$$Case $14-2$ Sarin Pharmaceuticals Ltd$.$

Alan Mannik, Director of Purchasing, Sarin Pharmaceuticals Ltd$.($Sarin$)$ Animal Health Division in Vancouver, British Columbia, planned to transfer eight products from the company's plant in France. On June $11,$ he held a conference call with Francois Simpson from the sarin site in Arras, France, to discuss the details of the transfer. It was Monday, June $2,$ and Alan needed to prepare for a meeting scheduled to review the transition to procurement. He paid special attention to the supply of raw materials and packaging.

SARIN PHARMACEUTICALS Ltd$.$

Founded in $1865,$ Sarin is headquartered in New York City and has a reputation for excellence and innovation in the discovery, development and production of medicines for humans and animals. Over the past year, the company had revenues of $$12$ billion and net income of $$1\mathrm{.}4$ billion. The company employed more than $45,000$ people in $60$ countries.

Sarin was divided into four segments: pharmaceuticals, vaccines, consumer health and animal health. The pharmaceutical division accounted for approximately $70$ percent of the company's revenues, while the vaccines, consumer health and animal health divisions accounted for $13$ percent, $10$ percent and $7$ percent of Sarin's revenues, respectively. The Pharmaceutical Division developed and produced drugs to treat a range of serious and chronic diseases such as cancer, epilepsy and heart disease. The Vaccines Division produced vaccines for children and adults to prevent a range of infectious diseases, including hepatitis A and B$,$ polio and influenza. The Consumer Health division focuses on a broad range of consumer health products in the areas of skin care, wellness, for the oral cavity and nutrition. Animal Health's smallest division developed and manufactured medicines for livestock, poultry and pets.

Sarin is focused on its strategic mission to discover, develop and bring healthcare products to market in an effective manner that addresses unmet medical needs. As a result, the company recently sold a number of operations that were not consistent with the company's strategy. A number of businesses have recently been acquired that complement Sarin's strategy, and additional acquisitions are expected to be announced next year.

ANIMAL HEALTH DEPARTMENT

The animal health department is facing major changes. The company recently acquired Milway$-$Kitsch Animal Health $($MCAH$),$ which will make Sarin the world's number one animal health product. Sarin has traditionally been a leader in large animal drug production and also has a strong presence in Latin America and Asia. MCAN, on the other hand, had strong product lines in the North American pet market and vaccines worldwide. They also had superior organizational strength in Europe and Australia. It was planned that the merger of the two firms would create a single integrated division that would allow Sarin to realize the vision of the Animal Health Division: $$We will be a driving force in the animal health industry. $"$ The combined company's manufacturing facilities totaled $46$ in $35$ countries.

ACQUISITION

The veterinary product manufacturing process required the acquisition of a wide range of chemical compounds, syringes, bottles, packaging materials and labels. Most of the products produced by Sarin were subject to strict regulatory requirements such as content, unit scale, language and dosage, which varied from country to country. The purchasing organization at the Vancouver plant was responsible for purchasing more than $1,600$ units of raw materials and packaging at a total annual cost of $$22$ million $($Canadian$).$ Each item had to be purchased from an approved sarin supplier. The approval process included a series of tests and checks, which could take a year to complete, and included the following steps:

$1.$ A copy of the standard operating procedures for the product must have been provided and approved by Sarin.

$2.$ A certificate of analysis of the batch of samples manufactured in accordance with the process specified in the standard operating procedure should have been provided.

$3.$ Testing required three random samples from different batches along with a certificate of analysis. These samples were tested with sarin and the results were compared with the certificate of analysis.

$4.$ The supplier's processes and capabilities must have met acceptable standards in product development, quality control and manufacturing.

$5.$ A pilot batch of Sarin will be launched at the plant using supplier materials and tested.

$6.$ Only after the supplier has successfully completed stages $1-5$ can the product be used in production. The first three shipments shipped by the supplier were required to undergo sarin testing. The supplier will only be approved if all three lots are approved. Future deliveries will be subject to periodic tests.

CLOSURE OF THE FRENCH PLANT

In March, it was announced that France's only veterinary sarin plant wou