements of raw materials are met through

import. Basic raw material used in the manufacturing of empty capsules is

pharmaceutical grade gelatin. Gelatin is a mixture of water-soluble proteins derived

primarily from collagen, which is a naturally occurring protein. Other major materials

used in the capsule manufacturing are dyes, dye -aids, preservatives and glycerin.

Variety of packaging materials like glass bottles, blisters, plastic caps, aluminum seals,

polythene/paper bags, cartons, carton partitions, labels and shrink wrappers are also used

by pharmaceutical industries.

They use FEFO method (first expiry first out)

Sourcing is taken place though shipment as well as through airways

Shipment process takes 5 month and carry large amount of raw material

Through air ways it take 60 days but carry less as compare to shipment

According to them ship is more cost effective for them

frequently the raw material is directly transferred to jamshoro and excess material is

stored in Karachi warehouse

Main imports are from Europe, Switzerland, Germany, Italy, and India.

Major portion of raw material are imported from the countries above.

And their vendors are also located in Karachi, Hyderabad.

Basic raw mat. And packaging mat. Is also imported through other countries almost

95 % because basic manufacturing of these materials are not in Pakistan

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Deliver

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Deliver process is take place through parazelsus which is separate company and the

distribution system is also discuss in parazelsus slides.

Parazelsus

Premier

These are the two distribution networks work for Novartis

In starting the distribution system was controlled by Novartis it self form jan. This year

they handed the distribution department to parazelsus

Distribution Operation Overview

Customers Coverage (25,431)

Trade Customers 22,310

Retailers 20,299

Whole Salers 2,011

Others 3,121Doctors ,363

Hospitals 503

Institutions 255

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Business Contribution in Total Sales

Trade 85.00

Retailers 53.00

Whole Salers 32.00

Others 15.00Doctors 7.00

Hospitals 2.00

Institutions 6.00

W. Sale / Retail Ratio in Trade Sales

Retailers 62.35

Whole Salers 37.65

37.65

62.35

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Return

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There are three types of return in Novartis supply chain.

Return of product if expired

Return of Product in fault of production process

Return of product due to defective raw material

The products are to be returned to NOVARTIS if they reach to their expiry period. To

safeguard the health and to avoid any severe condition the expiry products can be sent

back to Novartis.

Novartis mainly import raw material form different countries. Sometimes this raw

material has been found defective in quality assurance testing and this raw material is

sent back.

Due to the mishandling of raw material the addition or lesser quantity of certain raw

material in production process would force the company to callback its batch.

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PROBLEMS

Bottle Necks

Mechanical problems

Novartis has an older plant, due to which not only the cost of maintenance increases but

the production process also slows down.

Some of the maintenance problems are

Machine break downs

Maintenance break downs

Problems with raw material.

Novartis mainly import raw material from Switzerland and India. Most of the time the

shipment didnt reach on time which hurt the production of company. Another problem

is that most of the drivers put grains and wheat with raw material that can damage not

only the raw material but also effect the production process.

Severe limitation of storage space.

The one and the most important factor is the lesser number of warehouses. Novartis is

facing the problem of limited storage space. They have 3 warehouses located in Karachi,

Hyderabad and Jamshoro which are not enough to store the products. So they have to

either rent more warehouses or built warehouses in order to solve this problem.

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Bullwhip Effect

Fluctuation in the demand of medicine takes place only in the month season of winter

and summer where as in spring there is no fluctuation like summer and winter .In spring

the demand become constant as per their forecast. In summer the demand of calcium

increase by 4 times and the demand for kafkol rises 4 times in winter.

High cost of supply due to low forecast accuracy

Another problem that Novartis is currently facing is of lack of coordination between the

planning and the production departments. In most of the cases the forecast was either

much higher or lower than the actual demand which in turns increases the cost of supply.

High logistics costs due to remoteness of factory and space constraints.

The plant of Novartis is located in interior Sindh at JAMSHORO. On asking the

question from us that why the plant is located in interior remote area the supply chainmanager respond that its due to some governmental restrictions on us. Despite of any

reasons remoteness of factory and limited storage space definitely results in baring high

logistics cost to the Novartis.

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Recommendations

After detailed view of the Novartis Supply chain management and other departments

associated with it, we have following recommendations that can help Novartis to

improve their system.

Talented and skillful employees required

Novartis has to set the level of skills required by its personnel. One thing that is hurting

pharmaceutical sector is the lack of skills and the expertise require in the relevant fields.

Novartis has to search for the talent and benchmark the skills to be set by them.

Remove Capacity constraints in Production.

Another problem we observe in Novartis supply chain is the capacity constraints. They

have to remove the bottlenecks in their production process to maximize the capacity in

their production.

New machineries required

Novartis has an older plant which in results not only affecting the production of the

pharmaceutical products but in financial terms it increasing the maintenance cost.

Increase number of warehouses

As they have limited number of warehouses so it is suggested that they should increases

their ware houses

49


50/50

Lack of integration of supply chain functions.

The supply chain functions should be integrated in order for effective and smooth supply

chain process. The planning and production department should coordinate in order to

meet the demand accurately and efficiently.

Wind fall opportunities dying down in Urban markets- look out at rural markets

Novartis is mainly focusing on urban areas although its true that major part of business

comes through the urban route but infact the rural markets cant be neglected. The other

companies like ABBOT and GSK are enjoying the major part in urban market and day

by day the opportunities are dying down. Novartis has an opportunity to capture the rural

markets like many NGOS are opening hospitals in rural areas of NWFP, Punjab and

Sindh.

NOVARTIS Suuply Chain Report Min Nizar

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