Procurement Strategy in the Pharmaceutical Industry

Procurement is an important function to ensure meets its organizational goals. While Procurement is a support function for the organization, it is nevertheless a core function and critical to enhancing programme/project delivery. Procurement is a part of the process of achieving development project outcomes. Therefore all procurement activities are framed in the context of programmes and projects.

So the Procurement is a managerial discipline in this function need to acquire and enhance certain managerial skills, tools, and including procurement risk management, procurement strategies development and procurement planning.

Therefore the main benefits approach of procurement risk assessment, procurement strategies development and procurement planning serve as a bridge to cover the gap between programme and operations. They are also critical to programme delivery. Benefits of this approach include Best value for money, timely procurement; avoid unnecessary and unjustifiable emergencies, better allocation of existing resources, sufficient time to fully explore alternative procurement approaches, possibility to aggregate demand.

So in Procurement successful criteria is that Joint Planning between programme and procurement in the early stages, Good flow of communication, understanding of the procurement requirements, understanding of the market and associated risks, live process with structured revisions and feedback mechanisms.

In perception of researcher the procurement planning programme is very essential for fulfilment requirement of production demand and achieving goals for marketing and save the risk and shortage of availability of quality products production and marketing respectively. So the procurement development should be improving gradually with the strategies.

Construct Definition

Procurement: responsible for acquiring the goods and services necessary for the company. Sometimes organized as:

Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quality and quantity, at the right time, in the right place and from the right source for the direct benefit or use of corporations, individuals, or even governments, generally via a contract, or it can be the same way selection for human resource. Simple procurement may involve nothing more than repeat purchasing. Complex procurement could involve finding long term partners ” or even ‘co-destiny’ suppliers that might fundamentally commit one organization to another. Procurement can refer to buying, outsourcing, etc of any resources. (www.wikipedia.com)

Procurement Strategy: determines the company’ needs and plans for acquiring the necessary raw materials and services for the company.

Procurement strategy is a identification of need, defining of specification, defining contractual terms, sourcing the market, supplier appraisal, inviting quotes/tenders, analysing quotes/tenders, Negotiation where applicable, contract award/order placement, receive, evaluation of suppler, review of supplier performance, payment , vender rating two way feedback . (www.brentwood.com)

Background Information

In any organization, procurement strategies playing a vital role. Without procurement not only fulfils the requirement but also stop the production plan of any organization. So, the procurement structure is very important in any organization. So we study the pharmaceutical industry and its procedure of procurement. Different companies have different mode of procurement procedures. In this procurement procedure, the pharmaceutical companies receive the services or goods in raw shapes through supply chain system like import and local procurement system. Researcher is a Senior Procurement Officer in Star Laboratories (PVT) LTD. Lahore which is handling all Local Raw Materials, Packing Materials, Miscellaneous Items and any other special assignment of high management. Therefore we discuss the little introduction of Star Laboratories (PVT.) LTD.

Star Laboratories was registered in Lahore in 1960 as a partnership concern being a very small unit. Star Laboratories (Pvt.) Ltd. having a very large unit with a covered area of 86061 stf having an authorized capital of Rs.30 million and paid up capital of Rs.20 million.

Star Labs’ growth has been unprecedented. 1978 a Milestone when Star Labs was incorporated as a limited company emerged in the national streamline of growing pharmaceutical industry of the country and this achievement is still maintained in improving quality stability and reliability of veterinary and human products.

Star’s greatest asset is its human resource with present strength of more than 700 employees. Star believes that they have achieved this landmark with the loyalty honesty and hard work of their human resource.

A new era started in 1970 when Star started and multiplying their veterinary products by a margin to multinational with the aim and target to provide our 80% population of rural area the veterinary products for livestock development at a low and reasonable price for the prosperity and ease of our poor country competing the multinational.

Star is the market leader in Veterinary medicines producing almost complete range of veterinary products. A break through came in 1995 when Star was shifted to the new modem well equipped pharmaceutical plant at 23-Km, Multan road, Lahore with a refreshing aim of serving nationally and acting globally.

Professionals from the field of pharmacy & business administration carry out manufacturing at Star in accordance with the rule of Good Manufacturing Practices (CGMP) following international standards of quality management systems. From incoming raw and packing material, to in-process control till the finished goods, Quality Control Department intervenes at every stage to check the standard and the methodology of manufacturing.

