Part 3

CHAPTER 1: RESEARCH METHODOLOGY
1.1) RESEARCH OBJECTIVE:

Research studies evolve through a series of steps, each representing the answer to a key question. 1. Why should we do research? This establishes the research purpose as seen by the management team that will be using the results. This step requires understanding the decisions to be made and the problems or opportunities to be diagnosed. 2. What research should be done? Here the management purpose is translated into objectives that tell the managers exactly what questions need to be answered by the research study or project. 3. Is it worth doing the research? The decision has to be made here about whether the value of the information that will likely be obtained is going to be greater than the cost of collecting it. 4. How should the research be designed to achieve the research objectives? Design issues include the choice of research approachreliance on secondary data versus conducting a survey or experimentand the specifics of how to collect the data. 5. What will we do with the research? Once the data have been collected, how will it be analyzed, interpreted, and used to make recommendations for action
General Objective: An in depth study of Supply Chain Management of Pharmaceutical industry; A case study on selected Pharmaceutical Channel Members. Specific Objectives: 1. To study the basic pharmaceutical supply chain process. 2. To study the incorporation of automation by the various channel members in the industry. 3. To study what motivates the stocking of various drugs despite of the demand that cannot be stimulated. 4. To study how the expired drugs are managed in the industry.
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5. To understand how the channel members manage the conflict under various situation. 6. To know the various company policies to influence the product purchase by the channel members.
1.2) RESEARCH DESIGN:

1. During the tenure of our Grand Project we used Exploratory Study and Descriptive Study. 2. 3. It is done to gain more insight about any particular topic. It can provide the basic direction for the research purpose to be followed later. It can also provide the decision maker an edge to decide when and how to proceed. 4. It is also known as "inductive" or "theory-building" type of study.
1.3) SAMPLING DESIGN:

Sampling theory says a correctly taken sample of an appropriate size will yield results that can be applied to the population as a whole. There is a lot in this statement but the two fundamental questions to ensure generalization are: How is a sample taken correctly and how big should the sample be?
1.
Here in this report the sample size is being chosen on the basis of the convenient sampling format of sampling design. In a convenient sampling the samples are collected on the basis of researchers convenience.
1.4) RELEVANT POPULATION AND SAMPLE SIZE:

Here in our population consists of: POPULATION Retailers: Stockists Carrying forwarding agents.
SAMPLE SIZE We took responses of 115 retailers from Ahmedabad region We interviewed 11 stockists and We took interview of 2 C&F Agents
1.5) DATA COLLECTION:

The purpose of data collection is to obtain information to keep on record, to make decisions about important issues, to pass information onto others. In the project both the primary and secondary sources of data collection are used. For primary data two methods like observations and questionnaires were used.
1. Sample survey is the technique of studying a few people from the target people. This sample is supposed to be the representative of the whole population.. 2. While surveying the plant sometimes there are few things which probably might not be problem from someone else's perspective but is the same from one's own perspective. And hence such data can only be gathered through personal observation. So for solving that purpose also the data is also being collected through observation.
1.6) GEOGRAPHICAL SCOPE:

The study is limited to the scope of Ahmedabad location only.
1.7) LIMITATIONS:
a) The scope of the study is limited to the Ahmedabad region only. So the problems would be related to this region only. b) As the scope of research is limited to Ahmedabad only therefore there might be some errors and biasness in terms of geographic location. c) Convenient sampling will be used so there might be some errors in relevance to the whole population d) The limitations associated with the questionnaire preparation and the subsequent responses cannot be ignored. e) Researchers limitation will also come to play during the analysis as it being an exploratory analysis.
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CHAPTER 2: PHARMACEUTICAL INDUSTRY

2.1) AN OVERVIEW
Pharmaceutical Industry serves the purpose of developing research and distributing drugs in order to provide health care for the people in the society. The pharmaceutical industry is characterized by a high level of concentration with fifteen multinational companies dominating the industry. The Pharmaceutical Industry like other industries is subjected to follow certain rules and regulations. The Pharmaceutical Industry needs to follow rules about patent, marketing as well as testing of drugs that are scheduled to come to the market as medicines. Since the Pharmaceutical Industry gained importance in the 19th century, it has covered a long way and now it has become one of the most influential and successful industry in the world with both controversy and praise on its part. Pharmaceutical Industry is very much dependent upon the developments and discoveries that are made to search new types of drugs and also to search for new kind of medicines. One can also see differences within the industry regarding the same drug or report and different companies within the Pharmaceutical Industry look to follow different paths for the same thing.
2.1.1) A BRIEF HISTORY

The earliest drugstores date back to the middle Ages. The first known drugstore was opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating throughout the medieval Islamic world and eventually medieval Europe. By the 19th century, many of the drug stores in Europe and North America had eventually developed into larger pharmaceutical companies. Most of today's major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became massmanufactured and distributed. Switzerland, Germany and Italy had particularly strong industries, with the UK, US, Belgium and the Netherlands following suit.
The industry got underway in earnest from the 1950s, due to the development of systematic scientific approaches, understanding of human biology (including DNA) and sophisticated manufacturing techniques. Numerous new drugs were developed during the 1950s and mass-produced and marketed through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, bloodpressure drugs and other heart medications. MAO Inhibitors, chlorpromazine (Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and rapidly became the most prescribed drug in history, prior to controversy over dependency and habituation. In 1964, the World Medical Association issued its Declaration of Helsinki, which set standards for clinical research and demanded that subjects give their informed consent before enrolling in an experiment. Pharmaceutical companies became required to prove efficacy in clinical trials before marketing drugs. Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary center of pharmaceutical production without patent protection. The industry remained relatively small scale until the 1970s when it began to expand at a greater rate. Legislation allowing for strong patents, to cover both the process of manufacture and the specific products, came in to force in most countries. The pharmaceutical industry entered the 1980s pressured by economics and a host of new regulations, both safety and environmental, but also transformed by new DNA chemistries and new technologies for analysis and computation. Drugs for heart disease and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a faster approval process. Marketing changed dramatically in the 1990s, partly because of a new consumerism. The Internet made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming the nature of business. Drug development progressed from a hitand-miss approach to rational drug discovery in both laboratory design and natural-product
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surveys. Demand for nutritional supplements and so-called alternative medicines created new opportunities and increased competition in the industry.
2.1.2) RESEARCH AND DEVELOPMENT

Drug discovery is the process by which potential drugs are discovered or designed. A great deal of early-stage drug discovery has traditionally been carried out by universities and research institutions. Drug development refers to activities undertaken after a compound is identified as a potential drug in order to establish its suitability as a medication. Often, large multinational corporations exhibit vertical integration, participating in a broad range of drug discovery and development, manufacturing and quality control, marketing, sales, and distribution. Smaller organizations, on the other hand, often focus on a specific aspect such as discovering drug candidates or developing formulations. Often, collaborative agreements between research organizations and large pharmaceutical companies are formed to explore the potential of new drug substances.
2.1.3) MERGERS, ACQUISITIONS, AND CO-MARKETING OF DRUGS

A merger, acquisition, or co-marketing deal between pharmaceutical companies may occur as a result of complementary capabilities between them. A small biotechnology company might have a new drug but no sales or marketing capability. Conversely, a large pharmaceutical company might have unused capacity in a large sales force due to a gap in the company pipeline of new products. It may be in both companies' interest to enter into a deal to capitalize on the synergy between the companies.
2.1.4) MARKETING
Pharmaceutical companies commonly spend a large amount on advertising, marketing and lobbying. In the US, drug companies spend $19 billion a year on promotions. Advertising is common in healthcare journals as well as through more mainstream media routes. In some countries, notably the US, they are allowed to advertise direct to the general public.
Pharmaceutical companies generally employ sales people (often called 'drug reps' or, an older term, 'detail men') to market directly and personally to physicians and other healthcare providers. In some countries, notably the US, pharmaceutical companies also employ lobbyists to influence politicians. Marketing of prescription drugs in the US is regulated by the federal Prescription Drug Marketing Act of 1987.
2.3) INTERNATIONAL PHARMA INDUSTRY

The global pharmaceutical market by 2013 is expected to grow 5-6 % percent on a constantdollar basis, exceeding $825 billion and reach around USD 975 billion, driven by stronger nearterm growth in the U.S. market. The forecast, the leading annual industry indicator of market dynamics, predicts global pharmaceutical market sales to grow at a 5 6 percent compound annual growth rate through 2013, and takes into account the impact of the global macro economy, the changing mix of innovative and mature products, and the rising influence of healthcare access and funding on market demand. Global pharmaceutical market value is expected to expand to $975+ billion by 2013. The pharmaceutical industry is characterized by a high level of concentration with few multinational companies dominating the industry. The following is a list of the twelve largest pharmaceutical companies ranked here by revenue as of March 2010.
Revenues Rank Company Fortune 500 rank $ % millions change from 2008
61,897.0 -2.9
Profits $ % millions change from 2008

12,266.0 -5.3
Johnson & Johnson Pfizer Abbott Laboratories
33
2 3
40 75
50,009.0 30,764.7
3.5 4.2
8,635.0 5,745.8
6.6 17.7
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4 5 6
Merck Eli Lilly Bristol-Myers Squibb Amgen Gilead Sciences Mylan Genzyme Allergan Biogen Idec
85 112 114
27,428.3 21,836.0 21,634.0
15.0 7.2 1.3
12,901.3 4,328.8 10,612.0
65.2 N.A. 102.2
7 8 9 10 11 12
159 324 412 458 459 471
14,642.0 7,011.4 5,092.8 4,515.5 4,503.6 4,377.3
-2.4 31.4 -0.9 -1.9 2.3 6.8
4,605.0 2,635.8 232.6 422.3 621.3 970.1
9.7 31.1 N.A. 0.3 7.4 23.9
Issue date: May 3, 2010 Source: Fortune 500 2010 industry: Pharmaceutical
CURRENT SCENARIO
The value of the global pharmaceutical market is expected to grow 5-7 percent in 2011, to US$880 billion, compared with a 4-5 percent pace last year, according to IMS Health. "While the overall market will appear to rebound somewhat in 2011, the underlying constraints to growth in developed markets are stronger than ever - including the impact of major patent expiries and payer mechanisms to limit drug spending," said IMS Senior Vice President Murray Aitken. "The expectations are that pharmerging markets would continue their rapid expansion this year and would remain strong sources of growth, and would also see the potential for several significant innovative treatment options that are becoming available for patients in areas that include metastatic melanoma, multiple sclerosis and acute coronary syndrome." In its latest analysis, IMS identifies the following key market dynamics:
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Divergent growth rates expected for developed and pharmerging markets. As countries recover from the global economic crisis at different rates, there is growing divergence in the pace of pharmaceutical growth among major markets. The 17 pharmerging countries are forecast to grow at a 15-17 percent rate in 2011, to $170-180 billion. Many of these markets are benefiting from greater government spending on healthcare and broader public and private healthcare funding, which is driving greater demand and access to medicines. China, which is predicted to grow 25-27 percent to more than $50 billion next year, is now the worlds third-largest pharmaceutical market. Among major developed countries, Japan is forecast to grow 5-7 percent in 2011, a year when biennial price cuts will have little impact. The five major European markets (Germany, France, Italy, Spain, and the U.K.) collectively will grow at a 1-3 percent pace, as will Canada. The U.S. will remain the single largest pharmaceutical market, with 3-5 percent growth expected next year. Pharmaceutical sales in the U.S. will reach $320- $330 billion, up from $310 billion forecast for this year, not including the impact of off-invoice discounts or rebates. Peak years of patent expiries shift major therapies to generic dominance. In 2011, products with sales of more than $30 billion are expected to face the prospect of generic competition in the major developed markets. In the U.S. alone, Lipitor, Plavix, Zyprexa and Levaquin which together accounted for more than 93 million prescriptions dispensed in the past 12 months and generated over $17 billion in total sales likely will lose market exclusivity. The full impact of patients shifting to lower-cost generic alternatives for these products, as well as other brands in their therapy classes, mostly will be felt in 2012, due to the timing and expected competitive intensity among generic entrants. Broad measures applied by public and private payers to reduce growth in drug budgets. Governments are pursuing an ongoing wave of budgetary control mechanisms that target drug spending as one way to restore fiscal balance. Multiple markets will be impacted by these measures in 2011. Prominent examples include substantial reductions in the price of generics relative to their branded counterparts in Spain and in Canada, where generic pharmacy rebates are expected to be eliminated; new price negotiation requirements for
brands launched in Germany; and across-the-board price cuts for branded products in Turkey and Greece. In the U.S., health plans are stepping up their use of preauthorizations and cost sharing provisions in an effort to address rising healthcare expenditures. Therapy area growth dynamics driven by innovation cycle and areas of unmet need. In 2011, the introduction and uptake of new drugs - a third of which are specialty pharmaceutical products - are poised to fulfill patients' unmet needs and significantly alter treatment paradigms in several key therapy areas. These include innovative treatment options for stroke prevention, melanoma, multiple sclerosis, breast cancer and hepatitis C. As these new drugs are brought to market, patient access is expected to expand and funding redirected from other areas where lower-cost generics are available. Five potential blockbuster products - defined as those exceeding $1 billion annually in peak sales - are expected to be approved and launched globally by the end of next year. Pharmaceutical industry was one of the least affected industries in the global scenario even during economic slowdowns. Where there was a shrink of 10% in the chemical sector as a whole in last quarter of the year 2008 and 23 % in the first quarter of year 2009, Pharmaceutical industry registered a 1 % growth in its share. With this statistics it is well understood that the sector is still to witness much higher growth rate in the future. The growth can be attributed to the increasing incidence of lifestyle related diseases in the global population. The same is expected to grow in the future as well. The changed lifestyle of people and desire to seek maximum comfort every time or to match up with the pace of current scenario has resulted into the current demand. It has proved to be a boon for the world Pharmaceutical industry. North America again happens to be the largest pharmaceutical market with the maximum share of around 48% followed by UK with around 30% as a whole. Global Pharmaceutical market is witnessing increased opportunities in the area of Biopharmaceuticals, Pharmacogenomics and Biologics market.
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Source: Extract from RNCOS World Pharmaceuticals Market 2009, IMS 2008 Global Pharmaceutical Market Forecast
But at the same time it has been facing various problems as well. It is facing a lot of cost pressure and expiration of patents. Intellectual property rights have always been a sensitive matter to deal with as there are many laws which are subject to many loopholes in it. This provides a gap in the proper functioning of the industry as a whole. This of course creates an opportunity for the market to come up with low cost production hubs and new R &D centers.
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2.4) INDIAN PHARMA INDUSTRY

