Pharmaceutical Consultancy Case Study
Introduction
CSfD’s primary business is to deliver effective software solutions to businesses. However, the range of services we offer goes beyond the simple delivery of a software product and this was exemplified by a project recently completed for an overseas government department for health. This involved the provision of consultancy services completely independently of any system provision.
The department originally contacted us in spring 2008 with a view to gaining assistance with the implementation of some warehouse automation equipment. This request was part of a broader objective to deliver on a commitment made by the government to provide a first rate health care system for the people of that country.
Before any recommendations could be made, a thorough study was carried out on the existing business processes, which resulted in a presentation to the ministry in November 2008. The initial report presented by CSfD highlighted many process related challenges that existed throughout the supply chain. The exercise culminated in a recommendation that the ministry implement an inventory control system that would connect all government health centres and hospital pharmacies with the main warehouse and logistics operation for the dissemination of drugs throughout the country.
At the time of this presentation, the ministry was still in the process of rolling out a corporate financial system and it was decided that it would be prudent to wait until this system was fully implemented before making any decisions about adding any new applications. In the meantime, CSfD entered into what would ultimately become a four phase assignment:
Phase 1: Detailed business analysis
Phase 2: Process optimisation and waste elimination
Phase 3: Change management
Phase 4: Process flow documentation
History
The main warehouse and logistics operation was established more than 20 years ago to provide drugs and medical equipment to government health centres and hospitals within the country. During this time the population and demand for goods and services has grown organically. The speed of growth coupled with medical and technological advances has meant that it has been very difficult for the main warehouse and logistics operation to embrace these changes and provide fully optimised business processes. Increasingly, demand has outstripped what the operation was designed to supply.
This culminated in a situation where the main warehouse and logistics operation was struggling to meet deadlines and a lack of technology was making the control of products and stock levels difficult. A summary of typical problems encountered included:
- A long tendering process, considerably in excess of target timescales
- Ineffective procurement practices with demand history not being captured
- Inappropriate material planning
- A lack of progress monitoring and follow up
- Excessive stock levels tying up capital and compromising limited warehouse space
- Unanswered and unrecorded stock transactions
- Excessive stock levels held at hospitals and health centres
- Zero stock situations
- A lack of trust in stock levels
- No stock visibility
- Potential to damage stock
- Double handling of stock
- Poor warehouse organization
- Lack of effective batch control processes
- Security concerns
- Limited transportation practices, including the delivery cycle not being controlled by the picking process
- No order tracking
CSfD Business Process Consultancy
While waiting for the completion of the roll out of the corporate financial system, CSfD has continued to assist the ministry with a project to optimise their business processes. Whilst recognizing that the main warehouse and logistics operation would benefit from additional technology being applied to their operations, CSfD also realized that the use of this technology could only ever be optimised if the business processes were rationalised and improved upon in the first instance.
To this end CSfD provided the ministry with a phased proposal, starting with an analysis that focused on the following areas:
- Progress monitoring and follow up
- Main warehouse and logistics operation security
- Warehouse safety compliance
- Main warehouse and logistics operation privacy and integrity
- Inventory management system
- Warehouse management system
Progress monitoring and follow up
This was very weak or absent and as a consequence set deadlines had become almost meaningless. No effective enforcement system was in place and this had led to crisis management type situations to keep the main warehouse and logistics operation operative. CSfD’s first recommendation was that an independent progress monitoring unit (PMU) should be set up. The advantages of the PMU are progress towards meeting deadlines, visible follow up activities, the avoidance of crisis (such as zero stock situations) and the elimination of waste in terms of time and money. The PMU has facilitated the optimization of the tendering process with an immediate forecast reduction in average time elapsed coming down from 9 months to 7 months. Further efforts hope to see this improved further, with a medium term target of 6 months.
Re-engineering the inventory system
This included a number of recommendations including, empowering the stock taking unit by allowing it to breakaway from the inventory section and operate as a separate unit under the control of the audit section. Another recommendation was empowering the material planning group (MPG). The MPG has been recommended to work according to the PMU system and will benefit from the creation of optimised reporting, monitoring of consumption and better communications with both buyers and user communities. The MPG has also taken steps to adopt some of the new corporate financial system utilities available.
The corporate financial system is primarily aimed at providing financial functionality but with some limited warehouse management functionality in addition. CSfD has worked with the main warehouse and logistics operation to optimize that existing functionality and have helped identify some elements of bespoke work, which could help with further improvements.
Warehouse management system
Storage of the drugs and equipment tended to be based on old, out dated and non-applicable rules or merely finding the first available space, all of which had led to an inefficient and overcrowded facility. The problems were exacerbated by a lack of any labelling system or use of bin locations. Such was the increased demand on the facility that staff had been reduced to picking from new arrivals rather than existing stock in order to execute orders being placed for urgent requirements and patients were being allowed to visit the warehouse in person to collect their prescriptions.
As part of the CSfD solution, we made regular visits to the warehouse advising supervisors on good practice, who in turn were able to work on stock clearance of expired and non moving stock items, initiate bin locations, re-design of the picking area and more profound distinctions between the varying functions within the warehouse.
Further recommendations
Further recommendations that have been initiated include:
- Buying goods based on quantity rather than economical size, with prices for different pack sizes agreed up front. An annual budget has been put in place to enforce internal budget control. Procurement practices now allow for periodic stock call offs and not merely single delivery on an order.
- ABC classification of stock. This system ensures that all category A (fastest moving stock) is always in stock and that stock of slower moving stock (category C and D) is kept to a minimum. Due to limitations with the current IT systems, this has only been introduced on a manual basis at present and therefore has not reached its full potential. Never the less, CSfD has been able to demonstrate the potential effect on stock holding of introducing such a system, which would see a reduction in the total stock holding of in excess of 40%.
- Buyers now have complete responsibility for projects throughout their lifecycle, including short dated items, overstocks, slow moving stock and selling on overstocks or short dated items.
- The ordering of products in dispensed sizes to avoid the associated hazards of managing open bottles or tubs in the warehouse.
Work in Progress
A number of recommendations have been accepted in principle and are being considered as work in progress:
- Smaller and more frequent delivery of products.
- An increase in the number of deliveries from main warehouse to health centres, pharmacies and wards.
- Health centres to be placed on the central system as satellite depots.
- Each pharmacy is to be placed on the central system.
- Automated orders for health centres.
- Full visibility of stock at all locations.
- Automatic orders for health centres.
Future direction
The project to date has been extended twice and been completed successfully on all counts; tremendous praise has been levied on the project participants by the ministry. The work completed has helped to lay the foundations for ISO accreditation and the ministry is now in negotiations with CSfD to further extend the contract into the foreseeable future.
Although the re-engineering of the business processes has been critical to the success of the project to date, it is recognised that there is a limit on how far this can deliver the ministry’s ultimate objectives. Certain of the recommendations can only realise their full potential if ultimately supported by an appropriate industry specific system. CSfD are in a position to deliver an appropriate system within a 12 month period and through the optimization of stock levels alone can promise an early return on investment.
