India’s pharmaceutical and chemical industry holds a pivotal position in the global industry. The pharmaceutical industry is poised to exceed $55 billion by the end of 2020. Indian companies are striving to diversify in order to strengthen their portfolio. Companies are heavily investing in research and development and building capacity to manufacture biosimilars. The future of both the industries in the global market looks bright but there is a lot of work to be done across multiple fronts. It is important for firms to build capacity and capability in order to achieve success.
There is fierce competition in the pharmaceutical and chemical market and organizations are facing the challenge of improving operational performance parameters like service level and the cost to deliver. There is immense pressure to reduce the cost of drugs which calls for a reexamination of the supply chain. Indian pharmaceutical industry is expected to grow by 1.8 times by 2020. There will be a requirement of new facilities and lines to capture the growth. The top 10 players in the industry will need to sell products worth $10 billion more in order to maintain their market share. There will be a required of sophisticated storage facilities in the north to meet the increased network for growth. The supply chain will have to evolve in order to meet the market needs. The supply chain costs depend on the type of product. The cost can increase significantly due to the specialized cold chain requirements for vaccines and other formulations.
India’s supply chain has high transportation costs, sub optimal routes and issues with storage for high risk products. The companies lag in standards and there is a huge need for improvement in supply chain in the country. There is limited use of forecasting tools currently which leads to significant wastage and shortage. There is a lack of short term and long term supply planning which takes into account different demand and supply scenarios. Additionally, there is a limited use of IT tools to leverage the supply and production plan and this is due to the dearth of information transparency. Majority organizations in the industry do not have a single view on the demand supply scenario with regard to collaboration of the supply chain teams to enable replanning. The industry is in the early stages of maturity and sustainable growth will require covering this ground.
Supply chain challenges
The industry faces major challenges across different fronts. One of the biggest challenge is the quality and regulatory issues. There are about 700 FDA approved sites in India and these are inspected by global regulatory agencies from time and again. Issues with regarding to quality have deepened and wid ened over time. There are procurement issues with the quality of raw materials which have led to production delays and batch failures. The inability to get certified by global regulatory authorities have led to plan shutdowns and the lack of quality control in research has led to the failure of trial batches and delays in product launches.
These are general issues which have an impact on every organization but the real problem is the internal issue which includes the lack of data checks for accuracy, low quality of equipment and poor product testing. Top Indian players launch about 15 to 30 products in a year and it has substantial impact on the supply chain. It leads to higher distribution costs and higher inventory. With companies expanding into new markets, the regulations vary across different regions. Companies need to meet the guidelines for labelling and packaging of the products. Product specifications need to be customized and the labels need to be printed according to the guidelines. There is a sizable gap in regulatory standards in the country. Since the value chain is complex and there numerous concerns about quality and safety, India needs to put in a lot of effort in reworking its supply chain.
There are a number of players in the supply chain. With more than 65,000 stockists and 550,000 pharmacists in the supply chain, there is bound to cause complexity in the structure. There will be new suppliers in the next five years including new products and technology. Large companies will have eight to ten manufacturing units which will lead to a complex multilayer network and material movement. India also faces gaps in the infrastructure of the industry. The rail and road network are inadequate to transport chemicals and pharmaceuticals on time. There is lack of a robust cold chain network and a lack of storage supply. High operating expenses also add to the cost of the product. Major companies lose control of the movement of the product beyond the clearing and forwarding agents. There are a number of warehouses, retailers and distributors who do not have the right infrastructure to store a product. This results in wastage and damage of the product. It is time for an e active supply chain execution. Companies will have to innovate new methods and use the latest technology to keep a track of the movement of their products. The industry has a long way to go. If the operating costs and the cost of transportation comes down, the overall cost of a chemical or pharmaceutical product will also decline. It is important for major players to consider the supply chain as a significant part of their business and to invest their time and money on the same. If the supply chain is well managed, there will be fewer product rejects and delays. There are also not enough cold chain facilities for the storage of pharmaceutical products and only an improvement in the infrastructure will help in the same. With regard to the chemical and pharmaceutical industries, India has achieved global recognition but there is a lot of improvement required in both the markets. One of the major concerns for the same is an improvement in the supply chain and the establishment of an e supply chain to better manage the flow of products.