The Indian pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this subcontinent. Richard Gerster
The pharmaceutical industry in India is among the most highly organized sectors. This industry plays an important role in promoting and sustaining development in the field of global medicine. Due to the presence of low cost manufacturing facilities, educated and skilled manpower and cheap labor force among others, the industry is set to scale new heights in the fields of production, development, manufacturing and research. In 2008, the domestic pharma market in India was expected to be US$ 10.76 billion and this is likely to increase at a compound annual growth rate of 9.9 per cent until 2010 and subsequently at 9.5 per cent till the year 2015 . It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously Indian Pharmaceutical industry plays a key role in promoting and sustaining development in the vital field of medicines for the world. Indian Pharmaceutical Industry boasts of quality producers and has many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past years and helped to put India on the pharmaceutical map of the world. The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the
market share.
It is an
extremely fragmented market with severe price competition and government price control. The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and
injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations. Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Technologically strong and totally selfreliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market
CURRENT SCENARIO
India is a trillion dollar economy. It is into top 20 list of largest economy and possesses 12 th position in it. India possessed an average growth rate of 7 - 8 % even during global economic slowdown and expected to grow at a higher rate in the near future. This makes it a stronger economy than many other countries in the global picture. India has plans to invest a massive 500billion USD over the next 2-3 years. Strong market can be realized with the fact that the market is driven by 300million plus middle income group. It has a market of more than a billion customers. Below shown is the list of Indias current and future GDP growth rate as well as the Indias GDP share in the world Pharmaceutical market.
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Below shown is the list of Indias current and future GDP rate:
Year
2009 2010 2011 2012 2013 2014 2015
GDP (trillions)
57.0 63.3 71.5 80.8 91.4 100.2 116.7
Rupee
7 9 9 9 9 9 9
Growth
4 4 4 4 4 4 4
Inflation
46 46 46 46 46 46 46
USD-Rupee USD GDP(billions)

1240 1376 1555 1757 1986 2244 2536 Source: nextbigfuture.com
3000 2500 USD in Billions 2000 1500 1000 500 0

2007
GDP INDIA
2008
years 2009 YEARS
2010
2011
9.5 9 PERCENTAGE 8.5 8 7.5 7
GROWTH RATE
2007 2008 2009 2010 2011 2012 2013 2014 2015
YEARS 1
Source: nextbigfuture.com
Because of the availability of skilled manpower and access to domestic and international markets, India is ranked as a leading investment destination. Along with this various factors make it the most desired nations for the Foreign Direct Investments hub. FDI inflow grew an average of 9% even during global economic slowdown. Since 2000 FDIs are exceeding at an average of USD 120 billion per year. Around USD 19 billion FDI inflows was observed between April-November 2009. The same trend is expected to be followed in the near future in the country. Below is the pictorial representation of the contribution of the FDI in the Indian market, fraction of it and a list of top FDI Destinations of the world.
Source: DIPP; WIPPS 08-10, World Competitiveness/ Press Information Bureau
Source: IBEF, FDC

With so much amount of FDI attraction in the country it serves as the best place for the growth of Pharmaceutical industry. India is amongst the fastest growing Pharmaceutical industries in the whole world. It has been growing at a rate of 12 % annually from the last 7 years. Pharmaceutical sector has tremendous prospect due to patent expiries and demand for effective medicines. India is emerging as the hub of R&D and clinical trials. Maximum of its demand is met by the domestic industry. The Indian domestic consumption accounts for around 46% and the exports counts for around remaining 54% of total industry revenues.
Source: CRIS-INFAC, FDCA The domestic retail market is expected to cross the USD 16 billion mark by the year 2013. The Pharmaceutical market was worth USD 16.6 billion in the year 2007- 2008. The outsourcing industry is predicted to be USD 2.5 Billion by 2012 as a result of the low cost R& D costs.
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Source: CRIS-INFAC, FDCA The graph above talks about the changing paradigm of Indian pharmaceutical Industry. As we can see that in the year 2010 less emphasis was placed upon the services. 33% of the consumption of it came from domestic consumption. But the major part came up from the exports only. However the earlier statistics of the year 2006 shows more than half consumption came from the domestic market. Only 40% was exported to the world market. Now greater emphasis is placed upon the exports. The healthcare budget as stated in 2005 was 7 % which is expected to grow by almost double to around 13 % by 2025. At the same time Indian Pharmaceutical industry is expected to grow at CAGR of 14% from 2012 2013. This proposes very good chances of investment in the industry and the growth as well. The new generation is expected to be blessed with the breakthrough innovations with the similar kind of support both financial as well as non-financial in this particular sector.
ADVANTAGES TO PHARMACEUTICAL INDUSTRY
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Source: IBEF The basic production cost in India is upto 50% lower than costs in US. The reasons for the same are assumed to be: 30 50 % lower depreciation rate compared what US pharmaceutical market possesses. 85 90 % manpower cost savings compared to the US market scenario. Labour costs in India is typically 10 -15 % of the costs in US. Savings is applicable across all hierarchal levels ( e.g. operators, research scientists etc.) 40 50 % savings in the raw materials Bulk drugs can be manufactures in- house at the 40 50 % of ethicals cost Excipients and intermediates sourced locally at 20 30 % lower costs All raw materials can be sourced internally
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2.5) PHARMA INDUSTRY IN GUJARAT

Alembic Chemical Works Co. Ltd., one of the oldest pharmaceutical companies in India, was set up in Vadodara in 1907, just six years after Indias first domestic pharmaceutical unit- Bengal Chemical and Pharmaceutical Works was set up in Calcutta. Sarabhai Chemicals was started soon thereafter.
The industry had received strong support from the academic field. In 1940, the Drugs Laboratory in Vadodara was established, followed by LM College of Pharmacy. Further in 1989, the B. V. Patel Education Trust, Ahmedabad and Gujarat Branch of Indian Pharmaceutical Association (IPA) - established the B.V. Patel Pharmaceutical Education and Research Development (PERD) Centre in Ahmedabad.
In the last few decades, the invested capital to labour ratio has risen significantly. The employment almost doubled between 1979-80 and 1997-98. Over the years, the industry has developed strong linkages with related sectors and industries such as chemicals, pharma machinery, information technology, etc.
There are currently approximately 3,500 drug manufacturing units in Gujarat. The state houses several established companies such as Torrent Pharma, Zydus Cadila, Alembic, Sun Pharma, Claris, Intas Pharmaceuticals and Dishman Pharmaceuticals, which have operations in the worlds major pharma markets. Over the last few years, Gujarats contribution in the growth of Indias pharmaceutical industry has been significant. The state commands 42 percent share of Indias pharmaceutical turnover and 22 percent share of exports. Approximately 52,000 people are employed in Gujarats pharmaceutical sector, which has witnessed 54 percent CAGR in capital investments over the last three years.
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The following are the major highlights of the Gujarat pharmaceutical industry. The history of Gujarat pharmaceutical industry is as old as 103 years. This sector has experienced more than 40% of Indias Pharmaceutical turnover. 22% of Indias pharmaceutical exports are dedicated to Gujarat only. It even boasts about providing employment to about 55.000 people from this sector.
GUJARAT AS PHARMACEUTICAL HUB
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Below are few facts, value proposition, growth enablers and Regulatory for the gujarat pharmaceutical industry
Source: vibrant Gujarat 2011
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2.5.1) GUJARAT PHARMA: SWOT ANALYSIS
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CHAPTER 3: SUPPLY CHAIN MANAGEMENT
3.1) INTRODUCTION
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply chain management spans all movement and storage of raw materials, work-inprocess inventory, and finished goods from point of origin to point of consumption (supply chain). Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally." More common and accepted definitions of supply chain management are: Supply chain management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. A customer focused definition is given by Hines "Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughput efficiency must be increased, bottlenecks removed and performance measurement must focus on total systems efficiency and equitable reward distribution to those in the supply chain adding value. The supply chain system must be responsive to customer requirements."
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Global supply chain forum - supply chain management is the integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders. According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.
Fig 3.1 The supply chain

A supply chain, as opposed to supply chain management, is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management'. Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships and control associated business processes. Supply chain event management (abbreviated as SCEM) is a consideration of all possible events and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutions devised.
Fig 3.2 Another view for supply chain
3.2) PROBLEMS MANAGEMENT
ADDRESSED
BY
SUPPLY
CHAIN
Supply chain management must address the following problems: Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or 3PL). Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If,
however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy. Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods. Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.
3.3) ACTIVITIES/FUNCTIONS
Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional. Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped
into strategic, tactical, and operational levels. The CSCMP has adopted The American Productivity & Quality Center (APQC) Process Classification Framework a high-level, industryneutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint.
3.4) MANAGING SUPPLY CHAIN:

Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities. Strategic partnerships with suppliers, distributors, and customers, creating
communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics. Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities. Information technology chain operations. Where-to-make and make-buy decisions. Aligning overall organizational strategy with supply strategy. It is for long term and needs resource commitment. Operational level Daily production and distribution planning, including all nodes in the supply chain. Production scheduling for each manufacturing facility in the supply chain (minute by minute). Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
Inbound operations, including transportation from suppliers and receiving inventory. Production operations, including the consumption of materials and flow of finished goods. Outbound operations, including all fulfillment activities, warehousing and transportation to customers. Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.
3.5) IMPORTANCE OF SUPPLY CHAIN MANAGEMENT

Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In Peter Drucker's new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities. This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories. It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms. Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players.
Therefore, the choice of an internal management control structure is known to impact local firm performance. In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, significant success factors were identified, complementing the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices. Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network. Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System". In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration". The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by ISO and IEC.
Fig 3.3 Bullwhip effect
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3.6) SUPPLY CHAIN BUSINESS PROCESS INTEGRATION:

Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become known. The marketing department, responding to customer demand, communicates with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply chains partners can only be fully leveraged through process integration. Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper, operating an integrated supply chain requires a continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert are: Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management Much has been written about demand management. Best-in-Class companies have similar characteristics, which include the following: i. Internal and external collaboration
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ii. iii. iv.
Lead time reduction initiatives Tighter feedback from customer and market demand Customer level forecasting
One could suggest other key critical supply business processes which combine these processes stated by Lambert such as: a. Customer service management b. Procurement c. Product development and commercialization d. Manufacturing flow management/support e. Physical distribution f. Outsourcing/partnerships g. Performance measurement a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers. Customer service is the source of customer information. It also provides the customer with real-time information on scheduling and product availability through interfaces with the company's production and distribution operations. Successful organizations use the following steps to build customer relationships: determine mutually satisfying goals for organization and customers establish and maintain customer rapport produce positive feelings in the organization and the customers
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b) Procurement process Strategic plans are drawn up with suppliers to support the manufacturing flow management process and the development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship where both parties benefit, and a reduction in time required for the design cycle and product development. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkage to convey possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs. c) Product development and commercialization Here, customers and suppliers must be integrated into the product development process in order to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched with ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: 1. Coordinate with customer relationship management to identify customer-articulated needs; 2. Select materials and suppliers in conjunction with procurement, and 3. Develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. d) Manufacturing flow management process The manufacturing process produces and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes and must
accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency in meeting customer demand. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. e) Physical distribution This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g., links manufacturers, wholesalers, retailers). f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage, and outsource everything else. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, managing and controlling this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally, with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. Taking advantage of supplier capabilities and emphasizing a longN.R. INSTITUTE OF BUSINESS MANAGEMENT Page 33
term supply chain perspective in customer relationships can both be correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts, internal measures are generally collected and analyzed by the firm including 1. Cost 2. Customer Service 3. Productivity measures 4. Asset measurement, and 5. Quality. External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes customer perception measurement, and best practice benchmarking. h) Warehousing management: As a case of reducing company cost & expenses, warehousing management is carrying the valuable role against operations. In case of perfect storing & office with all convenient facilities in company level, reducing manpower cost, dispatching authority with on time delivery, loading & unloading facilities with proper area, area for service station, stock management system etc. Components of supply chain management are as follows: 1. Standardization 2. Postponement 3. Customization
3.7) THEORIES OF SUPPLY CHAIN MANAGEMENT:

Currently there is a gap in the literature available on supply chain management studies: there is no theoretical support for explaining the existence and the boundaries of supply chain management. A few authors such as Halldorsson, et al., Ketchen and Hult and Lavassani, et al. have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These theories include: Resource-Based View (RBV) Transaction Cost Analysis (TCA) Knowledge-Based View (KBV) Strategic Choice Theory (SCT) Agency Theory (AT) Materials Logistics Management (MLM) Just-in-Time (JIT) Material Requirements Planning (MRP) Total Quality Management (TQM) Time Based Competition (TBC) Quick Response Manufacturing (QRM) Customer Relationship Management (CRM)
3.8) SUPPLY CHAIN CENTROIDS

