Mitigating business challenges and demand & sales issues by Pharma Industry using SAP IBP
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By: Krypt Team - May 22nd, 2019

Authored by: Vijendra Kargudri


The global pharmaceutical market

The pharmaceutical (pharma) industry is based on the Right to Health, wherein being healthy is a foundation for a country’s economic development and essential to its citizen’s improved quality of life.

The global pharmaceuticals market will exceed $1.5 trillion in 2023 from $1.3 trillion in 2018, growing at 5-8%, as per the IQVIA Market Prognosis, 2018. Though global medical spending has increased year-on-year, the pharma market growth has plateaued due to high failure rates. According to Deloitte’s, the restraining factor for launch of high-priced new breakthrough drugs by big pharma companies is $2 billion average cost of developing a new drug, coupled with falling RoI — down from 10.1% per year in 2010 to 3.2% per year in 2017.

Unlike FMCG or high-tech manufacturing industry, pharma industry supply chains are predominantly work-in-process. Some major factors that affect the pharmaceutical market size include:

  • disease prevalence (communicable & non-communicable), government policies,
  • drugs’ —accessibility, affordability, efficacy, safety,
  • consumer preference, and
  • supply chain factors, while trading across the borders.

Challenges within the pharma industry affecting the demand & sales

Some of the major challenges within the pharmaceutical industry are

Emerging Generic Market

Low-cost generic brands have been the by-product of the global aging population and increasing healthcare costs; leading to increased competition and eroding margins for big players.

Shortened Patent Life

The stiff competition provided to the big players by the emerging generic brands has shortened the product patent life. It has increased patent litigation and reduced a patent’s ability to act as an entry barrier.

Emerging Market Landscape

The growth of the pharma industry is defined by the emerging markets. Most of the global pharma giants’ branded product portfolios production sites are heading towards the Asian markets to enable local market access and cost-efficiencies.

Growing Trade Regulation

Trade embargos and tighter regulations hinder innovation & agility in the pharma industry, causing a decline in R&D. With stringent trade regulations varying across countries, it is important for pharma companies to ensure compliance and avoid being fined or get into a sanctioned list.

Product & Process Development Complexity

Every new drug’s discovery & development processes continue to be prolonged & a costly affair with uncertain outcomes due to clinical trial failures, market withdrawals because of side effects and competition from similar products.

Further, manufacturing processes are slow & inefficient due to complex problems of chemistry and yield optimization, which has led to higher batch sizes and longer cycle times.

Demand Uncertainty

The Pharma industry is burdened with demand uncertainties in ─ clinical trial outcomes, existing stock keeping units (SKUs) due to competition, forecast accuracy from market teams that compound the inventory planning challenge and result in poor supply chain metrics.

Auditable & Traceable Product

Patient health along with pharma company’s brand is at stake of counterfeit drugs. Such drugs’ volume in the developing world is up to 30%. This scenario mandates companies to meet ‘Track & Trace’ directives and new serialization regulations and have auditable inventory throughout the supply chain.

Capital Investments & Capacity Planning Lead Times

Pharma industry’s success is driven by the go-to-market time, which necessitates leaders of the pharma industry to place mid-to-long-term capacity bets to mitigate highly uncertain demand environment.

Taxation-driven Supply Network Design

Owing to high tax implications, many pharma companies are forced to take advantage of tax haven status for a certain duration by giving priority over logistics. The ramification of this is complicated supply chains once the tax advantage expires. Also, many pharma plants are designed with legacy manufacturing technology suited for batch job production instead of continuous flow-based processes.

Supply chain turbulence

Pharmaceutical supply chains involve multiple agents having different business objectives. This fact along with inherently volatile external demand environment, disconnected planning processes between market facing teams and production-oriented teams creates supply chain turbulence.

High logistics cost

The logistics costs for pharma products run high due to the complexity of a temperature managed supply chain, high costs for longer duration inventory holding, high levels of wastage given the perishable nature of the product, volatile demand, and costly changeovers to run large production campaigns in API.

How can Krypt help the pharma industry mitigate demand/sales issues?

As an SAP’s preferred partner for IBP, Krypt has an established SAP IBP implementation & solutions experience for the pharma industry. Most of the pharma industry is challenged by varying sensitivities of the market, which can be addressed by implementing SAP IBP. Krypt offers rapid “what-if” scenario-driven implementation for supply chain solutions that ─

  • integrates disparate data sources & processes to derive real-time insight from such data to make informed decisions
  • helps the pharma company be agile, better aligned and responsive to dynamic market’s demand/supply requirements
  • complements pharma company’s strategies across its product portfolio
  • provides visibility across processes to execute the operational plan
  • provides better user engagement, faster planning cycles, and consistent process planning
  • mitigates demand/supply challenges through accurate demand forecasting & supply planning.

As a pharmaceutical manufacturing company, if you wish to know about our products/services, please request a demo or do contact us.

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