How to improve effectiveness of supply chain management at sanofi Pastour in VietNam

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MBQPM4 “DOAN MINH CHAU” “HOW TO IMPROVE EFFECTIVENESS OF SUPPLY CHAIN MANAGEMENT AT SANOFI PASTEUR IN VIETNAM” MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT Ho Chi Minh City (2014)   STATEMENT OF AUTHENTICATION I, Doan Minh Chau, hereby declare that this assignment is prepared by myself in completion of Master in Quality and Business Performance Management Program (2012-2014) in Ho Chi Minh City, and that I have not submitted this material, either in whole or in part, for a degree at this or any other institution.   ACKNOWLEDGEMENT I would like to thank Mrs. Vo Thi Phuong, Chief Representative of Sanofi Pasteur S.A Representative office in Ho Chi Minh city, who gives a lot of support for my continuous learning and allows me to access to company’s data and reports to complete this case study, and thank to my colleagues who provide me the relevant information and data mentioned in this assignment. I would like to send my gratitude to Pro. Jacques Martin for guiding and advising me on structure and presentation of discussion topic, my gratitude is also sent to all professors who gave lectures for MBQPM 4 intake as knowledge transferred and experience learned from them help me to complete this assignment effectively. I will keep a good memory of our classmates MBQPM4, with all interactions, sharing knowledge moments we have passed together where I learned a lot from their experiences which are also very useful to my final report. And lastly, a big thank to my family for their patience, love and encouraging during my quality journey with Solvay since 2012 till the completion of this assignment.   TABLE OF CONTENTS • Presentation of subject • The importance of the subject • Structure of presentation Part I. ANALYSIS OF SUPPLY CHAIN OPERATIONS: CHAPTER 1: COMPANY BACKGROUND 1. Vision/ Mission / Organization 10 2. SWOT/ PESLT /PORTER DIAMOND analysis 16-20 CHAPTER 2: STRUCTURE OF SUPPLY CHAIN 1. From product to delivery process: 23 1.1 Demand Forecast 23 1.2 Sourcing and Purchasing 25 1.3 Manufacturing 26 1.4 Quality control 28 1.5 Distribution 28 2. Critical issues identification & analysis: 31 2.1 Shortage of product / Failure to deliver on time 31 2.2 Root-cause identification and analysis 31 2.2.1 Production capacity 35 2.2.2 Manufacturing process 35 2.2.3 Supplier 36 2.2.4 Quality control 36 2.2.5 Distribution 37 2.2.6 Regulatory 38     Part II. IMPROVING SUPPLY CHAIN OPERATIONS: CHAPTER 1: INCREASING THE EFFECTIVENESS OF SUPPLY CHAIN OPERATIONS 1. Production capacity 41 2. Manufacturing 41 3. Sourcing / purchasing 42 4. Quality control 42 5. Forecast Management 43 6. Distribution 43 CHAPTER 2: IMPROVING DOWNSTREAM PROCESS 1. Supply and Demand Forecast management 47 2. Customer Relationship Management 53 3. Regulatory Affairs Management 55 4. Distribution capability improvement 57 PART III.CONCLUSION 58     LIST OF ABBREVIATIONS 1 GPEI: Global Polio Eradication Initiative 2 GAVI: Global Alliance for Vaccine and Immunization 3 NGO: Non-governmental Organization 4 WHO: World Health Organization 5 PAHO: Pan American Health Organization 6 UNICEF: United Nations Children's Fund 7 EPI: Expanded Program on Immunization 8 JAICA: Japan International Cooperation Agency 9 GMP: Good Manufacturing Practices 10 SAP: German company which is the market leader in supplying ERP software, systems and training. 11FuturMaster: Software for Forecasting, Planning and Supply Chain Optimization. 12 HQ: Headquarter /Global office of Sanofi Pasteur S.A in Lyon, France 13 D&S: Demand and Supply 14 IO: Industrial Operations 15 FDA: Food and Drug Administration 16 MTS: Make to Stock 17 MTO: Make to Order 18 NICVB: National Institute for Control of Vaccine and Biological of Vietnam 19 DAV: Drug Administration Division /Ministry of Health of Vietnam 20 CIF: Cost, Insurance and Freight 21 PMC: Preventive Medicine Center     LIST OF TABLES Part I. ANALYSIS OF SUPPLY CHAIN OPERATIONS Table 1.1: Organization chart of Sanofi Pasteur in Vietnam Table 1.2: Distribution flow of vaccines in private and public market in Vietnam Table 1.3: Vaccine Customers Mapping Table 1.4: Vaccine’s public and private market 2005-2012 Table 1.5: Vaccine market 2012 in Vietnam Table 1.6: Long range planning 2012-2017 Table 1.7: Vaccine manufacturing timeline Table 1.8: Forecast is the first step in supply chain process flow Table 1.9: Make to Stock Model Table 1.10: Vaccine Manufacturing Process Table 1.11: Distribution of vaccine mapping Table 1.12: Vaccine temperature monitoring Table 1.13: Product allocation planning Table 1.14: List of SP products in supply constraint in 2013 Table 1.15: Ishikawa diagram for root cause analysis Part II. IMPROVING SUPPLY CHAIN OPERATIONS Table 2.1: Risk assessment flow chart Table 2.2: Pareto chart on causes of vaccine storage Table 2.3: Moving –average forecast calculated over 4 months’ period Table 2.4: Stock coverage end of month Table 2.5: Root cause identification list Table 2.6: Rolling forecast structure Table 2.7: Demand Model