Building intelligent integration approach

Dr.Reddy’s, launched in 1984, is an amalgamated global pharmaceutical company providing both affordable and inventive medicines for better and healthier lives by manufacturing and marketing an extensive range of pharmaceuticals in India and abroad. It grew from a supplier of pharmaceutical ingredients to manufacturing of pharmaceutical products. Dealing in three business verticals — Pharmaceutical Services, Active Ingredients, Global Generics and Proprietary Products — Dr. Reddy’s has an annual revenue of $2.20 billion. Being a pharmaceutical company it continually exceeds its potential to sustain its excellence in the ultracompetitive global pharmaceutical market. In a two-part interview Ravi Prakash Mathur, Senior Director Supply Chain – Head of Logistics, talks about how Dr.Reddy’s administers its effective pharma supply chain logistics and management. (Here is the first part of the interview)

What are some of the things that you are doing right at Dr. Reddy’s to run a highly optimized and effective supply chain? What is mission critical to you at Dr. Reddy’s?
Dr. Reddy’s business is guided by the customer’s primary requirement “providing affordable and innovative medicines for healthier lives”. When customers need our medicines, they should be available on time and in full. Our whole supply chain is oriented to deliver on this primary objective without compromising on our core values and at the same time ensure that we meet the business objectives with respect to supply chain cost &operational efficiencies.
As part of its ongoing journey towards excellence and innovation, Dr. Reddy’s is embarking on an Intelligent Integration approach, where the organization is working towards end to end integrated planning across its global network where planning logic is being modelled to address the differential needs of various market segments.
Apart from this, business intelligence and analytics are being leveraged to get key insights into business trends and performance metrics on real-time basis, so that organization is geared towards addressing the real issues and root causes on proactive basis. This will ensure Dr. Reddy’s continues to be a flexible and fast paced organization, even as it grows in scale and size.

In this era where need for speed is of vital importance and the success or failure of a product or service is determined by its ability to achieve the required speed to market conditions, where do you see the importance of nimble and agile supply chain solutions for a pharma company like Dr. Reddy’s?
An agile supply chain is capable of responding in time to fluctuations in customer needs and external environment. For pharma industry these are equally important. Earlier, companies used to carry excess inventory or used to expedite order processing to react to fluctuations in customer needs or capitalize on unforeseen market opportunities. This option entails high cost of carrying inventory & operations and carries the risk of inventory obsolesce. In Dr. Reddy’s we believe that the supply chain success will come through becoming more nimble and agile even as we grow in size and business complexity. Hence the current focus is on leveraging the intelligent integration of processes to reach the desired state and to enhancing the supply chain capabilities on ongoing basis.

By your own assessment how robust is the supply chain process at Dr. Reddy’s?
The supply chain of Dr. Reddy’s is oriented to realize availability of affordable and innovative medicine to patients on time. Given the current size and scale of Dr. Reddy’s , we are working towards developing supply chain optimization capabilities, where we still continue to offer the customer service levels which our customer expect from us but we are also able to manage our costs and inventory in the most optimal manner.

Where do you see the role of technology in differentiating the unique supply chain capabilities that you are responsible for building up at Dr. Reddy’s?
Conceptually the basics of good supply chain planning and execution are well known across organizations. Still many organizations struggle to reach the desired supply chain optimization. The challenge comes due to scale and complexity of a global organization, where beyond a point manual interventions do not help and well-designed systems are essential to develop supply chain capabilities.
Translating the basic supply chain best practices into tangible business success can be realized by leveraging the capability of technology, where end to end integrated planning and execution systems are embedded with the differentiated supply chain optimization logic developed by SCM team of Dr.Reddy’s. The combination of using standard technology solutions having Dr. Reddy’s specific customizations will be the key differentiator.

Within your pharma export how much of it goes by air and how much by ocean? And what do you think is the ideal proportion (between air and ocean in export) for you in your supply chain management?
Currently for Dr. Reddy’s, 40 percent of export shipments happen by air and the balance 60 percent by sea. Given the work being done towards end to end integrated planning, there is scope to do higher percentage of its shipments by sea. The air shipments mainly are happening to realize growth opportunities.

Do you see a gradual model shift in your export favouring ocean transport?
We do see a significant shift towards a model favouring ocean transport. However one must realise that ocean transport also implies higher transit inventory levels which then become vulnerable to uncertainties of demand. The ocean transport model also implies that you always have to replenish to top up to the higher target inventory levels. So, while ocean transport is a good model, it has to be used intelligently and with full knowledge and understanding of the demand pattern of your own product. It also has to be used carefully where the ocean transit times are very high and where trade lanes are prone to port congestions.

What makes you decide or favour air transport?
Given the cost structure of air transport vis-à-vis sea shipments, it is not advisable to use it as a default means of transport. Hence we prefer air transport only for business scenarios, where the benefit of being faster outweighs the cost associated with air shipments. We favour air shipments for tactical decisions to realize business opportunities.