In the study of supply chain management, the concept of centroids has become an important economic consideration. A centroid is a place that has a high proportion of a countrys population and a high proportion of its manufacturing, generally within 500 mi (805 km). In the
U.S., two major supply chain centroids have been defined, one near Dayton, Ohio and a second near Riverside, California. The centroid near Dayton is particularly important because it is closest to the population center of the US and Canada. Dayton is within 500 miles of 60% of the population and manufacturing capacity of the U.S., as well as 60 percent of Canadas population. The region includes the Interstate 70/75 interchange, which is one of the busiest in the nation with 154,000 vehicles passing through in a day. Of those, anywhere between 30 percent and 35 percent are trucks hauling goods. In addition, the I-75 corridor is home to the busiest north-south rail route east of the Mississippi.
3.9) TAX EFFICIENT SUPPLY CHAIN MANAGEMENT

Tax Efficient Supply Chain Management is a business model which considers the effect of Tax in design and implementation of supply chain management. As the consequence of Globalization, business which is cross-nation should pay different tax rates in different countries. Due to the differences, global players have the opportunity to calculate and optimize supply chain based on tax efficiency legally. It is used as a method of gaining more profit for company which owns global supply chain.
3.10) SUPPLY CHAIN SUSTAINABILITY

Supply chain sustainability is a business issue affecting an organizations supply chain or logistics network and is frequently quantified by comparison with SECH ratings. SECH ratings are defined as social, ethical, cultural and health footprints. Consumers have become more aware of the environmental impact of their purchases and companies SECH ratings and, along with non-governmental organizations ([NGO]s), are setting the agenda for transitions to organically-grown foods, anti-sweatshop labor codes and locally-produced goods that support independent and small businesses. Because supply chains frequently account for over 75% of a companys carbon footprint many organizations are exploring how they can reduce this and thus improve their SECH rating.
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For example, in July, 2009 the U.S. based Wal-Mart corporation announced its intentions to create a global sustainability index that would rate products according to the environmental and social impact made while the products were manufactured and distributed. The sustainability rating index is intended to create environmental accountability in Wal-Mart's supply chain, and provide the motivation and infrastructure for other retail industry companies to do the same.
3.11) COMPONENTS OF SUPPLY CHAIN MANAGEMENT INTEGRATION

The management components of SCM The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process re-engineering, buyer-supplier relationships and SCM suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components: Planning and control Work structure Organization structure Product flow facility structure Information flow facility structure Management methods Power and leadership structure Risk and reward structure
Culture and attitude However, a more careful examination of the existing literature[19] leads to a more comprehensive understanding of what should be the key critical supply chain components, the "branches" of the previous identified supply chain business processes, that is, what kind of relationship the components may have that are related to suppliers and customers. Bowersox and Closs states that the emphasis on cooperation represent the synergies leading to the highest level of joint achievement. A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk, thus including primary level components. A secondary level participant (specialized) is a business that participates in channel relationships by performing essential services for primary participants, including secondary level components, which support primary participants. Third level channel participants and components that support the primary level channel participants and are the fundamental branches of the secondary level components may also be included. Consequently, Lambert and Cooper's framework of supply chain components does not lead to any conclusion about what are the primary or secondary (specialized) level supply chain components. That is, what supply chain components should be viewed as primary or secondary, how should these components be structured in order to have a more comprehensive supply chain structure, and how to examine the supply chain as an integrative one. Reverse supply chain Reverse logistics is the process of managing the return of goods. Reverse logistics is also referred to as "Aftermarket Customer Services". In other words, any time money is taken from a company's warranty reserve or service logistics budget one can speak of a reverse logistics operation.
3.12) SUPPLY CHAIN SYSTEMS AND VALUE

Supply chain systems configure value for those that organize the networks. Value is the additional revenue over and above the costs of building the network. Co-creating value and sharing the benefits appropriately to encourage effective participation is a key challenge for any supply system. Tony Hines defines value as follows: Ultimately it is the customer who pays the
price for service delivered that confirms value and not the producer who simply adds cost until that point
3.13) GLOBAL SUPPLY CHAIN MANAGEMENT

Global supply chains pose challenges regarding both quantity and value: Supply and value chain trends Globalization Increased cross border sourcing Collaboration for parts of value chain with low-cost providers Shared service centers for logistical and administrative functions Increasingly global operations, which require increasingly global coordination and planning to achieve global optimums Complex problems involve also midsized companies to an increasing degree, These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments (culture, infrastructure, special tax zones, sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in supply chain management, there will be many more challenges when the scope of supply chains is global. This is because with a supply chain of a larger scope, the lead time is much longer. Furthermore, there are more issues involved such as multi-currencies, different policies and different laws. The consequent problems include: 1. Different currencies and valuations in different countries; 2. Different tax laws (Tax Efficient Supply Chain Management); 3. Different trading protocols; 4. Lack of transparency of cost and profit.
3.14) INDIAN PERSPECTIVE

India is the fourth largest country in terms of Purchasing Power Parity (PPP) and constitutes one of the fastest growing markets in the world. Globalization of businesses, infrastructural bottlenecks, increasing uncertainty of supply chain networks, shortening of product life cycles and proliferation of product variety have forced Indian firms to look beyond their four walls. They face issues related to choosing and working with the right supply chain partners (suppliers, customers and logistics service providers), fostering trust between them and designing the right system of gauging performance. Industry and academic estimates put logistics and SCM spend in India at approximately 13% of the Gross Domestic Product (GDP). Global estimates for this vary and are around 13% of GDP in China and about 9% of GDP in the US. The transportation cost in India accounts for nearly 40% of the cost of production, with more than half the goods being moved by road. Trucking accounts for nearly 70% of transportation and accounts for 60% of all logistics cost. 67% of truck ownership is in the hands of small unorganized players. Road is followed by rail and finally coastal shipping. Rail has been steadily losing ground due to myopic government strategies and inherent inefficiencies. The freight movement of Indian railways has risen to 411354 net tonne-kilometers (Available at: http://www.indianrail.gov.in/) and the total road length is 3315231 kilometers (Available at: http://www.nhai.org). Though enormous maritime routes are available combination of poor government policies and lack of initiative from the private sector, water which is probably the cheapest mode of transport is barely used. Air as a mode is limited to a small percentage of courier shipments. Various SCM spend indicators such as in-bound transportation costs, inventory related costs and distribution expenses as percentage of net sales vary from industry to industry. However, as per Centre for Monitoring Indian Economy (CMIE), they are coming down over a period of years. The industries spent nearly 17-18% of their net sales on various logistics activities, including distribution, warehousing, and inventory. Global averages are around 9-12%. So, there is ample scope to reduce spends on logistics. This in turn allows companies to protect operating margins during downturns and make above-normal profits during upturns.
The focus on costs and ICT-enabled services is leading to electronic procurement that cuts time and costs (including transaction costs) and brings in transparency and speed. The ERP industry in India is worth US$ 300 million and is growing at over 15% a year. 52% of the respondents in Economic Times Intelligence Group SCM 2004 survey have implemented ERP and three-fourths of these find ERP to be extremely effective in business. 44% of the companies surveyed had already implemented data warehousing and mining applications, and another 26% had plans to do so. Almost every firm found this practice to yield good results in revealing consumer trends, patterns and potential segments. For supply chain tracking, the most preferred method is the truck driver reporting his location. Another method gaining popularity is the use of SMS (Short Messaging Service). Time lags here can be pre-determined. Depending on the number of times the SMS signal is polled and sent by to the base station, the location of the vehicle can be accurately determined. With Global Positioning Systems (GPS), this is no longer the issue. However, the use of GPS for supply chain management in India is relatively low. Service providers like Transport Corporation of India (TCI) have poured in US$ 0.34 million for GPS in their trucks. Firms like Bajaj, Maruti Udyog Limited, TVS Motors and Bharat Shell are already using TCIs GPS systems.
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CHAPTER 4. SUPPLY CHAIN MANAGEMENT IN PHARMACEUTICAL INDUSTRY

The Indian pharmaceutical industry is continuing its high growth rate at 13% for the last six Years. From foreign control, to domestic grass-roots growth, the Indian pharmaceutical segment has evolved over the last three decades. This rapid growth has yet to create radical changes in the Indian distribution system. The main hurdles include the highly fragmented nature of the distribution network, limited advancement in regulatory reforms, and presence of strong resistance from lobbies of traders involved in the supply chain of pharmaceutical products. Indias current distribution situation creates greater risks for biotech products, which require careful climate control throughout their transit period. The lack of awareness toward the importance of these requirements makes biotherapeutics even more vulnerable to spoilage during distribution. Moreover, the infrastructure for cold chain management is still developing in India. This situation has forced both pharmaceutical and biotech companies to consider alternate distribution systems. These attempts, however, have faced severe resistance by the lobbies of traders involved in the channel.
4.1) INDIAN DISTRIBUTION SYSTEM: THE CURRENT STATE

India is a geographically diverse country with extreme climates that make distribution a critical function. The long channel of distribution and high incidence of brand substitution makes it mandatory for a company to make all its stock keeping units (SKUs) available at all levels at all times. In India, most brands have generic versions of drugs and retailers can usually obtain higher margins with generics than for branded products. To reduce risks of substitution, innovator companies must make sure their products are made available to the stockists and retail shops.
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Drug distribution in India has witnessed a paradigm shift. Before 1990, pharmaceutical companies used a different distribution system, in which they established their own depots and warehouses that now have been replaced by clearing and forwarding agents (CFAs). These organizations are primarily responsible for maintaining storage (stock) of the companys products and forwarding SKUs to the stockiest on request. Most companies keep 13 CFAs in each Indian state. On an average, a company may work with a total of 2535 CFAs. Unlike a CFA that can handle the stock of one company, a stockist (distributor) can simultaneously handle more than one company (usually, 515 depending on the city area), and may go up to even 30 50 different manufacturers. The stockiest, in turn, after 3045 days (a typical credit or time limit) pays for the products directly in the name of the pharmaceutical company. The CFAs are paid by the company yearly, once or twice, on a basis of the percentage of total turnover of products.
MANUFACTURER
CENTRAL WAREHOUSE
SUPER STOCKIST
STOCKIST
SUB STOCKIST
HOSPITALS
RETAIL SHOP
Figure 4.1 shows how a manufactured product passes through the company-owned central warehouse, which supplies it to the CFA or super stockist. From the CFA the stocks are supplied either to the stockist, substockist, or hospitals. The retail pharmacy obtains products from the
stockist or substockist through whom it finally reaches the consumers (patients). Certain small manufacturers directly supply the drugs to the super stockist. According to the Indian Retail Druggists and Chemists Association, in 1978, there were roughly 10,000 distributors and 125,000 retail pharmacies in India. Today, the total number of stockists in India is around 65,000 and the number of pharmacies is about 550,000, an increase of around 6-and 4-fold, respectively. Despite the rapid increase in the number of stockists and pharmacies, there has not been a proportional increase in the volume of prescriptions distributed. Thus, the efficiency of the current system has clearly not been demonstrated. Further, it is estimated that more than three-fifths of Indians still do not have access to modern medicines. This clearly shows that the rural market is largely unattended and untapped.
4.2) PRICING AND MARGINS

The prices and the margins of drugs for the wholesaler and retailers are largely decided by the National Pharmaceutical Pricing Authority (NPPA), which varies depending on whether the active constituent of the product is a scheduled drug or a nonscheduled drug. Scheduled drugs are price controlled whereas nonscheduled drugs are not. The NPPA is an organization of the government of India established to fix or revise prices of controlled bulk drugs and formulations. Companies must keep drug prices affordable to the general public. To keep medicines within reach of the poor population, the government has covered 76 scheduled drugs. In addition to the above mentioned margins, wholesalers and retailers are also compensated with additional trade offers. Hospitals and large institutions sometimes directly negotiate with the manufacturing company and get the drugs in their pharmacy at lower costs. Stockists compete with each other in a given city. Generally, hospitals order large quantities and can negotiate with stockists, who provide payment terms, credit periods, and margins. Further, retailers and distributors form associations locally and nationally, and manufacturing companies must comply with their terms. For example, in many states when a company launches a new product (either branded or generic), to make that product available in the pharmacy, the company has to pay commissions to the chemist (pharmacy) association. On receiving the
commission the association will issue a no-objection certificate, which is mandatory for any company to make their product available in the market. Cipla, a manufacturer of asthma drugs, tried to bypass the supply chain by providing home service for its products. Cipla faced strong resistance from the traders lobby, which stopped stocking Ciplas product. Ultimately, Cipla had to withdraw the scheme.
4.3) INTERMEDIARIES OF DISTRIBUTION CHANNEL