Reporting 2012-2013 Table 2.8: Product technical complaint tracking Table 2.9: Rationalization for direct importation model Table 2.10: SP Operations Key enablers Table 2.11: SP Balance Scorecard     INTRODUCTION In recent years, most of business has to compete actively in a very fast changing environment to increase customer satisfaction and maximize profitability. Supply chain is a key activity within the company to maintain competitive advantage. According to Jacoby (2009-42), for many manufacturing firms that are threatened by low-cost competition, supply chain management has become a competitive necessity. The effectiveness of supply chain management will help the organization to compete in a dynamic business environment which is combined by highly predictable and completely un-predictable factors. Slack, Chambers and Johnston (2007-157) observed that t he better the service the operation can provide to its customers, the better will be its potential to attract customer and therefore generate revenue. This assignment aims to discuss the supply chain operations at Sanofi Pasteur S.A., a vaccine manufacturer, to see how important the effective supply chain management contributes to the overall performance of the company. It is important to analyze existing constraints that impact the supply chain operations and to suggest solutions to improve the effectiveness of the supply chain management in order to increase the quality of service provided to Customers, to maximize profitability and to maintain competitive advantage in both private and public health sector in Vietnam market. This assignment is divided into 2 parts: the First part introduces an overview on Sanofi Pasteur S.A, business context in which the company operates as well as critical issues faced by the company which give negative impact on customer satisfaction, following by root-cause analysis. The Second part proposes possible solutions and prioritized action plans to improve the effectiveness of the supply chain management, with strong focus on downstream processes to continuously improve and innovate to stay competitive in the market. An overview on supply chain operations at Sanofi Pasteur S.A.is described hereafter in the First part of this assignment. It covers the company mission, internal, external factors driving its business objectives in Vietnam market; the supply chain structure covering production cycle and distribution of vaccine in the market as well as critical issues faced by the company which give negative impact on customer satisfaction, following by root-cause analysis.     Part I. ANALYSIS OF SUPPLY CHAIN OPERATIONS CHAPTER 1: COMPANY BACKGROUND 1. Vision/ Mission/Organization Sanofi Pasteur S.A. (hereafter referred as to “SP”) is a French company who discovers, develops, produces and distributes human vaccine and biological products. SP is the largest company entirely dedicated to vaccines. The company provides more than one billion doses of vaccine each year, making it possible to immunize more than 500 million people across the globe. With a broad and balanced presence in emerging markets, SP employed approximately 105 000 employees in 110 countries. The 2009 net sales of Global performance are 29.3 billion Euros with 6.3% increase compared to 2008 on a reported basis. A world leader in human vaccine industry, SP offers the broadest range of vaccines protecting against 20 infectious diseases caused by viral diseases such as: yellow fever, mumps, poliomyelitis, measles, rubella, influenza, hepatitis A and B, rabies, Japanese encephalitis, chicken pox and by bacteria diseases such as pertussis, diphtheria, haemophilus influenzae typ b infections, meningococcal meningitis, pneumococcal infections, tetanus, tuberculosis, typhoid, cholera… Every day, the company invests more than 1 million Euros in research and development of innovated products such as dengue fever, Japanese encephalitis and new pediatric combo vaccines. SP has entered in partnership with GPEI 1 , GAVI Alliance 2 , NGOs 3 and international institutions including WHO 4 , PAHO 5 , UNICEF 6 , International Red Cross and others partners for active global disease prevention program. With the Vision “A world in which no one suffers or dies from a vaccine preventable disease”, SP commits to protect and improve human health worldwide by: • Providing superior, innovated vaccines for the prevention and treatment of diseases. • Playing an active role in the immunization community to maximize vaccination.     Marketed in Vietnam since 1992, SP plays an active role in the immunization community to increase public health awareness and makes innovated vaccines available for the market needs. In the last 3 years, SP supplied to Vietnam market more than 2 million doses of vaccines, annual turnover increased from 12.8 Mio USD in 2011 to 15.3 Mio USD in 2013. The turnover is expected to be triple in 2016 by introducing new vaccines to the market. In Vietnam, SP has its representative office registered and operated in Ho Chi Minh city with main activities: - Carry clinical studies for registration purpose - Register and renew market authorization - Promotion marketed products. The representative office is structured in form of business unit within Sanofi Group in Vietnam with 4 main cross functions: Sales/ Supply/ Marketing/ Medical with flat organization chart shown in Table 1.1 below. BU - Vaccines Business Unit Director Sales manager Supply chain manager Group Product manager Medical manager 15 1 3 Table 1.1 Organization chart of Sanofi Pasteur in Vietnam Source: Sanofi Pasteur Vietnam [...]