Scope

The life sciences sector covers the ethical and generic pharmaceutical drug industry, from the production of the active principle to product packaging, and relationships with customers (hospitals, dispensing chemists, general or specialized retailers, patients). This relationship is either direct or passes through intermediaries (agents, wholesalers, distributors, etc.).

Background

Historically very profitable, this sector is changing fast against a backdrop of:

• the imbalance of the health insurance systems in every European country due to ageing populations, that has resulted in:
  • economic pressure applied by state authorities on medications (promotion of generics, withdrawal of refunds, state or NGO calls for tender, etc.) and price/service competition on OTC products,
  • the rationalization of public health systems (overhaul of hospital networks, reorganization and efforts to boost productivity, etc.),
  • the deregulation, at varying speeds, of the drug distribution patterns in certain countries, that can increase the influence of dispensing customers on their suppliers.
• increased R&D costs required to develop new molecules, in a situation where generics are on the rise, with a number of consequences for industrial manufacturers:
  • a quest for effects of scale in order to cover rising R&D costs with industrial or distribution synergies, through buy-outs, mergers and stockholdings,
  • the globalization of production capacity and the development of emerging countries as both trading and manufacturing zones.
• the general application of the precautionary principle amongst the general public, resulting in the destabilization of established markets in the event of pharmacovigilance issues.

The challenges

The following key operational levers can be used to improve service, stay abreast of the market and control the top/bottom line economic equation in the face of these trends:

• define and promote differentiating service offers for supplied customers: customer segmentation, adaptation of the frequency of visits and/or deliveries,  increased ease of shelf-filling, etc.
• adapt the distribution strategy to each geographical zone (direct distribution or through partners in the medication chain, number of storage points), with a view to satisfying the segmented service offers, controlling customer relations and optimizing distribution costs,
• improve control of the demand (consumption forecasts based on statistics and cooperation with customers or partners, incorporation of calls for tender in the demand plans, implementation of rated distribution plans between production plants and hubs, development of SRM with certain retail customers, etc.),
• adapt the model of collaboration between the factories and markets (customer managed inventory or vendor managed inventory), according to the markets, product types and the characteristics of the industrial process,
• control of the long-, medium- and short-term balance between demand and capacity, the S&OP and the master production and distribution schedules, combining an economic vision (budget impacts and working capital requirements) and customer service (forecast satisfaction rates of customer demand),
• support the new industrial strategies (e.g., decoupling points at the semi-finished stage, and the associated inter-factory flows) by adapting the control of flows and stocks from both the process and information system perspectives,
• adapt the stock policy (stock which articles and in which quantities?) to the service offers and the required level of service per customer and product segment and to the reactivity of manufacturing and logistics,
• improve the reactivity and flexibility of the means of production (reduction of cycles, optimization of the campaign sizes, etc.).

How can Argon Consulting assist you?

We assist our customers in this sector in the transformations needed to rise to these new challenges, from the assessment of the issues they face to the application of a range of operational performance levers:

• supply chain strategy and governance:
  • optimization of the distribution patterns (which partners, for which service offer and at what cost?),
  • optimization of the industrial model (decoupling points, product/site assignments, etc.),
  • supply chain governance model,
• supply chain planning processes and information systems:
  • forecasting and planning demand and distribution,
  • S&OP, MPS,
• Lean management initiatives to improve the performance of production, reduce cycles and make capacity more flexible,
• cross-functional projects to reduce stocks, cycles and costs,
• optimization of logistics: logistics, warehousing and transport system.

Argon Consulting’s customers include Merck, Pfizer, Medtronics, Boston Scientific, Sorin group, la Générale de Santé, etc.