4.3.1) CLEARING AND FORWARDING AGENT The C & F agent is the Second link in the Distribution Channel. The selection of the C & F agent is done exclusively by the Company. i.e the C & F agent of the company is been made based on certain norms and certain criteria held by the company. There is only one C & F agent per State. But there are certain exceptions also like as if the State is big than there might be more than one C & F agent also. And if the State is small then the C & F agent might provide its service to two states also. The C & F is the Companys Depot and the commission kept on the Sale of the product is round about 1-2 % for the C & F agent. Functions of the C & F Agent:The C & F agent plays an important role in Distribution. It serves as an intermediate between the Companys Distribution Department and the Stockist. The C & F is the Storage place of the Companys product, from where the required product is been delivered to the different Stockist of the State. The C & F receives the commission from the Company based on its sale of the product to the Stockist. The C & F receives the Product from the Distribution Department as per the forecast held by the Regional Business Manager of the Company. The Regional Business Manager makes the forecast based on the notification by the MR and SO of the Company to the Doctors and different Stockist.
The C & F Agent on the behalf of the Company solves the problem of the Stockist related to the damaged goods or goods having breakage problems. The C & F Agent is been send the note every month by the Stockist related to the product which are near to expiry (i.e within 6 months) and this problem of the Stockist is then solved by the C & F Agent through giving the Credit note to the Stockist for the Product and the Product is then taken by the C & F agent. The C & F Agent Sends the Statement related to the expiry note to the Company and the Company then gives the notification for the near expiry product to the Regional Business Manager, who further uses this product for the physician sample. If the Product is expired then that product is destroyed at C & F in presence of statutory Auditor and the companys representative/RBM. The C & F also collects the payment from the Stockist which is given in the form of Cheque in the name of the Company; this Cheque is then submitted in the Companys nominated Bank. If certain product which is not available at a certain C & F then that product can be received from the other C & F also if that product is available at that C & F. This system is known as Inter C & F transfer system, which controls inventory level and which also avoids expiry/near expiry stock at that C & F locations.
4.3.2) STOCKIST The selection of the Stockist is done exclusively by the Company. i.e the Stockist are made based on certain criteria and norms held by the Company. The Stockist are made district wise by the company. There may be one or more than one Stockist in a district or city depends upon business potentiality. For e.g. In Gujarat state, in Ahmedabad the company has 6 Stockist, in Baroda the company has 4 Stockist, in Surat the company has 3 Stockist, and in Bharuch the company has 1 Stockist etc. The Stockist is the Distributor who purchases the product from the C & F agent and has to make the payment through cheque to the Company within the prescribed limit as decided by Company.
The Stockist gets the Profit margin of 6 to 7 % on the sale of the product. The Prices set are based on Pricelist given by the company following the DPCO [Drug Price Controlling Authority] norms. Functions of the Stockist: The Stockist is the third link in the Distribution Channel. It acts as an intermediary between the C & F agent and the Chemist (retailer). The Stockist is considered to be a wholesaler who supplies the product to the different Chemist. It depends on the Stockist individual criteria about, how it sets the credit limit for the sold goods with the Chemist. It also depends on the Stockist about the Cash discount to be given on the product to the Chemist for his purchase. The Stockist conveys the news to the Chemist about the Bonus/Discount offered by the company. The Stockist also conveys the news related to the revised price of the product as held by the company. The problems of the Chemist related to the breakage as well as damaged goods is been solved by the Stockist. The Stockist also takes the product from the Chemist which are near to expiry and gives him replacement for it. If the Payment is due from the Chemist than also the Stockist has to pay the payment to the Company for its purchase of Stock from the C&F. The Stockist can also persuade the Chemist to take more stock.
4.3.3) CHEMIST/ RETAILER: The Chemist/Retailer is the final link in the Distribution Channel. The Chemist is any retail shop to whom the Stockist sales the Product. The company does not interfere in the selection of the Chemist by the Stockist. Also the credit period given to the Chemist by the Stockist on the
purchase of the product solely depends on the Stockist. The Payment by the Chemist is done to the Stockist only. The Companies plays the part in a way, that the companies MR should have frequent visits at the Chemists and also to the Doctors for promoting of the products. And hence the Secondary Sales could increase. Functions of the Chemist: The Chemist acts as an intermediary between the Stockist and the consumer. The Customer has direct purchase from the Chemist. The Chemist has to make all the payments for its purchase to the Stockist. Any Problem of the Chemist related to the companys product i.e. damaged goods / breakages or product which are near to expiry is been solved by the Stockist. And for this the Stockist may either give the Chemist the replacement for the damaged goods or the Stockist might give the Chemist a credit note. There is no compulsion on the Chemist to take a particular level of stock from the Stockist. The Chemist may place the order as per his requirement.
4.4) THE FUTURE OF INDIAS DISTRIBUTION SYSTEMS

ORGANIZED RETAIL Organized retail pharmacies are in a nascent stage in India, but have started making inroads in the distribution system. The first retail pharmacy chain was started by the Subiksha Retail Services Pvt. Ltd. The Medicine Shoppe, one of the largest retail drug stores in the US, opened two retail outlets in Mumbai and has franchised three more in Mumbai, Calcutta, and Baroda. Others have also entered the field including Health & Glow, Pills & Powders, and Reliance that has set up units under the brand name of Reliance Wellness. Nitin Gokarn, senior manager of supply-chain management (SCM) at Merck India, is optimistic for the growth of organized retail.
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He says that, Though organized retail faces strong resistance from the traders lobby, it has a great potential. He also opines that, It will take a great deal of political will and reforms to make this happen. With an organized retail system, pharmaceutical companies would be able to offer medicine at higher margins, and some speculate that retailers may even be able to pass on cost benefits to the end-users as well. Table: Margins at various levels of distribution system Levels Clearing and forwarding agents Stockist or distributors Margins 110% on the total turnover + other expenses 8% on scheduled drugs 10% on nonscheduled drugs Retailers 16% on scheduled drugs 20% on nonscheduled drugs SOURCE: http://www.nppaindia.nic.in/index1.html LARGE UNTAPPED RURAL MARKET The growth of institutional sales had little impact on the accessibility of medicine in rural areas, according to an analysis by the Indian Retail Druggists and Chemists Association. A large proportion of the rural population still does not have access to proper medication and the situation may take long to improve. Rural areas contribute around 21% to the total pharmaceutical market. In 200607, the rural pharmaceutical market was estimated at around $1.4 billion. Nearly 70% of Indias population lives in rural areas where healthcare infrastructure is poor. With increasing rural household incomes, the rural market is becoming more attractive. According to estimates by the Planning Commission, rural households now spend 12% of their income on healthcare.
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VALUE ADDED TAX (VAT) IMPACT With the introduction of VAT, medicine prices have been standardized and price discrimination, in which different states pay different prices for the same products, has reduced. VAT has also helped reduce the illegal interstate transfer of goods and the unethical interstate trade for higher margins. Per the new rules, sales tax is levied at each stage of value addition and credit for the tax paid on the inputs can be obtained. IT ADOPTION IT adoption in healthcare has grown drastically. Pharmaceutical companies have realized the need for integrated solutions in SCM to keep inventories at optimum levels, to improve distribution, to provide for liquidation of stock, and to streamline interconnectivity between manufacturing facilities, warehouses, and CFAs in different states. The use of software like SAP and SAS, apart from other customized software, is increasing. However, the adoption of technologies such as radio-frequency identification (RFID) has been slow.
4.5) FUTURE CHALLENGES

Pharmaceutical companies in India have realized the importance of SCM and are aggressively looking for ways to improve the costs associated with SCM. Distribution in India is proportionally much more costly than it is in the US or EU. The companies, which have spent as much as one-third of their revenues toward financing their supply-chain operations, recognize that the cost of logistics is very high in India. In US and EU, the expenditure on SCM alone is perhaps 2%, whereas in India it averages 46% of total sales. According to Gokarn, Its mainly because in India the cost of drugs is very low compared to the developed markets. Taking into consideration the poor infrastructure and extreme geographic conditions, it is difficult to curtail the cost involved in SCM.
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4.6) LONG-CHANNEL
Inventory Management The multilayered distribution channel and lobbying at all layers has been successful at preventing pharmaceutical companies from bringing in significant reforms toward higher trade margins, and at bypassing the multiple distribution layers to reach customers directly. Because pharmaceutical companies do not have direct access to retailers data on sales (tertiary sales), most pharmaceutical companies depend on stockists sales data to monitor sales (secondary sales). The primary sale involves transferring stock from the central warehouse to its CFA. The medical representatives are given predefined sales targets. To meet these targets they push inventory on the stockist to levels that exceed the actual demand. When the next level of sale does not take place, the stockist will either return goods to the company or the stock expires. Increasing Competition between Wholesalers and Retailers Today, with so many mergers and acquisitions in the Indian pharmaceutical industry, the number of stockists for each company has increased. Now two stockists of the same company may be competing against each other. Retailers take advantage of this situation by prolonging the credit period and asking for more discounts, which has an adverse effect on stockists, because they have to comply with the retailers to sustain their business. Brand Substitution The emergence of generic drugs has also taken a toll on Indian pharmaceutical company sales, as prices can be almost 2 to 15 times less for the same drug. Moreover, to capture market share generics, companies offer higher trade margins at the retail level. Sometimes generic drugs provide up to 500% trade margin, which is a lucrative offer for a retailer to pass up, and this leads to brand substitution. Recalling Drugs
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There is no foolproof system for recalling drugs in India. Once a medicine is released into the market, it becomes a daunting task for a pharmaceutical company to recall because of the highly fragmented nature of the distribution network. Newer technologies such as RFID would help in keeping track of products along the entire chain and would limit counterfeit drugs to enter into the system. International Competitiveness and Cold-Chain Management Indian pharmaceutical companies are increasingly seeking opportunities to supply drugs to the world market. More developed cold-chain management practices will be required to achieve this goal. This is one of the major challenges faced by the industry if they are to retain product quality during shipment. Companies like Eli Lilly in India have implemented initiatives such as having their own vehicles equipped with cold-chain management systems. Other companies such as World Courier have developed cold-chain management models to help pharmaceutical companies maintain the cold chain. Manufacturers must ensure that their drug reaches customers with uncompromised quality. In India, because manufacturers do not retain control over the multi layered distribution system, the cold-chain management process continues to be difficult and expensive. However, manufacturers are increasingly realizing the importance of an effective distribution system, all the way to the end-customer. Coping with the challenges of streamlining the systems in India will ultimately benefit the patient and the healthcare system.
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CHAPTER 5: PRIMARY DATA

5.1) PERSONAL OBSERVATIONS
We have observed that distributors are not passing all the schemes to retailers. For this Cipla has started a system wherein they send a direct letter to all the retailers specifying about the schemes. The rate of drugs varies significantly from stockists to stockists. We went to several distributors wherein we asked the price of X drug, and found out that there was considerable difference in the prices. Despite being a mandatory law that every retail outlet should have a refrigerator to store drugs, there were some outlets that were operating without refrigerator. Although companies try to maintain direct contact with the retailers with the help of Medical Representative but still they actually dont know the current status of the stocks at both the ends. That is retailer is not knowing the The schemes are announced via emails rather there is a need for an integrated software system where all the schemes should be announced through the software only. Sales automation is not linked with Logistics automation. The stockists are providing different schemes for different retailers based upon their relationships. The retailers and the stockists do not prefer to use online record system because it does not provide them a platform for malpractices. Many of the Retailers do not keep their computer on all the time during the entire day, though being avail by the software that helps them to know when the stock of a particular brand is going to be finished. They still rely on traditional method of reviewing stock status.
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CHAPTER 6: ANALYSIS
HYPOTHESIS: H0: Replenishment of drugs is not significantly done by distributers. H1: Replenishment of drugs is significantly done by distributers. ANALYSIS: STATISTICS: N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis Replenishment 114 1 1.11 1.00 1 .308 4.881 .449
Table 6.1: Statistics for Replenishment of drugs FREQUENCY TABLE: Replenishment Frequency Percent Valid Percent Cumulative Percent Valid Yes Go personally Total 103 12 115 89.6 10.4 100.0 89.6 10.4 100.0 89.6 100.0
Table 6.2 Frequency table for replenishment of drugs

CHART:
120 100 80 60 40 20 0 103 89.6
12 Frequency Yes Go personally
10.4 Percent
. Chart 6.1: Replenishment of drugs INTERPRETATION: Hence from the above frequency table it can be seen that to majority of retailers i.e. to 89.6% retailers, distributor comes to replenish their stock and to take the order. So, the null hypothesis gets rejected.
HYPOTHESIS: H0: There is no significant difference in the service frequency of distributor to various retailers. H1: There is a significant difference in the service frequency of distributor to various retailers. ANALYSIS: STATISTICS: Service Frequency N Valid Missing Mean Median
115 0 2.26 2.00

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Mode Std. Deviation Kurtosis Std. Error of Kurtosis
1 1.243 -1.219 .447
Table 6.3: Statistics for Service frequency FREQUENCY TABLE: Service Frequency Frequency Percent Valid Percent Cumulative Percent Valid Daily Twice a week Thrice a week weekly Twice a month Total 43 31 11 28 2 115 37.4 27.0 9.6 24.3 1.7 100.0 37.4 27.0 9.6 24.3 1.7 100.0 37.4 64.3 73.9 98.3 100.0
Table 6.4 Frequency table for service frequency CHART:

50 40 30 20 10 0 Daily Twice a week Thrice a week weekly Twice a month 43 37.4
31
27 11 9.6
28
24.3
1.7
Frequency
Percent
. Chart 6.2: Replenishment of drugs

INTERPRETATION: The service frequency of retailers varies from daily to twice a week to thrice a week to weekly to even as low as twice a month. Here, 37.4% of retailers are serviced daily by their distributors, while 9.6% are serviced thrice a week and 27% are serviced twice a week. 24.3% of retailers avail the service of the distributors weekly and only 1.7% twice a month. This shows that there is a huge amount of difference among the frequency of retailers getting their stock replenished.
HYPOTHESIS: H0: Significant amount of retailers does not use online order placing techniques H1: Significant amount of retailers uses online order placing techniques. ANALYSIS: Order Taken N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 2.63 4.0 4 1.478 -1.980 .447
Table 6.5: Statistics for Replenishment of order placing technique
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FREQUENCY TABLE: Order Taken Frequency Percent Valid Percent Cumulative Percent Valid In person Over the phone In person and on phone Total 50 4 61 115 43.5 3.5 53.0 100.0 43.5 3.5 53.0 100.0 43.5 47.0 100.0
Table 6.6: Frequency table for order placing techniques CHART:

