CASE STUDY OF A PHARMACEUTICALS
The telephone kept ringing in the cabin of the Sales Head. Mr. Sharma shifted his glance at the telephone and read the number. Realizing that it was an international call he ordered his secretary to answer the call on behalf of him. No sooner did she answer it with her melodious voice, the dealer from the other end yelled at her in frustration. Mr. Sharma heard the angry voice and rolled his eyes before his cell phone began to vibrate uncontrollably. It was a call from another dealer from Jaipur. Mr. Sharma ignored it and glanced at his computer that was flooded with mails from all the dealers while his secretary tried to pacify the angry dealer from abroad.
“Enough of this nonsense! I can’t take this pressure anymore!” he pulled his hair in irritation and snorted like an angry bull. “Sirji Chai….” The peon walked in with a cup of hot tea. “Get out of my cabin!” Mr. Sharma yelled at him and rose from his seat as the poor peon hurriedly drank the tea in confusion and ran away.
“This is the fault of that production head! Why should I hear all this crap because of the delays from his end?” he fumed and began breathing heavily and immediately asked his secretary to connect him to Mr. Venkat at Kurukshetra.
When the Production Head answered the call he was in for a big surprise from the Sales Head sitting in Ahmadabad. “Mr. Venkat, why don’t you understand my situation? During every PPC meeting, you promise to deliver goods as per schedule but in reality, you seldom dispatch goods as per schedule! Now I’m fed up with offering excuses to both Indian and international customers for the delay in supplies. Hence I have spoken to the Chairman already and from Monday you’ll be in the corporate office managing sales and I’ll be in Kurukshetra, managing the production!” With that said and done he banged the phone while Mr. Venkat gulped and stared at Lord Balaji’s picture that was adorning the side wall of his cabin.
Later that night Mr. Sharma was wide awake in the balcony of his bedroom, regretting the incident that took place in the office. He now wondered how he would manage the production unit at Kurukshetra. Being in sales for years, he had no experience in production. This worried him a lot. His wife noticed how tensed he looked and inquired. After hearing everything from him she smiled and gave him a solution. “Relax, I’ll ask my brother Mr. Singh to go to Kurukshetrain your place. In any case, nobody has seen you in person,” she said. “And as you know, Mr. Singh is a senior consultant with SynCore,” she winked and assured him that everything would be fine.
The next day Mr. Singh left for Kurukshetra, in place of Mr. Sharma. On reaching Kurukshetrahe immediately looked into the matter and called all the heads of production, purchase, logistics and planning for a meeting, so as to diagnose the problem and work out solutions.
There he identified the first challenge that was related to domestic distribution - there was an increase in inventory which had been triggered by promotions and sales targets. The dispatches to depots were being planned on forecast and the previous month’s actual sales. This had led to shortages & surpluses at the same time.
Mr. Singh, being an expert in giving the right solutions at the right places, charted out a perfect solution to address this problem. He defined inventory norms for all regional depots and the supplying points were instructed to replenish the stocks at the regional depots only upon consumption – linked to the inventory norms. Later an online system was developed to generate the daily replenishment reports for regional depots. At the same time it was envisaged that for certain products the supplying points would not have sufficient stock to cater to the total domestic demand. In such cases a formula for “minimum replenishment quantity” was designed & implemented in the online system. The next suggestion that Mr. Singh gave was, to replenish stock at all national depots based on the inventory norms.
Mr. Singh worked with the Kurukshetrateam to customize and deploy the solution for the domestic distribution of finished goods. The company realized that for many SKUs in finished products there was excess inventory to the tune of a few 100crorerupees! This information helped the production planning team to produce only those SKUs required to meet the entire demand.
The stock outs in distribution system soon reduced by 20% in one month after the system was implemented. The new system was the only system which the team decided to use for domestic distribution.The total inventory in the system for finished products was now more in line with the market needs.
It was during this period that Mr. Singh suddenly happened to notice the growing clashes between the Purchasing Head and his plant team. “What happened to the material? I’ve received international sales orders for something else and you’re telling me that the required material was used for domestic orders?” One of the plant team members yelled at the Purchasing Head.
“Stay in your limits! Should I remind you whom you’re talking to?” The Purchasing Head remarked and threatened him. “Last time we brought the material and it was just rotting out there!” he snorted. Mr. Singh heard all the commotion and soon walked in as a referee. When he intervened and personally spoke to the Purchasing Head, he realized another hidden challenge that the plantswere facing.
The challenge was such that, for every international order, the order fulfilment lead time was promised without a confirmation of material availability at the plants. At the same time, the plant was catering to the domestic market demand as well. The plants were constantly facing a situation where they had to expedite almost every purchase order for material.
Hence Mr. Singh analysed the situation and immediately designed a “Material Priority System.” For almost all the material categories and products, the inventory norms were defined and linked to the pending international orders. Based on the stock level compared to the inventory norm the material purchase priorities were decided.
This helped to reduce the conflict between the plant team and the Purchase Head as everybody had the same priority system that was linked to the customer’s orders.
It wasn’t long before Mr. Singh felt that his solutions were bearing fruitful results and decided to take his leave. He later informed Mr. Sharma about the changes and assured him that there wouldn’t be any more delays in delivery from the production unit. Mr. Sharma then heaved a sigh of relief and finally visited the corporate office. As he entered he noticed that Mr. Venkat was busy answering calls while his secretary was having a tea break.
Seeing his condition Mr. Sharma chuckled from within and told him to stop. He then handed over a report of all the changes that Mr. Singh had implemented in the production unit. “You see Mr. Venkat; I wanted to give you a break from the production unit. You will be surprised to know that your team at Kurukshetrahas implemented a new system wherein there won’t be any delays in delivering the orders to our customers,” Mr. Sharma explained and told him to go through the file.
“I hope you enjoyed the switch…” he added while Mr. Venkat hurriedly booked the first flight back to Kurukshetra.