... partnership opportunity 2 Strategy No 2: Develop and maintain partnership with Vietnam EPI to generate recommendation on vaccination schedules to sustain SP growth in both private and public market In the Chapter 2 below, the structure of SP supply chain operations will provide a common understanding on several steps to be involved in vaccine supply chain operations as well as associated challenge which impacts... (end-Users) will come to these health organizations to get vaccination on doctor’s prescription As a result, failure to take part to Customer’s tender will create bottleneck on supply of vaccines in the market Operating in such a competitive and fast changing vaccine market, only effective supply chain management can helps SP to commit to timely respond to Customer demands However, in the last 3 years,... sent to NICVB19 in Hanoi for local safety tests The vaccine must be stock in quarantine from 1-15 working days and during this period, distributors will have to complete the local re-packaging with Vietnamese insert notice to be in compliance with local regulatory requirements before selling vaccines to the market Table 1.11: Distribution of vaccine mapping Source: Sanofi Pasteur International As vaccines... the cold chain must be monitored and controlled strictly from the reception at the airport until the delivery to Customers storage Below Table 1.12 describes is the temperature data monitoring from 20C to 80C during transportation and storage to ensure its quality before distribution to Customers Table 1.12: Vaccine temperature monitoring Source: Sanofi Pasteur International The distributors’ warehouse... testing requirements to ensure the safety and efficacy of the final product Every vial or syringe is needed to be inspected for product or container/ closure defect, packaged with insert into cartons, and stored while awaiting regulatory release and ship to customers A significant impact of the elimination of the preservative, their removal has had a great cascading impact on the manufacturing and supply. .. the profitability or gross margin, thus  constraint is still far away to be solved if the sales margin of allocated products is two low However, SP needs to revise its supply strategies to operate effectively and efficiently in order to reduce operational costs and maintain high satisfactory level of Customers In the below Ishikawa fish born diagram, many major categories causes of shortage and late... resources to develop 2 strategies: 1 Strategy No 1: 1 Strategy No 1: Focus on business excellence and Develop and expand of new market to optimize organization effectiveness to generate more sales accelerate clinical trial and faster registration of new vaccines to re-gain the market leader position and secure competitive advantage 1 Strategy No 2: Develop customer relationship management to maintain loyalty... population Birth cohort : 1.5M babies/ year Possibility to expand market in rural areas where vaccines are still not yet affordable in some poor provinces 2 Low awareness in vaccination against diseases, people focus on treatment only Possibility to cooperate with EPI to provide education & training on safety vaccination to the healthcare workers in provinces, as well as vaccination awareness to lay... Make to Stock Model Source: Sanofi Pasteur International Two main processes which must be carried out to produce a batch of vaccine are bulk manufacturing and finishing operations Picture 1.10 below shows the process mapping to produce and distribute vaccine to market: Bulk Form & Fill Active Ingredients Production Intermed Products Production Packaging Distribution Finish Goods Subsidiary or distributor... (Marketing, Supply, Medical) Flat organization facilitating quick reporting and decision making process Limited headcount challenges sales expansion in remote provinces FIRM STRATEGY, STRUCTURE AND RIVALRY (continued) Double loop learning to solve issue in the short term to defend the market share Prioritize regulatory objectives to faster the registration of new vaccines to regain the leader position in . impact the supply chain operations and to suggest solutions to improve the effectiveness of the supply chain management in order to increase the quality of service provided to Customers, to maximize. OPERATIONS Table 1.1: Organization chart of Sanofi Pasteur in Vietnam Table 1.2: Distribution flow of vaccines in private and public market in Vietnam Table 1.3: Vaccine Customers Mapping. II. IMPROVING SUPPLY CHAIN OPERATIONS: CHAPTER 1: INCREASING THE EFFECTIVENESS OF SUPPLY CHAIN OPERATIONS 1. Production capacity 41 2. Manufacturing 41 3. Sourcing / purchasing 42