70 60 50 40 30 20 10 4 In person 50 43.5 61 53
3.5
In person and on phone
0
Over the phone Frequency Percent
Chart 6.3: Order placing techniques INTERPRETATION: The order is generally taken in person that is the distributors person comes to take the order from the retailers, this is the option availed by 43.5 % of retailers, while only 3.5% retailers order completely over the phone. Majority (53%) of them uses both the option to place the order. While no one is there who places their order on an online basis. Hence hypothesis is not rejected.
HYPOTHESIS: H0: There is no significant amount of correlation between trade promotion and time of promotion. H1: There is a significant amount of correlation between trade promotion and time of promotion. ANALYSIS: STATISTICS: Discount Trade Promotion N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 1.1826 1.0000 1.00 .38804 .785 .447 Free Trade Promotion 115 0 1.5478 2.0000 2.00 .49989 -1.997 .447 Free Another Product Trade Promotion 115 0 1.8000 2.0000 2.00 .40175 .315 .447 Other Trade Promotion 115 0 1.9217 2.0000 2.00 .26976 8.270 .447
Table 6.7: Statistics for Trade promotions FREQUENCY TABLE:

Discount Trade Promotion Frequency Percent Free Trade Promotion Frequency Percent Free Another Product Trade Promotion Frequency Percent Other Trade Promotion Frequency Percent
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Valid
Yes No Total
94 21 115
81.7 18.3 100
52 63 115
45.2 54.8 100
23 92 115
20 80 100
9 106 115
7.8 92.2 100
Table 6.8 Frequency table for trade promotions STATISTICS FOR THE TIME OF PROMOTIONS: Time Of Promotions N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 1.41 1.00 1 .494 -1.892 .447
Table 6.9: Statistics for Time of promotions FREQUENCY TABLE: Time Of Promotions Frequency Percent Valid Percent Cumulative Percent Valid Round the Year Season wise Total 68 47 115 59.1 40.9 100.0 59.1 40.9 100.0 59.1 100.0
Table 6.10 Frequency table for time of promotions
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CHART:
80 70 68 59.1 47 40.9
60
50 40 30 20 10 0 Frequency Round the Year
Percent Season wise
Chart 6.4: Replenishment of drugs Applying Chi- Square test on the above collected data, we got,
ROUND THE YEAR DISCOUNT FREE ANOTHER PRODUCT OTHER 59 22 16 5 SEASON WISE 35 30 7 4 TOTAL 94 52 23 9
TOTAL
102
76
178
Fo 59 35 22 30 16
Fe 53.86 40.13 29.79 22.2 13.28
(Fo- Fe)2/ Fe 0.49 0.65 2.03 2.74 0.6
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7 5 4 Chi square calculated Chi square tabulated @95% df
9.82 5.16 3.84
0.81 0.005 0.0067 7.33 7.815 (2-1)(4-1)=3
Now, applying correlation test on these variables to find the extent of correlation among them, Correlations Discount Free Trade Trade Promotion Promotion Free Other Time Of Another Trade Promotions Product Promotion Trade Promotion .011 -.114 .156
Discount Trade Promotion
Pearson Correlation Sig. (2tailed) N
-.294**
.001
.905
.226
.095
115 -.294**
115 1
115 .245**
115 .126
115 -.311**
Free Trade Promotion
Pearson Correlation Sig. (2tailed) N
.001
.008
.181
.001
115 .011
115 .245**
115 1
115 .178
115 .106
Free Another Product Trade Promotion
Pearson Correlation Sig. (2-
.905
.008
.057
.259
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tailed) N Other Trade Promotion Pearson Correlation Sig. (2tailed) N Time Of Promotions Pearson Correlation Sig. (2tailed) N 115 -.114 115 .126 115 .178 115 1 115 -.021
.226
.181
.057
.822
115 .156
115 -.311**
115 .106
115 -.021
115 1
.095
.001
.259
.822
115
115
115
115
115
**. Correlation is significant at the 0.01 level (2-tailed).
INTERPRETATION: As can be seen from the table companies use Discounts as a major tool to promote their sales. And it can be seen from Chi square test, that as tabulated is greater than the calculated the null hypothesis get rejected. Hence, there is a significant amount of correlation between trade promotion and time of promotion. The Pearson Correlation value is showing that many of the variable are having negative correlation among themselves.
HYPOTHESIS: H0: There are a significant amount of retailers who does not keep drugs that prefer special storage conditions.
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H1: There are a significant amount of retailers who keep drugs that prefer special storage conditions. ANALYSIS: STATISTICS: Special Storage N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 1.17 1.00 1 .381 1.058 .447
Table 6.11: Statistics for Stocking at Special storage conditions
FREQUENCY TABLE: Special Storage Frequency Percent Valid Percent Cumulative Percent Valid Yes No Total 95 20 115 82.6 17.4 100.0 82.6 17.4 100.0 82.6 100.0
Table 6.12 Frequency table for stocking at special storage conditions
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CHART:
100 80 60 40 20 20 17.4 95 82.6
0
Frequency Yes No Percent
Chart 6.5: Stocking at Special storage conditions
INTERPRETATION: As it can be seen from the frequency table, 82.6% of the retailers prefer the drugs that require special storage conditions. But still 17.4% of retailers are there who does not keep the required drugs because of the requirement of the storage conditions. There is a mandatory law that every retailer has to keep a refrigerator in their chemist shop but these 17.4% of the retailers do not follow this.
HYPOTHESIS: H0: There is no significant correlation between the storage conditions and percentage of drug expired. H1: There is a significant correlation between the storage conditions and percentage of drug expired. ANALYSIS:
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STATISTICS FOR STORAGE CONDITIONS: Storage Conditions N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 2.50 2.00 2 .968 -.950 .447
Table 6.13: Statistics for storage conditions
FREQUENCY TABLE: Storage Conditions Frequency Percent Valid Percent Cumulative Percent Valid Below 0 0C Above 0 0C Above 8 0C At room temperature Total 18 42 34 21 115 15.7 36.5 29.6 18.3 100.0 15.7 36.5 29.6 18.3 100.0 15.7 52.2 81.7 100.0
Table 6.14: Frequency table for storage conditions
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CHART:
45 40 35 30 25 20 15 10 5 0
42
36.5 34 29.6 18 21 15.7 18.3
Below 0 C
0-8 C
8-25 C
At room temperature
Frequency
Percent
. Chart 6.6: Special storage conditions STATISTICS FOR EXPIRY RATIO OF DRUGS: Expiry Ratio N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 2.45 2.00 2 1.037 -1.088 .447
Table 6.15: Statistics for Expiry ratio

FREQUENCY TABLE: Expiry Ratio Frequency Percent Valid Percent Cumulative Percent Valid Less than one 1-5% 5-10% more than 10% Total 19 53 15 28 115 16.5 46.1 13.0 24.3 100.0 16.5 46.1 13.0 24.3 100.0 16.5 62.6 75.7 100.0
Table 6.16: Frequency table for expiry ratio CHART:

60 50 40 30 20 10 0 Less than one 1-5% Frequency 5-10% Percent more than 10% 19 16.5 15 13 28 24.3 53 46.1
. Chart 6.7: Expiry ratios Applying cross tabulation over here to find the dependency and correlation among the variables: Expiry Ratio * Storage Conditions Cross tabulation Count Storage Conditions Total
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Below 0 0 C Expiry Ratio Less than 1% 1-5% 5-10% more than 10% Total 3 5 4 6
Above 0 0 C 11 20 9 2
Above 8 0 C 4 18 2 10
At room temperature 1 10 0 10 19 53 15 28
18
42
34
21
115
Applying Chi- Square test on the above collected data, we got, Fo 3 11 4 1 5 20 18 10 4 9 2 0 6 Fe 2.97 6.94 5.62 3.47 8.29 19.36 15.67 9.67 2.35 5.48 4.45 2.74 4.38 (Fo- Fe)2/ Fe 0.0003 2.37 0.47 1.76 1.305 0.02 0.346 0.011 1.16 2.26 1.33 2.74 0.6
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2 10 10 Chi square calculated Chi square tabulated df
10.22 8.28 5.11
6.6 0.36 4.68 26.012
16.919 9
Now, applying correlation test on these variables to find the extent of correlation among them, Correlations Storage Conditions Expiry Ratio Storage Conditions Pearson Correlation Sig. (2-tailed) N Expiry Ratio Pearson Correlation Sig. (2-tailed) N 115 .147 .118 115 115 1 .147 .118 115 1
INTERPRETATION: The Chi Square tabulated is smaller than the calculated, hence the hypothesis gets rejected. There is a significant correlation between the storage conditions and percentage of drug expired. The Pearson Correlation value is 0.147 and it is between 0-1 and but it is nearer to 0 and hence there is less of correlation between storage condition as a whole and expiry ratio of drugs.
HYPOTHESIS: Ho: The lot size of order does not vary significantly every time when there is no reorder point. H1: The lot size of order varies significantly every time when there is no reorder point. ANALYSIS: STATISTICS FOR REORDER POINT: Reorder Point N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 1.87 2.00 2 .338 2.997 .447
Table 6.17: Statistics for Reorder point FREQUENCY TABLE: Reorder Point Frequency Percent Valid Percent Cumulative Percent Valid Yes No Total 15 100 115 13.0 87.0 100.0 13.0 87.0 100.0 13.0 100.0
Table 6.18 Frequency table for Reorder point
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CHART:
120 100 80 60 100 87
40
20 0 Frequency Yes No Percent 15 13
Chart 6.8: Replenishment of drugs STATISTICS FOR VARYING LOT SIZE: Varying Lot Size N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 1.12 1.00 1 .328 3.557 .447
Table 6.19: Statistics for Varying lot size
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FREQUENCY TABLE: Varying Lot Size Frequency Percent Valid Percent Cumulative Percent Valid Yes No Total 101 14 115 87.8 12.2 100.0 87.8 12.2 100.0 87.8 100.0
Table 6.20: Frequency table for varying lot size CHART:

120 100 80 60 40 20 0 Yes No Frequency Percent
Chart 6.9: Varying lot size Applying cross tabulation over here to find the dependency and correlation among the variables: Reorder Point * Varying Lot Size Cross tabulation Count Varying Lot Size
Total
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Yes Reorder Point Total Yes No 11 90 101
No 4 10 14 15 100 115
Applying Chi- Square test on the above collected data, we got, Fo 11 90 4 10 Chi square calculated Chi square tabulated df Fe 13.17 87.82 1.826 12.17 (Fo- Fe)2/ Fe 0.36 0.054 2.59 0.39 3.394
3.841 1
INTERPRETATION: From the Chi Square test it is seen that the tabulated value is greater than the calculated. Hence the null hypothesis is not rejected. Even if there is a fixed reorder point or not the lot size does not vary and hence it signifies there is no correlation between the two.
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HYPOTHESIS: H0: During urgent demand the retailers does not significantly uses the option of going to the distributors to collect it personally and even does not ask the drug from other retailers. H1: During urgent demand the retailers significantly uses the option of going to the distributors to collect it personally and even does not ask the drug from other retailers. ANALYSIS: STATISTICS: Urgent Demand N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 111 4 2.49 2.00 1 1.560 -1.225 .455
Table 6.21: Statistics for Urgent demand
FREQUENCY TABLE: Urgent Demand Frequenc

Percent
Valid
Cumulative
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y Valid Direct from company Collect it personally Get it from other retailers Tell no to customers From company and collect personally Total 47 19 19 40.9 16.5 16.5
Percent 40.9 16.5 16.5
Percent 40.9 57.4 73.9
8 22
7.0 19.1
7.0 19.1
80.9 100.0
115
100.0
100.0
Table 6.22: Frequency table for urgent demand CHART:

50 45 40 35 30 25 20 15 10 5 0
47
40.9
19
16.5
19
22 16.5 8
19.1
Direct from company
Collect it personally
Get it from other retailers
Tell no to customers
From company and collect personally
Frequency
Percent
Chart 6.10: Urgent demand
INTERPRETATION:
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40.9% of the retailers in urgent situation arranges the drugs directly from company, while 16.5% collect it personally and get it from other retailers as well both individually. 7% of the retailers are such that do not uses any option and tell no to customers. 19.1% retailers use both the option of collecting it personally and of collecting it directly from company. This shows that retailers highly rely on the distributor personnel for delivery of the drugs in urgent situation.
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Other Inputs:
1.
The retailers have to bare some percentage of losses due to expired drugs.
ANALYSIS: STATISTICS: Loss Due To Expiry N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 1.23 1.00 1 .420 -.244 .447 Percentage Loss 115 0 2.79 2.00 2 1.473 -1.213 .506
Table 6.23: Statistics for Loss due to expiry vs Percentage loss FREQUENCY TABLE: Loss Due To Expiry Frequency Percent Valid Percent 77.4 22.6 100.0 Cumulative Percent 77.4 100.0
Valid
Yes No Total
89 26 115
77.4 22.6 100.0
Table 6.24: Frequency table for loss due to expiry