Star’s reputation over a reasonable span of 44 years has opened new horizons for its veterinary products in global connection for exports to Saudi Arabia, Kuwait, Sri Lanka, Nigeria, Sudan, U.A.E, Ethiopia, Lebanon, Kenya, Yemen, Mauritius, Mauritania, Turkmenistan, Uzbekistan, Guyana and Somalia.

Research Question or Problem Statement or Objectives

Research Questions

• RQ1: How to decrease the issues, cost and save wastage of time of procurement structure?
• RQ2: How to improve in time delivery of quality Product and remove barriers structure and to develop standard by procurement strategies?
• RQ3: How to reduce the supply chain problems and enhancing the Source of suppliers for acquiring quality product with standard?

Research Objectives

• To enhance the quality production of product, reduce the cost and improves the structure of procurement with strategic mode continuously.
• To mitigate shortage of quality goods or services and rejection.
• To compare past and present procedure and findings of other companies rule and development of procurement strategies.

Scope and Limitations of Study

Proposed study will be conducted in Star Laboratories (Pvt) Ltd with population of 700 employees a sample 120 employee for sales and marketing sector will be chooseed on the basis of convenient sampling.

There could be following limitation of the study that can be observed during interviews and questionnaires sessions.

Data will be collected only from procurement department and Production.

Researcher role in Star Laboratories may subject to limitation.

No body can receive the data form import department due to some limitations.

Respondents are from procurement department because every body spend of their time in their work and may not give the information about work.

In procurement department very difficult to manage rejected products cause wastage of time and delay in production.

Researcher biasness is of most important nature

for researcher the respondents State of mind equally important

When researcher receives the data from many respondents may be not educated so that cause of difficulties

If we receive the information from the procurement department the limitations imposed by account department so that information con not received.

Chapter 2

Review of Related Literature

Procurement is the process of acquiring goods, works and services covering both acquisitions from third parties and from in-house providers. The process spans the whole cycle from identification of needs, through to the end of a services contract or the end of the useful life of the asset. It involves options appraisal and the critical “make or buy” decision. This strategy provides the framework for the management of procurement activity within the Council to ensure it is taken forward in the most cost effective and efficient manner to deliver value for money.

(www.harrogateboroughcouncil.com)

Sustainable procurement is the process of integrating these environmental, social, and economic factors into purchasing decisions. This Strategy provides a blueprint to implement sustainable procurement at the City of Portland and Multnomah County. It will move local government beyond the current state of ad hoc, often contradictory, inconsistently applied policies. It will move local government toward purchasing decisions that promote the long-term interests of the community. (www.portlandonline.com)

Procurement Strategies is the important in every organization because without purchasing goods respondents can not run the production. So, the Procurement procedure is playing an important role in the industry. In this function, managerial discipline is that need to acquire goods or services, enhance managerial skills, knowledge about procurement and tools. The process of procurement is that firstly requisition prepares on demand of the Stores, Productions and quality control department. After the requisition receiving the procurement department take quotation from the specific suppliers on demand but specific work caring on order making and inventory system. So the major function of procurement department making the planning, programming and developing the procedure by strategic manners.

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The aim of this theoretical study is to create a general framework for procurement strategy formulation and, in particular, present how to create and implement a procurement strategy. The framework suggested in this study will result from a study of various approaches discussed in the literature. The traditional perspective, as presented in the competitive strategy literature, finds the buyer-supplier relationship in terms of both parties competing with each other. The new approaches such as JIT, partnership sourcing and lean purchasing present quite a different perspective in terms of partnership. The central theme of this study is that, to be successful, the procurement management should use both approach. (Veli-Matti Virolainen, July 1999)

As companies attempt to shed old habits and begin to view procurement as a strategic resource from which a competitive advantage can be gained, there is a great deal of corporate baggage that must be shed. More importantly, there is a new mindset that must be instilled both in procurement and across the firm. Strategic supply symbolizes the importance of enterprise wide thinking where functional units inside the firm and key suppliers from the firm’s supply chain all work in concert to bring value to the marketplace. This paper presents data from the US and the UK that helps us better understand and address issues that are key to managing across independent supply chain partners. We also address some of the barriers to implementing such a supply strategy. These barriers exist inside the firm as well as between the firms at its key suppliers. Whilst we acknowledge that progress is being made, however the data suggest that the journey is far from over. (Paul D Cousinsa and Robert Spekmanb, January 2003)

