What is the value of logistics for a large pharmaceutical firm?

Abstract

Understanding business needs arising out of both, external and internal environments, is an essential first step in determining the value of logistics in a large pharmaceutical firm. In this research, we have used a variety of conceptual models and frameworks to explore and understand the pharmaceutical business environment and its present & future business needs. Specifically, two questions anchored the research: What will be the impact of drug technologies on logistics activities? And, should logistics activities be outsourced? Drug technology contributes significantly to a pharmaceutical firm's revenue, but marketing also play an important role in a drug's success by influencing doctors' decisions in favor of the firm's drugs. Since it is difficult to ascertain the true value of a pharmaceutical drug, perception of service plays a critical role in conveying the positive attributes of the drugs to the potential consumers. In this context, this thesis investigates if logistics & supply chain strategy should be aligned with marketing and drug technology strategies to maximize pharmaceutical firm's competitive advantage.

(cont.) To this end, we investigated the impact of dominant drug technologies on the logistics function in the pharmaceutical industry as technology drives revenue growth in the industry. It was found that business & competitive needs lead firms to develop new drugs using different types of innovative drug technologies. Indeed, the requirements of different drug technologies are different and impact business decisions related to procurement, inventory, transportation, and facility network design in different ways. Therefore, by ignoring the impact of chosen technology on supply chain design, a firm will find itself in a difficult position. Thus, we strongly believe that supply chains play an important role in extracting the maximum value out of its huge investment in drug development and marketing. Therefore, outsourcing of logistics activities should be done only after analyzing how different drug technology categories will affect operational metric requirements of logistics activities and if logistics activities can protect the economic profits.