CHART:
100 90 80 70 60 50 40 30 20 10 0 89 77.4
26
22.6
Frequency Yes No
Percent
. Chart 6.11: loss due to expiry FREQUENCY TABLE: Percentage Loss Frequency Percent Valid Percent 15.7 Cumulative Percent 15.7
Valid
Less than 5% 5-10% 10-15% 15-20% More than 20% None Total
18
15.7
31 14 4 22
27.0 12.2 3.5 19.1
27.0 12.2 3.5 19.1
42.6 54.8 58.3 77.4
26 115
22.6 100.0
22.6 100.0
100.0
Table 6.25: Frequency table for percentage loss

CHART:
35 30 25 20 15 10 5 0 Less than 5% 5-10% 10-15% 15-20% More than 20% None 4 18 15.7 14 31 27 22 19.1 26 22.6
12.2 3.5
Frequency
Percent
Chart 6.12: Percentage loss
INTERPRETATION: The retailers have to bare certain amount of loss while returning the expired drugs back to retailers. The fix amount of loss cannot be determined as it is varying largely from retailer to retailer. Even there are 22.6% of retailers who do not bare any type of loss while retuning the expired drugs. Certain amount of loss that retailers need to bare should be there because it encourages the retailers to maintain their inventory effectively to keep away themselves from incurring losses. But certain retailers do not have to incur any loss and it might be due to their relationship with the distributor or the distributors want to encourage sales from it by making retailers purchase in bulk or more quantity.
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2.
Retailers do not provide the customers with the alternative medicines other than the prescribed ones.
ANALYSIS: STATISTICS: Provide Alternative Medicines N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 113 2 1.86 2.00 2 .666 -.739 .451
Table 6.26: Statistics for Providing alternative medicines
FREQUENCY TABLE: Provide Alternative Medicines Frequency Percent Valid Percent 31.3 53.0 Cumulative Percent 31.3 84.3
Valid
Yes No
36 61
31.3 53.0
Page 81
Ask the doctor Total
18
15.7
15.7
100.0
115
100.0
100.0
Table 6.27: Frequency table for Providing alternative medicines CHART:

70 61 53 36
60
50 40 30 20 10 0 Yes Frequency No 31.3
18
15.7
Ask the doctor Percent
Chart 6.13: Providing alternative medicines
INTERPRETATION: The above frequency table and chart shows that the 31.3% of retailers do provide the alternative drugs to those prescribed by the doctors , 53% do not provide them and 15.7% retailers ask the doctor before providing them. This might be done to achieve higher margin by proving alternative drugs.
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3. Retailers gain maximum profit in OTC drugs.
ANALYSIS: STATISTICS: Prescriptive Drugs N Valid Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis 115 0 OTC drugs 115 0 Cosmetics Ethical Nutraceuticals Same For All 115 0 1.8348 2.0000 2.00 .37300 1.361 .447
115 0 1.8957 2.0000 2.00 .30705 4.965 .447
115 0 1.9826 2.0000 2.00 .13130 54.929 .447
115 0 1.9739 2.0000 2.00 .16009 34.911 .447
1.7043 1.4522 2.0000 1.0000 2.00 1.00
.45833 .49989 -1.198 .447 -1.997 .447
Table 6.28: Statistics for Drugs providing maximum margin FREQUENCY TABLE: PRESCIPTI VE OTC COSMETI CS ETHICAL NUTRACE UTICALS Frequ ency 3 SAME FOR ALL
Frequ Per Frequ Per Frequ Per Frequ Per ency cent ency cent ency cent ency cent Va lid Ye s N o To 34 29. 6 70. 4 100 63 54. 8 45. 2 100 12 10. 4 89. 6 100 12 10. 4 89. 6 100
Perc Frequ Per ent ency cent 2.6 19 16. 5 83. 5 100
81 115
52 115
103 115
103 115
112 115
97.4 100.
96 115
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tal
.0
.0
.0
.0
.0
Table 6.29 Frequency table for drugs providing maximum margin CHART:
120 100 80 60 40 20 0 Yes No
Frequency
Frequency
Frequency
Frequency
Frequency
PRESCIPTIVE
OTC
COSMETICS ETHICAL NUTRACEUAME FOR ALL S
Chart 6.14: drugs providing maximum margin
INTERPRETATION: From the above frequency table and chart it can be seen that retailers get maximum amount of profit from the OTC drugs and next from the cosmetics.
4. Retailers do not sell the drugs that should not be sold without prescription.
ANALYSIS: STATISTICS: Without Prescription Medicines N Valid Missing

115 0
Page 84
Frequency
Percent
Percent
Percent
Percent
Percent
Percent
Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis
1.77 2.00 2 .420 -.244 .447
Table 6.30: Statistics for Providing drugs without prescription
FREQUENCY TABLE: Without Prescription Medicines Frequency Percent Valid Percent Cumulative Percent Valid Yes No Total 26 89 115 22.6 77.4 100.0 22.6 77.4 100.0 22.6 100.0
Table 6.31 Frequency table for providing drugs without prescription
Page 85
CHART:
100
80 60 40 20 0 26
89 77.4
22.6
Frequency Yes No
Percent
Chart 6.15: Providing drugs without prescription
INTERPRETATION: 77.4% of retailers does not sold the drugs without prescription that must not be sold without prescription. They are actually selling the drugs without prescription as well but to their regular customers. 22.6% of retailers sell these drugs without prescription as well.
5. Most of the retailers still use the traditional form of methods to keep a check on inventory
level. ANALYSIS: STATISTICS: Inventory Check N Valid Missing 115 0
Page 86
1.88 2.00 2 .677 -.800 .447
Table 6.32: Statistics for keeping check on inventory
FREQUENCY TABLE: Inventory Check Frequency Percent Valid Percent Cumulative Percent Valid Through computer software Manually Both Total 34 61 20 115 29.6 53.0 17.4 100.0 29.6 53.0 17.4 100.0 29.6 82.6 100.0
Table 6.33 Frequency table for keeping check on inventory
Page 87
CHART:
70 60 50 40 30 20 10 34 61
53
29.6
20 17.4
0
Through computer software manually Both
Frequency
Percent
. Chart 6.16: keeping check on inventory
INTERPRETATION: The retailers still does not use the computer software to keep a check on the inventory level. They are still following the traditional manual form of entry for keeping a check on the inventory.
6.
The credit policies of the stockists are related with the cash discounts. ANALYSIS: STATISTICS: Cash Discounts 115 0 1.86 2.00
Page 88
N Valid Missing Mean Median

Mode Std. Deviation Kurtosis Std. Error of Kurtosis
2 .372 2.259 .447
Table 6.34: Statistics for Cash discounts
FREQUENCY TABLE:
Cash Discounts Frequency Percent Valid Percent Cumulative Percent Valid less than 2% 18 15.7 15.7 15.7 2 -5 % 96 83.5 83.5 99.1 more than 5% 1 .9 .9 100.0 Total 115 100.0 100.0 Table 6.35 Frequency table for Cash discounts
120 100 80 60 40 96 83.5
20
0
18
15.7 1 0.9
less than 2%
2 -5 % Frequency Percent
more than 5%
Chart 6.17: Cash discounts Applying cross tabulation over here to find the dependency and correlation among the variables: Cash Discounts * Credit Period Cross tabulation
Count 1 week to 30 days 15 57 1 73 30 to 60 days 0 14 0 14 Credit Period Based upon relationship 2 14 0 16 Total Don't Engage In credit Terms 1 11 0 12
Cash Discounts
less than 2% 2 -5 % more than 5%
18 96 1 115
Total Applying Chi Square test we get,
Chi-Square Tests Value df
Pearson Chi-Square 5.237a Likelihood Ratio 7.728 Linear-by-Linear 1.422 Association N of Valid Cases 115 a. 7 cells (58.3%) have expected count less than 5. The minimum expected count is .10. INTERPRETATION:
Asymp. Sig. (2-sided) 6 .514 6 .259 1 .233
As the value of Chi Square is less than the 0.05 the null hypothesis is not rejected. Hence, the credit policy is not directly related to the cash discounts.
Page 90
STOCKISTS
HYPOTHESIS: HO: The trade promotions offered does not varies significantly from stockists to stockists. H1: The trade promotions offered varies significantly from stockists to stockists. ANALYSIS: STATISTICS: Discounts Free Others Trade Drugs Promotion Samples N Valid 11 11 11 Missing 0 0 0 Mean 1.0000 1.9091 1.8182 Median 1.0000 2.0000 2.0000 Mode 1.00 2.00 2.00 Std. Deviation .00000 .30151 .40452 Kurtosis 11.000 2.037 Std. Error of Kurtosis 1.279 1.279 1.279 Table 6.36: Statistics for Trade discounts FREQUENCY TABLE: Discounts Trade Promotion Free Drugs Samples Frequency Valid Yes No Total 11 0 11 Percent 100.0 0 100 Others
Frequency Percent Frequency Percent 1 10 11 9.1 90.9 100.0 2 9 11 18.2 81.8 100.0
Table 6.37: Frequency table for trade discounts
Page 91
CHART:
120 100 80 60 40 20 0 Frequency Percent Frequency Percent Frequency Percent Discounts Trade Promotion Free Drugs Samples Others Yes No
. Chart 6.18: Trade discounts Applying t-test to test the hypothesis, we get, One-Sample Test Test Value = 0 t df Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower FreeDrugsSamples 21.000 10 Others 14.907 10 .000 .000 1.90909 1.81818 1.7065 1.5464 Upper 2.1116 2.0899
INTERPRETATION: The frequency table shows that the stockists use majorly discounts as a trade promotion tool, which was also observed in retailers part as well. The t test conducted shows that the null hypothesis is rejected. That means the trade promotions offered varies significantly from stockists to stockists.
HYPOTHESIS: H0: There is no significant relationship between frequency of ordering and trade promotions been offered to the stockists. H1: There is a significant relationship between frequency of ordering and trade promotions been offered to the stockists. ANALYSIS: STATISTICS: Frequency Of Ordering N Valid 11 Missing 0 Mean 1.82 Median 2.00 Mode 2 Std. Deviation .751 Kurtosis -.878 Std. Error of Kurtosis 1.279 Table 6.38: Statistics for Frequency of ordering
FREQUENCY TABLE:
Frequency Of Ordering Frequency Percent Valid Percent Cumulative Percent Valid Weekly Twice a Month 4 5 36.4 45.5 36.4 45.5 36.4 81.8
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Monthly Total
2 11
18.2 1 00.0
18.2 100.0
100.0
Table 6.39 Frequency table for frequency of ordering STATISTICS: Inbound Outbound Transportation Transportation Charge Charge 11 11 0 0 2.00 1.00 2.00 1.00 2 1 .000 .000 1.279 1.279
Valid Missing
Table 6.40: Statistics for inbound and outbound transportation charges FREQUENCY TABLES: Inbound Transportation Charge Frequency Percent Valid Percent Cumulative Percent Valid No 11 100.0 100.0 100.0
Table 6.41 Frequency table for inbound transportation charges Outbound Transportation Charge Frequency Percent Valid Percent Cumulative Percent Valid Yes 11 100.0 100.0 100.0
Table 6.42 Frequency table for outbound charges

STATISTICS: Frequency Of Delivery To Retailers N Valid 11 Missing 0 Mean 2.73 Median 2.00 Mode 1 Std. Deviation 1.902 Kurtosis -2.045 Std. Error of Kurtosis 1.279 Table 6.43: Statistics for Frequency of delivery to retailers
FREQUENCY TABLES: Frequency Of Delivery To Retailers Frequency Percent Valid Percent Cumulative Percent Valid Daily Twice a week Weekly Twice a Month Total 5 1 1 4 11 45.5 9.1 9.1 36.4 100.0 45.5 9.1 9.1 36.4 100.0 45.5 54.5 63.6 100.0
Table 6.44 Frequency table for frequency of delivery to retailers Applying the cross tabulations, Frequency Of Delivery To Retailers * Outbound Transportation Charge Cross tabulation Count
Page 95
Outbound Transportation Charge Total Yes Frequency Of Delivery To Retailers Daily Twice a week Weekly Twice a monthly Monthly Total 5 1 1 0 4 11 5 1 1 0 4 11
INTERPRETATION: From the above frequencies and chart it can be said that stockists do not prefer to order more frequently. 45.5% order twice a month, 36.4% orders weekly and 18.2% orders monthly. The inbound transportation charges for the stockists are being borne by the company or the C & F Agents but these are not affecting the frequency of ordering by the stockists. The outbound transportation charges are not being borne by the retailers. The stockists deliver the drugs to the retailers and they only bare the charges for it though being the frequency of delivery frequent (Daily). The outbound charges and the frequency of delivery to retailers are not significantly correlated as can be seen from the correlation table; the number of frequency varies from daily to monthly. The frequency of delivery varies largely based upon the location of the retailers.
HYPOTHESIS: H0: There is no significant relationship between lead time and frequency of stock out occurrence. H1: There is a significant relationship between lead time and frequency of stock out occurrence.
ANALYSIS:
STATISTICS: Frequency Of Stock Out N Valid 11 Missing 0 Mean 1.82 Median 1.00 Mode 1 Std. Deviation 1.250 Kurtosis -.387 Std. Error of Kurtosis 1.279 Table 6.45: Statistics for frequency of stock out FREQUENCY TABLE: Frequency Of Stock Out Frequency Percent Valid Percent Cumulative Percent Valid Weekly Twice a Week Thrice a Week More than Thrice a Week Total 7 1 1 2 11 63.6 9.1 9.1 18.2 100.0 63.6 9.1 9.1 18.2 100.0 63.6 72.7 81.8 100.0
Table 6.46 Frequency table for frequency of stock out
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CHART:
70 60 50 40 30 20 10 0 Weekly Twice a Week Thrice a Week More than Thrice a Week Frequency Percent
. Chart 6.19: Frequency of stock out FREQUENCY TABLE: Inbound Lead Time Frequency Percent Valid Percent Cumulative Percent Valid 1 2 days More than 2 days Total 5 6 11 45.5 54.5 100.0 45.5 54.5 100.0 45.5 100.0
Table 6.47 Frequency table for Inbound lead time
Page 98
CHART:
60 50 40 30 20 10 0 Frequency 1-2 days Percent more than 2 days 5 6 45.5 54.5
. Chart 6.20: Inbound lead time Applying cross tabulations to find the correlation among the variables, Inbound Lead Time * Frequency Of Stock Out Cross tabulation Count Frequency Of Stock Out Weekly Twice a Week 0 1 Thrice a week 1 0 More than Thrice a week 0 2 5 6 Total
Inbound Lead Time
1 to 2 days More than 2 Days
4 3
Total
11
Applying Chi Square test, Fo 4 Fe 3.18 (Fo- Fe)2/ Fe 0.21