As more evidence indicates that a corporation is very much defined by its purchases and benefited by its close partnership with the suppliers, the sourcing decision becomes increasingly important in the firm’s growth and profit. This paper synthesizes the available sourcing alternatives into four categories, namely multiple sourcing, single sourcing, single/dual hybrid or network sourcing, and global sourcing, and provides a comprehensive review of these purchasing methods based on extensive literature. Besides the discussion of the pros and cons, the paper focuses on the underlying factors that determine the preference and suitability of each sourcing option. In addition, with the note that numerous companies are switching to do business on a global basis, we attempt to use China as an example to examine global sourcing from the standpoints of both buyer and supplier. (Amy Zhaohui Zeng, 2000)

Global procurement is not a simple or easy solution to a company’s sourcing needs. With new markets and changing competitors challenging established business, global sourcing is now offering an opportunity for organizations to meet these challenges on a global basis. Discusses the varied interpretations and significance of global sourcing as an ingredient of success, emphasizing the link between world-class production/quality, marketing and procurement. From these discussions and empirical evidence, provides a matrix of management choices to facilitate the selection of worldwide sourcing strategies most appropriate to corporate goals. (Shan Rajagopal, Kenneth N. Bernard, 1994)

Industrial procurement is arguably that part of strategy which should have a customer focus. The recent attention to such strategies in a variety of commercial and government contexts, has grown much faster than detailed understanding of how sourcing decisions are made and their implications for organisations. This paper provides an overview of empirical research into sourcing decisions made in organisations. (Michael Quayle, May 2000)

Chapter 3

Methods and Procedures

Research Methodology

Researcher receives previous data which contains on Quantitative research and Qualitative. In my opinion which receive current data Quantitative (Survey based), Qualitative (Interviews), to explore the procurement strategies in selected Star Laboratories (Pvt.) Ltd

The researcher will conduct the proposed study using a questionnaire for collection of a primary data. The secondary data will be collected from research articles, different web sites etc.

Current Quantitative Research

Survey Instrument

Copy of the survey instrument is attached (see appendix).

Sampling Techniques

A non probability convenience sampling technique will be used for selection of the sample from the target population of Star Laboratories (Pvt.) Ltd

Sample Size

Respondent of my study will be about 120 Respondents. This study of procurement strategies based on managers, officers, production pharmacists, store incharges, marketing sales officers who are working in the Star Laboratories (Pvt.) Ltd.

Data Collection

Procurement strategies data will be collected through interview survey, telephonic conversation and the questionnaire. This data will be distributed by the researcher himself. Data will be collected from different people who based on procurement strategies and the respondents will be contacted personally. The respondents will work at different departments and convenience sampling method will be used in this study of procurement strategies.

Chapter 4

Data Analysis and Representation

Data Analysis

Data will be analysed by using Microsoft Excel to apply specific formulas and find mean, standard deviation, variance etc.

Chapter 5

Findings, Conclusions and Recommendations

Details of findings recommendations and conclusions will be explained in this chapter.

References

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Paul D Cousinsa, & Robert Spekmanb, B Darden Graduate Business School, University of Virginia, Strategic supply; Relationship management; Value; Performance measurement, Volume 9, January 2003, Pages 19-29

Shan Rajagopal, Kenneth N. Bernard, Global Procurement: Motivations and Strategy ,Marketing Intelligence & Planning, MCB UP Ltd, Year: 1994 Volume: 12 Page: 4 – 17

Veli-Matti Virolainen, Lappeenranta University of Technology, Purchasing; Procurement; Procurement strategies; Buyer-supplier relationship, Volumes 56-57, 20 July 1999, Pages 677-688

www.Wiipedia.com. Procurement definition: en.wikipedia.org/wiki/Procurement, page accessed February 8, 2010

www.wiktionary.com Procurement definition: en. wiktionary.org/wiki/Procurement, page accessed February 8, 2010