To Study the Issues in Procurement of Raw Materials in Pharmaceutical Industry

ABSTRACT

Procurement today has become an integral part of any manufacturing business. Procurement is now not seen as a function but as a department that affects the entire supply chain and finances of the company. It is not just about purchasing effectively but it is about beginning to offer that value which the company promises to its customers. Various factors affect the purchase decisions made by the executives, may it be quotations or negotiations. This paper identifies various such factors that affect the purchase decision and which among them are the most important and critical factors. It also focuses on identification of some critical problems that are linked to the procurement function and their severity.

Primary as well as secondary data has been used in order to make this paper worth the value what is expected to be deliver. The statistical methods used in analysis of data are, T-test, and pie charts are used where needed.

Responses were collected from purchase executives of different geographical regions and with an in-depth knowledge, experiences and designation ranging from purchase manager to associated director.

CONTENTS

Sr. no CONTENTS PAGE NO.

1 Acknowledgements 3

2 Abstract 4

3 Table of contents 5

4 Introduction

Statement of problem

Purpose of study

Significance of study

6

6 Review of Literature 7

7 Methodology 14

8 Interpretation of output 19

9 Conclusion, Recommendations and Limitations 23

10 Annexure 1 24

11 Bibliography

INTRODUCTION

STATEMENT OF PROBLEM:

There is a need to understand the various parameters that affect procurement decisions for purchase of raw materials in pharmaceutical industry. Also to find out potential issues in procurement and their impact on supply chain.

PURPOSE OF STUDY:

The procurement function in the pharmaceutical industry has made its way to new heights. Today, it is an important tool that offer a new value to the customer and the company itself. Still there are a lot of issues pertaining of this study is to identify what are the important considerations and pitfalls during procurement process.

SIGNIFICANCE OF STUDY:

This type of study is significant in order to have a clear information of the factors that are to be considered while performing strategic procurement. How the priorities amongst various factors can be allocated and how risks can be summed up and contingency plans can be developed, can be gained from this type of study.

OEJECTIVE OF STUDY:

• To understand the different factors affecting procurement decisions in the pharmaceutical industry

• To understand what priority these factors are given in the industry

• Find out potential issues relating to procurement function

REVIEW OF LITERATURE

INTRODUCTION TO SUPPLY CHAIN MANAGEMENT AND PROCUREMENT:

A supply chain is a system of organization, people, activities, information, and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer. Supply chain links value chains.

Supply chain management (SCM) is managing and transfer of good. That includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of consumption. Interconnected or interlinked network, channels and node business are involved in the provision of product and services required by end customer in a supply chain.

Procurement as a business process relates to the acquisition of goods and services from third parties as necessary inputs to a business. This entails creating and cultivating competencies, services, agreements, and actions within the supply base to help build the desired competitive advantage in the target market. Steps in procurement include need identification, supplier identification, supplier communication, negotiation, supplier liaison, logistics management, tender notification.

STRATEGIC PROCUREMENT:

It deals with a long term, business-supportive view of the procurement process when dealing with supply chains. Procurement is carried out anywhere in a business with absolutely no involvement of procurement or purchasing organizational function. Most organizations, however establish a functional department can be named variously: sourcing, purchasing, buying, procurement, supplies management, or something similar. The entirety of a firm’s basket of purchased goods and services from what is known as the purchasing portfolio of the business. Proper understanding and management of the purchasing portfolio is an absolute prerequisite for effective procurement.

E-PROCUREMENT:

E-procurement (electronic procurement), is also known as supplier exchange fromB2B or B2C or B2G sale and purchase of supplies, work, and services through the internet as well as from other information and networking systems, such as electronic data interchange and ERP. The e-procurement value chain consist of indent management, e-Tendering, e-Auctioning, Vendor management, catalogue management, Purchase Order Integration, order status, Ship Notice, e-Invoicing, e-Payment, and contract management. Output from e-procurement are: reduction in price; Improvement in contract compliance; Reduction in production cycle time; Reduction in administration cost; Enhanced inventory management; Improvement in visibility of customer demand; Improvement in visibility of supply chain; Reduction operating & inventory costs; reduction in procurement cycle time; negotiated reductionin cost per unit; enhancement in accuracy of production capacity;