Page 99
0 1 0 3 1 0 2 Chi square calculated Chi square tabulated df
0.45 0.45 0.91 3.12 0.545 0.545 1.09
0.45 0.67 0.91 0.004 0.38 0.545 0.76 3.929
7.815 3
INTERPRETATION: The stock out is a position when the stockist is not having the stock and demand arises. This kind of situation happens once in a week for 63.3% stockists, twice a week for 9.1%, thrice a week for 9.1% and more than thrice a week for 18.2%. This situation if happening once a week as well should be handled carefully and the frequency of its occurrence should be reduced. This is not a positive sign for them. In order to deal with it the stockists generally calls the C & F Agent immediately. The inbound lead time may have a significant effect on it. By calculating the effect of it through the Chi Square test, it is found that the calculated value is smaller than the tabulated value. Hence, the null hypothesis is not rejected. There is no significant relationship between lead time and frequency of stock out occurrence.
Page 100
HYPOTHESIS: H0: There is no significant preference for drugs to be kept in inventory by the stockists. H1: There is a significant preference for drugs to be kept in inventory by the stockists. ANALYSIS: STATISTICS: OTC drugs Cosmetics Nutraceuticals Ethical 11 11 11 11 0 0 0 0 1.4545 1.5455 1.4545 1.9091 1.0000 2.0000 1.0000 2.0000 1.00 2.00 1.00 2.00 .52223 .52223 .52223 .30151 -2.444 -2.444 -2.444 11.000 1.279 1.279 1.279 1.279
Valid Missing
Prescriptive 11 0 1.0000 1.0000 1.00 .00000
1.279
Table 6.48: Statistics for Preference of drug type FREQUENCY TABLES: PRESCRIPTI OTC COSMETICS NUTARCEUTI ETHICAL VE CALS Freque Perc Freque Perc Freque Perc Frequen Perce Freque Perc ncy ent ncy ent ncy ent cy nt ncy ent 11 100. 6 54.5 5 45.5 6 54.5 1 9.1 0 0 0 5 45.5 6 54.5 5 45.5 10 90.9 11 100 100. 100. 100. 11 11 11 100.0 11 0 0 0 Table 6.49 Frequency table for preference of drug type
Val id
Ye s No Tot al
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CHART:
120 100 80 60 40 20 0 YES NO
Percent
Percent
Percent
Percent
Frequency
Frequency
Frequency
Frequency
PRESCRIPTIVE
OTC
COSMETICS UTARCEUTICALS ETHICAL N
Frequency
Percent
. Chart 6.21: Preference for drug type INTERPRETATION: All of the stockists prefer Prescriptive drugs, then comes the OTC drugs and Nutraceuticals preferred by 54.5% of stockists, Cosmetics preferred by 45.5% stockists and ethical preferred by only 9.1% stockists. This difference might be due to high profit margin in the Prescriptive and OTC drugs.
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OTHER INPUTS:
1. Sales are affected by the trade promotions. ANALYSIS: STATISTICS: Sales Vs Trade Promotion N Valid 11 Missing 0 Mean 1.00 Median 1.00 Mode 1 Table 6.50: Statistics for Sales vs trade promotion
FREQUENCIES:
Sales Vs Trade Promotion Frequency Percent Valid Percent Cumulative Percent Valid Yes 11 100.0 100.0 100.0
Table 6.51 Frequency table for sales vs trade promotion INTERPRETATION: All of the stockists agree to the point that the sales are being encouraged by the trade promotions and that too the discounts increases the sales upto a great extent.
2. Discounts on larger lot sizes does not impact stockists purchase, inventory and expired drugs management. ANALYSIS:
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STATISTICS: Discounts Vs Lot Size N Valid 11 Missing 0 Mean 1.09 Median 1.00 Mode 1 Std. Deviation .302 Kurtosis 11.000 Std. Error of Kurtosis 1.279 Table 6.52: Statistics for Discount vs lot size
FREQUENCY TABLE: Discounts Vs Lot Size Frequency Percent Valid Percent Cumulative Percent Valid Yes No Total 10 1 11 90.9 9.1 100.0 90.9 9.1 100.0 90.9 100.0
Table 6.53 Frequency table for discount vs lot size
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CHART:
100 80 60 Yes 40 20 0 Frequency Percent No
. Chart 6.22: Impact of discounst on sales INTERPRETATION: From the above table and chart it can be said that discounts are also impacting upon the lot size of the retailers purchase. So as the lot size increases the discounts also increases. But it can have a negative impact upon the reverse logistics, i.e. to gain discounts the retailers may buy larger lot sizes than required and in turn it may increase the expired drugs as well or they may reduce their future purchase to avail the current prevailing scheme.
3. The lead time for delivery of drugs to stockists vary. Inbound Lead Time N Valid 11 Missing 0 Mean 2.55 Median 3.00 Mode 3 Std. Deviation .522 Kurtosis -2.444 Std. Error of Kurtosis 1.279 Table 6.54: Statistics for Inbound lead time for stockists
Page 105
FREQUENCIES:
Inbound Lead Time Frequency Percent Valid Percent Cumulative Percent Valid 1 2 days More than 2 days Total 5 6 11 45.5 54.5 100.0 45.5 54.5 100.0 45.5 100.0
Table 6.55 Frequency table for inbound lead time for stockists CHART:
60 50 40 30 20 10 0 Frequency Percent 1 2 days More than 2 days
. Chart 6.23: Inbound lead time for stockists INTERPRETATION: As per the frequency table and chart it can be seen that the inbound lead time varies from 1 day to more than 2 days. 54.5% stockists receive their goods in more than 2 days, while 45.5% receives it in one to two days.
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4. The lead time for delivery of goods from stockists to retailers is fast and varying. ANALYSIS: STATISTICS: Outbound Lead Time 11 0 1.00 1.00 1 0.000 1.279
Valid Missing
Table 6.56: Statistics for Outbound lead time FREQUENCY TABLE: Outbound Lead Time Frequency Percent Valid Percent Cumulative Percent Valid Less than a day 11 100.0 100.0 100.0
Table 6.57 Frequency table for Outbound lead time for stockists INTERPRETATION: The service of stockist to retailers is very fast as they all are able to deliver their drugs in time less than a day. This is the major reason for retailers relying more on stockists in time of urgency for the replenishment of their stocks.
5. The losses due to expired/ damaged drugs are not bared by the stockists. ANALYSIS: Percentage Loss 11
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Valid
Missing Mean Median Mode Std. Deviation Kurtosis Std. Error of Kurtosis
0 4.36 6.00 6 2.335 -1.470 1.279
Table 6.58: Statistics for Percentage loss
FREQUENCY TABLE: Percentage Loss Frequency Percent Valid Percent Cumulative Percent Valid Less than 5% 10- 15% No Loss Total 3 1 7 11 27.3 9.1 63.6 100.0 27.3 9.1 63.6 100.0 27.3 36.4 100.0
Table 6.59 Frequency table for percentage loss
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CHART:
70
60
50 40 Frequency 30 20 10 0 Less than 5% 10- 15% No Loss Percent
. Chart 6.24: Percentage loss INTERPRETATION: As per the frequency table, that is the responses given by the stockists, it can be said that the majority of the stockists (63.6%) do not incur losses due to the expired drugs. They just transfer them to the C & F Agents of the company. 27.3% of the stockists replied that they incur losses but that is less than 5%. Only one stockist said that they incur a loss between 10 to 15%.
6.
There is no significant usage of computer system for keeping a check on inventory level and assure adequate supply of drugs.
ANALYSIS: Inventory Check 11 0 1.09 1.00 1

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Valid Missing
Mean Median Mode

Std. Deviation Kurtosis Std. Error of Kurtosis
.302 11.000 1.279
Table 6.60: Statistics for Keeping inventory check
FREQUENCY TABLE: Inventory Check Frequency Percent Valid Percent Cumulative Percent Valid Through computer system Manually Total 10 1 11 90.9 9.1 100.0 90.9 9.1 100.0 90.9 100.0
Table 6.61 Frequency table for keeping inventory check CHART:

100 90 80 70 60 50 40 30 20 10 0 Frequency Percent Through computer system Manually
. Chart 6.25: Keeping inventory check
Page 110
INTERPRETATION: As can be seen through the frequency that is obtained from the responses of the stockists, it can be said that 90.9% of the stockists use computer system to keep a check on their inventory level. Only one person responded that they monitor their inventory manually. This is the positive sign that now technology is being implemented in keeping a check on stock level, but still there is a need to find that if proper check on inventory is being done then why the stock out position is so frequent. 7. There is no significant conflict between existing and new stockists into the market. ANALYSIS: Effect Of New Stockist 11 0 2.00 2.00 2 .000 1.279
Valid Missing
Table 6.62: Statistics for Effect of entry of new stockists
FREQUENCY TABLE: Effect Of New Stockist Frequency Percent Valid Percent Cumulative Percent Valid No 11 100.0 100.0 100.0
Table 6.63 Frequency table for entry of new stockists
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INTERPRETATION: Here, when asked of what you will do if a new stockist is being appointed by the company in your area of operation, the entire stockist responded unanimously that they wont do anything. As per them; there is an Association for handling of these issues which has a set rule that if the company finds more business of Rs. 10- 20 lacs, than and then only it can appoint a new stockist in their area of operation. And hence they would do nothing for it. 8. There is a basic requirement for the appointment of the stockists by the company.
ANALYSIS: STATISTICS: Basic Requirement N Valid 11 Missing 0 Mean 1.09 Median 1.00 Mode 1 Std. Deviation .302 Kurtosis 11.000 Std. Error of Kurtosis 1.279 Table 6.64: Statistics for Basic requirement for the appointment of stockists
FREQUENCY TABLE: Basic Requirement Frequency Percent Valid Percent Cumulative Percent Valid Yes No Total 10 1 11 90.9 9.1 100.0 90.9 9.1 100.0 90.9 100.0
Table 6.65 Frequency table for the appointment of the stockists

CHART:
100
90
80 70 60 50 Yes No
40
30 20 10 0 Frequency Percent
Chart 6.26: Basic requirements for the appointment of new stockists
INTERPRETATION: As per the table and the responses of the stockists, every company has certain basic criteria for their evaluation while appointing a stockist. These criteria in general can be listed as follows: o The coverage area of the new stockiest o The financial capacity of the new stockiest o The storage and handling capacity o Whether there is a bank guarantee for the new stockiest o The bank which is providing the guarantee o Reputation of the guarantor and the one guarantee in the market 9. No financial support is been provided to the stockists from the above channel members. And there is no financial support provided to the lower channel members from the stockists. ANALYSIS:
STATISTICS:
Valid Missing
Financial Support From Company 11 0 2.00 2.00 2 .000 1.279
Aid To Retailers 11 0 1.45 1.00 1 .522 -2.444 1.279
Table 6.66: Statistics for Financial support from company and to retailers
FREQUENCY TABLES: Financial Support From Company Frequency Percent Valid Percent Cumulative Percent Valid No 11 100.0 100.0 100.0 Table 6.67 Frequency table for financial support from company Aid To Retailers Percent Valid Percent Cumulative Percent 54.5 54.5 54.5 45.5 45.5 100.0 100.0 100.0
Frequency Valid Yes 6 No 5 Total 11
Table 6.68 Frequency table for financial support to retailers INTERPRETATION: As it can be seen no financial aid is provided to the stockist from the C & F Agents or the Company itself. The financial aid could be in the form of long credit terms, help in setting up the network in new area, pre finance facility to purchase the drugs etc.
In the same way the stockist can provide the financial aid to the retailers, and 54.5% of them even provide it.
10. There is no particular procedure been followed by the stockists to manage the reverse logistics. ANALYSIS: STATISTICS: Reverse Logistics Loss Due To Expire Drugs N Valid 11 11 Missing 0 0 Mean 1.00 1.64 Median 1.00 2.00 Mode 1 2 Std. Deviation .000 .505 Kurtosis -1.964 Std. Error of Kurtosis 1.279 1.279 Table 6.69: Statistics for reverse logistics and loss due to expired drugs
FREQUENCY TABLES: Reverse Logistics Frequency Percent Valid Percent Cumulative Percent Valid Ask the C & F 11 100.0 100.0 100.0 agent to take it back Table 6.70 Frequency table for reverse logistics Loss Due To Expired Drugs Frequency Percent Valid Percent Cumulative Percent 4 36.4 36.4 36.4
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Valid Yes
No Total
7 11
63.6 100.0
63.6 100.0
100.0
Table 6.71 Frequency table for Loss due to expired drugs
INTERPRETATION: When the drugs gets expired the stockists ask the Company Personnel or C & F Agent to take those back to the Company. Here the 63.6% of the stockists have to bare no loss due to expired drugs.
11. Companys credit policy and Stockists Credit Policy are not different. ANALYSIS: STATISTICS: Companys Credit Policy N Valid 11 Missing 0 Mean 1.45 Median 1.00 Mode 1 Std. Deviation 1.036 Kurtosis 3.492 Std. Error of Kurtosis 1.279 Stockist Credit Cash Policy Discount 11 11 0 0 1.55 1.91 1.00 2.00 1 2 .820 .302 -.254 11.000 1.279 1.279
Table 6.72: Statistics for Companys and stockists credit policies vs cash discounts
FREQUENCY TABLES: Companys Credit Policy Frequency Percent Valid Percent Cumulative Percent 9 81.8 81.8 81.8
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Valid 1 wk- 30 days
Based upon Relationship No credit Given Total
1 1 11
9.1 9.1 100.0
9.1 9.1 100.0
90.9 100.0
Table 6.73 Frequency table for companys credit policy Stockist Credit Policy Frequency Percent Valid Percent Cumulative Percent Valid 1 wk- 30 days 7 63.6 63.6 63.6 30- 60 days 2 18.2 18.2 81.8 Based upon Relationship 2 18.2 18.2 100.0 Total 11 100.0 100.0 Table 6.74 Frequency table for Stockists credit policy Cash Discount Frequency Percent Valid Percent Cumulative Percent Valid Less than 2% 1 9.1 9.1 9.1 2- 5 % 10 90.9 90.9 100.0 Total 11 100.0 100.0 Table 6.75: Frequency table for Cash dicounts INTERPRETATION: From the frequency table it can be interpreted that majorly Companies have a credit period of around 1 week to 30 days, while the stockists also provide the same credit period to the retailers. But the stockists even work based upon the relationship with the retailers. Cash discounts that they avail for paying earlier are around 2- 5%.
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FINDINGS AND CONCLUSION

