Read the case study provided and answer the following questions.

PLAYING THE CHAMPIONS LEAGUE: SUPPLY CHAIN LESSONS FROM CONSUMER GOODS COMPANIES

Pharma executives need to place more value on supply chain excellence and reconsider the way their supply chains are

managed. The best way for pharmacos to get up to date on global best practices is to understand how supply chain

champions in other industries simultaneously deliver superior performance in cost$,$ service levels, and capital effectiveness.

The value at stake is significantin consumer goods, for example, supply chain champions achieve on average $4$ percent

higher EBIT than their peers.

For decades now, executives in the pharmaceutical industry have not viewed supply chain management as especially

important. Their indifference appeared to be warranted: high gross margins justified building enormous inventories and did

little to encourage management to think about holistic approaches to the supply chain. But that was then. Today, the

pressures on the pharmaceutical sector mean that traditional industry mindsets about the value of modern supply chain

management practices have to changeand quickly. For a start, pharmas that intend to grow in emerging markets will have

to apply different supply chain models to be successful. What works to distribute products to consumers in Germany or

Japan will not be anywhere as near as effective in rural China. At the same time, demand is becoming more diverse tender

markets, for example, increasingly require enormous flexibility in capacity and supply. Quality issues are also driving the

need for managers to be accountable for their supply chain practices. As concerns about drug quality become big news

rattling consumer confidence and raising regulators hacklesthere are more and more calls for, among other things, better

traceability of batches across the full chain. Furthermore, efficiency programs have yielded results on cost and inventory

across key parts of the value chain, but not necessarily to the bottom line.

There is a greater need to see how the supply chain operates from end to end. A typical question might be: What is the

value of delivering in a more agile way to the regional warehouse if this just leads to one days worth of additional inventory

in that warehouse? Furthermore, research shows that supply chain practices also directly drive differences in performance.

In consumer goods, supply chain champions had on average $4$ percent higher EBIT than median performersa difference

that is directly attributable to superior supply chain performance. Why would this differ in pharma? Initial research shows

this could be as high as $7$ percent for the pharmaceutical industry. These are just a few examples to illustrate the increased

demands on pharmaceutical supply chains. Now comes the issue of how to respond to those challenges. Although there

are real opportunities for improving supply chain management in pharma, there are no easy ways to do so$.$ Managing the

supply chain is a complex and constant endeavor. It is markedly different from working to establish operational excellence

at a single supply point, such as packing and shipping from one distribution center. All participantsfrom raw materials

suppliers and production teams to warehousing staff and transportation providersneed to work together across the chain

in a coordinated way to derive the full impact of best practice in supply chain management. This has two direct implications.

First, there has to be a clear and easily interpreted supply chain vision. How do we want to organize our supply chain in the

future, and why? How does this differ from today? What results do we expect from that new setup? What skills do we need

to manage the end$-$to$-$end supply chain, and which of those skills do we lack? Without the alignment of all stakeholders

around such a vision, there are perpetual risks of suboptimizing the process and causing friction and mistrust between the

business functions involved. The second implication is that there is no room to delegate a supply chain transformation to a

staff function or to one of the line functions. Leading and taking a one$-$directional commitment is a topic for the senior

management agenda. In general, it must be a senior managerthe chief executive officer, the chief operating officer, or a

business$-$unit headwho directly oversees and steers the improvement program and holds the appropriate managers

accountable.

As pharma executives think about how to re$-$invent their supply chains, they may be daunted by the enormity of the task.

But they can take comfort from the fact that other industries have blazed most of the necessary trails. Manufacturers such

as Procter & Gamble $($P&G$),$ Unilever, and Nestl are some of the exemplarscompanies that can boast long$-$proven and

highly effective practices and continual reinvestment in new thinking about supply chain efficiencies.

Product portfolios in pharma are far more complex than is typical of families of consumer goods products average

revenues per stock$-$keeping unit $($SKU$)$ can be many times higher. Complexity involves longer production lead times, multi$-$

stage manufacturing, the need to never be out of stock because of the implications for patients, and the stringent quality

regulations that govern the industry. The counterargument is that it is also true that many aspects of pharmas supply chains

are simpler than those in consumer goods. For instance, there is little sudden variability and predictability in demand for

most pharmaceutical products after launch by contrast with consumer products such as yogurt, mobile phones, or apparel.

In short, we contend that the intrinsic differences are not enough to prevent pharma executives from adopting proven

practices from the consumer business. So$,$ what are the specifics that pharma managers can learn from their colleagues in

consumer goods? Most important, supply chain champions focus on many fronts simultaneously.

Source: Boeck, P and Mishra D $(2022)$

QUESTION $1$

$[30$

MARKS$]$

$1\mathrm{.}1.$ As highlighted in the case study, What works to distribute products to consumers in Germany or Japan

will not be anywhere as near as effective in rural China. Critically discuss if you agree with the statement and

provide relevant evidence to substantiate your response.

$(10)$