Retailers:
1. Retailers store drugs of various major pharmaceutical companies. 2. Most of the time the delivery of drugs to retailers is been handled by the distributors, while some retailers go by themselves to the distributors to replenish their drugs requirements. 3. There is a huge amount of difference among the frequency of retailers getting their stock replenished. 4. Generally order is placed personally to the distributors. But few of them prefer to place orders over phone as well. Majority (53%) of them uses both the option to place the order but the order never takes place online 5. Various types of trade discounts been offered to the retailers and majority of them are cash discounts and these are generally available round the year. , there is a significant amount of correlation between trade promotion and time of promotion. 6. Most of them store drugs which require special storage and the range lies from 8 0C and above and this storage condition do possess a significant relationship with the expiry ratio. 7. Reverse logistics can be maintained with the help of asking distributor to take them back to the stockists or to dispose them off manually. 8. On an average more than 10% of the expired drugs are observed for the retailers within a month. The retailers mainly incur major losses due to expiry of drugs and which is around 22% on an average. 9. There is no fixed re-order point for ordering drugs and at the same time the lot size varies. And the inventories for the reordering purpose are recorded manually only. 10. In case of urgency retailers give a call to the stockists for the replenishment. 11. Retailers generally do not prefer to provide their customers with the alternative medicines rather than what is prescribed. At the same time there is no selling of those drugs which are banned and ought not to be given without prescription.
12. Retailers get maximum amount of profit from the OTC drugs and next from the cosmetics. 13. Generally credit periods of 1 to 30 days are provided to the retailers and if they are willing to pay the cash at the delivery only then offered with 2% of cash discount. But, the credit policy is not directly related to the cash discounts.
Stockists
1. Trade promotions lay significant impact on sales of the drugs or medicines. Various discounts being offered encourages the purchase, inventory and expired drugs management and at the same time increases frequency of ordering. 2. The trade promotions offered varies significantly from stockists to stockists. 3. Above channel members borne the transportation charges during inbound logistics; the same is done by the stockists during the outbound logistics and the payment of transportation charges motivates retailers to order frequently. 4. The order consignment is received within 1 to 2 days. Due to lead time being small stockists are motivated not to stock larger lots sizes of drugs. The drugs delivered within 24 hours against the order placed which again motivates the frequency of delivery to retailers. 5. The stock out situation happens once in a week for 63.3% stockists, there is a need to take care of such frequent stocking out of drugs. There is no significant relationship between lead time and frequency of stock out occurrence. 6. Stockists do not tend to restore losses due to the expired drugs. The retailers mainly incur major losses and the same is transferred to the carry forward agents by the stockists. 7. The inventory level is kept under check with the help of computer software and proper inventory management serves the corrective action for the prevention of stock out occurrence. 8. The company can appoint a third stockiest if the new one is going to contribute around 10-20 lacs to the revenue of the market as a whole. There is generally no conflicting situation arising between the old and the newly appointed stockists.
9. There is a set of basic requirements been laid up by the companies while appointing a new stockiest either in the same territory or to a different one. The basic requirements are as follows: o The coverage area of the new stockiest o The financial capacity of the new stockiest o The storage and handling capacity o Whether there is a bank guarantee for the new stockiest o The bank which is providing the guarantee o Reputation of the guarantor and the one guarantee in the market 10. Neither any financial support is being provided to the stockiest from the channel members above them in the chain and nor do they provide the same to the members below them. 11. The Medical representative performs the function of reverse logistics.
C & F Agents
1. These agents accept drugs from major seven to eight companies. They store each and every product related to that company only. There are many complementary gifts, discounts and offers to the agents from the companies itself. 2. Discounts never play an important role in decision of the lot size. But at the same time C&F agents frequently use trade promotions to push their products into the market. 3. The order placement takes place frequently as they place order on monthly basis and even sometimes they get the order consignment when the company wishes to sell its product in the market. 4. While delivering the drugs to the stockists they have to bear the costs for the transportation. The order placement from the stockists side takes place quite frequently as a result of it. 5. The losses due to expired drugs are transferred to the company as they recycle the expired drugs and hence maintain a strong reverse logistics from the agents to the company. The costs of reverse logistics are borne by the company itself.
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6. They keep a check on the inventory level with the computer software only and hence avoid the stock out situation as they have the linkage with the company and before it can occur, replenishment is provided. 7. The basic requirement happens to be the: o Financial well being of the agent o The coverage area of the agent o The storage capacity of the agent o Conformance of the agent of the company policies o Market reputation of the agent o The revenue than can be generated from the agent o The proximity to the desired market 8. They generally provide a credit term of around 1 to 30 days to those who are not able to pay the bill at the time of delivery. And if they manage to pay at a stretch then they have cash discounts to back them up. But otherwise no other financial support in any form is provided to them.
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SUGGESTIONS
1. Infiltration between two states: There are different tax regimes between two different states. For example if you wish to purchase drug X from Gujarat state and some other state at the same time then you will find the price difference! This price difference occurs due to difference in the Tax rates in different states. Some other neighbouring state possesses comparatively three times lesser than what Gujarat state has. So many people, to avail benefits due to differential tax rates prefer to purchase the same drugs from other states even if they are residing there in Gujarat. So such situations of differential tax rates generally affect the smooth operations of supply. This was proposed as a major concern in the discussion with the carrying and forwarding agents and the stockists. The common goods and service taxes (GSTs) should serve as a welcoming improvement which would generate maximum revenues for both the industry and the channel members. Government is planning to implement it in the near future but as yet the time frame not decided. A most sought expectation from all the channel member is sooner implementation of this type of system. 2. Transportation of goods: reduce the number of intermediaries and reduce the delivery time so that the drugs with less lifespan can be transported faster. At the same time itll prevent channel members from frequent stock outs. 3. Inventory management: There should be a common warehouse for all the pharmaceutical companies those manufacturing drugs with shorter life span. 4. C&F: Encourage more investment in Pharmaceutical Logistics to deal with the problem of lesser number of special condition vans. It can be either private players or government aided itself. 5. For the remote locations: Should reach the specified or remotest place in a given time. As there are samples like blood which needed to be tested within a particular time frame. Again a common warehouse should be constructed with centralized distribution system for all.
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6. Labour issues: There are shortage of labor in the region like Gujarat and Himachal Pradesh. Due to settings up of many pharmaceutical industries in these regions there is shortage for the labor. This affects the industry in the high peak demand situation. As there is higher demand and they are not able to meet up with it due labour constraint. There should be establishment of industries into various other neighboring places as well. 7. There is a burning issue of air lifting of the Pharmaceutical drugs during exports to the major countries. These happen to be the most costly form of transportation for the major companies. As the changing paradigm of Indian Pharmaceutical industry currently shows that there is maximum emphasis placed upon the exports to the foreign market. Hence it poses as a major problem for redeeming international trade for the Indian players. Sometimes even the prices of airlifting only exceed the actual cost of production of the drugs! Domestic player can co produce the product along with the other existing players of the other market, utilizing their latest technology and eliminating the exporting price. Few of the Industry players should come together and must export their medicines of same nature or requirements together to several of the places in the world rather than going for it solely. 8. China is proving to be a major threat to the Indian Pharmaceutical industry. The Chinese drugs are comparatively way cheaper than the Indian drugs. But of course the issue of inferior quality always remains there still to manage to penetrate the market deeper. This act is taking up the market share of the Indian companies. Chinese drugs are cheaper because there are few producers those are manufacturing in volumes. Hence for them achieving economies of scale is much easier compared to Indian producers. Indian Pharmaceutical industry is highly defragmented hence producing in volumes is not a feasible option for them. There is a notion prevailing in the consumer mindset that Indian drugs are superior in quality compared to Chinese products. So organizations like IDMA and OPPI must come together along with industry as a whole to promote India as the country with better technology of superior practices and encourage business in India.
9. Retailers must incorporate software systems to their ordering systems. This would make the system faster and would prevent the situation of providing with the alternative drugs. Though being equipped with the software they do not prefer to use them because its a cumbersome task to enter each and every detail in the software. It takes more time in billing compared to the traditional form. So, retailers should follow the procedure of updating the database on a regular basis every day if feasible otherwise every weekend. 10. The losses incurred to the retailers must be minimized in some way or the other for the expired drugs. 11. Personal observation suggests that despite strict clauses in the pharmaceutical regulation drugs are provided to a larger extent without prescription. There should be a definite clause stating the particular conduct of selling the otherwise banned drugs and the alternative ones. 12. The storage conditions are not appropriate at the retailers end which makes the drugs more susceptible to expiry. Emphasis should be placed upon the storage and handling procedure of the drugs. The organized retail chains in such cases provide the best conditions for storage. 13. There should be a direct connection between the stockists and the company which can actually equip both the ends with special favours. Company would be benefitted by getting the maximum revenues and at the same time correct data without malpractices incorporated to it. Stockists on the other hand would enjoy the maximum of the price discount on the same drugs which are generally not offered to them on a large basis. 14. The drug price control Act was establish for the interest of the consumers of drugs but it was a hurdle for the manufacturers of Pharmaceutical Industry as the price of raw material are rising at an increasing rate but the cost of the products remained the same. Thus, such regulations are causing hurdles for making profit for this industry and most of the companies think that it is unfavorable for them.
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CHAPTER 1: RESEARCH METHODOLOGY

1.1) RESEARCH OBJECTIVE:

1.2) RESEARCH DESIGN:

1.3) SAMPLING DESIGN:

1.4) RELEVANT POPULATION AND SAMPLE SIZE:

1.5) DATA COLLECTION:

1.6) GEOGRAPHICAL SCOPE:

N.R. INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER 2: PHARMACEUTICAL INDUSTRY

2.1.1) A BRIEF HISTORY

N.R. INSTITUTE OF BUSINESS MANAGEMENT

2.1.2) RESEARCH AND DEVELOPMENT

2.1.3) MERGERS, ACQUISITIONS, AND CO-MARKETING OF DRUGS

2.3) INTERNATIONAL PHARMA INDUSTRY

Profits $ % millions change from 2008

Johnson & Johnson Pfizer Abbott Laboratories

N.R. INSTITUTE OF BUSINESS MANAGEMENT

27,428.3 21,836.0 21,634.0

15.0 7.2 1.3

12,901.3 4,328.8 10,612.0

65.2 N.A. 102.2

159 324 412 458 459 471

14,642.0 7,011.4 5,092.8 4,515.5 4,503.6 4,377.3

-2.4 31.4 -0.9 -1.9 2.3 6.8

4,605.0 2,635.8 232.6 422.3 621.3 970.1

9.7 31.1 N.A. 0.3 7.4 23.9

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2.4) INDIAN PHARMA INDUSTRY

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USD-Rupee USD GDP(billions)

3000 2500 USD in Billions 2000 1500 1000 500 0

years 2009 YEARS

9.5 9 PERCENTAGE 8.5 8 7.5 7

2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: DIPP; WIPPS 08-10, World Competitiveness/ Press Information Bureau

Source: IBEF, FDC

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ADVANTAGES TO PHARMACEUTICAL INDUSTRY

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2.5) PHARMA INDUSTRY IN GUJARAT

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GUJARAT AS PHARMACEUTICAL HUB

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Source: vibrant Gujarat 2011

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2.5.1) GUJARAT PHARMA: SWOT ANALYSIS

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CHAPTER 3: SUPPLY CHAIN MANAGEMENT

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Fig 3.1 The supply chain

Fig 3.2 Another view for supply chain

3.2) PROBLEMS MANAGEMENT

3.4) MANAGING SUPPLY CHAIN:

3.5) IMPORTANCE OF SUPPLY CHAIN MANAGEMENT

Fig 3.3 Bullwhip effect

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3.6) SUPPLY CHAIN BUSINESS PROCESS INTEGRATION:

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ii. iii. iv.

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