Executive Insight

Thursday, 22 October 2009 10:07

Strategic plant and office location critical for sustainable markets penetration and competitive advantage

Introduction

The pharmaceutical industry, along with many other industries, is fast recognising that the location of a production plant can be a weapon for competitive advantage and the key to an organisation’s long term profitability and ultimate survival.
This is in response to unprecedented changes within the business landscape that have necessitated closer scrutiny of all operations, business units and the location of new plants.
Countries around the world are battling to deal with rising healthcare costs due to a number of factors such as the pace of technological innovation, stress, unemployment, pollution and people living longer. Increasingly, the industry is realising that the strength of a brand name is no longer a factor when consumers make a purchase and there has been a move towards cheap generic drugs.

This move has prompted large international pharmaceutical companies to go in search for new markets instead of depending solely on the developed world for sales and profitability.

In the so-named developing world, the African market is one that presents numerous opportunities for growth. Currently dominated by US and European manufacturers, who sell through local distributors, it represents a market of over 750 billion people with a growing income per head.
Locating a plant on the continent could prove to be a prudent cost saver as local manufacturing would reduce transportation costs, especially from Europe and the US, and make the products more competitive.

An initial search for a vantage location site would require a number of steps to ensure viability. It is first highly important to solicit inputs from all parties who will potentially be affected by the decision to start a new plant. Potential locations should then be identified and detailed information gathered on the sites. A technical team should then examine the area from a topography and geology perspective. All the functional areas should be identified by drawing a corporate list. Geographic regions should then be evaluated in terms of key established criteria. The high scoring sites should then be subject to in-depth investigation. It would be up to the strategic department to examine each site in detail with frequent visits.

In respect of the abovementioned steps, South Africa presents a good opportunity for international pharmaceutical companies to set up shop. There are numerous reasons to support this idea. There are reliable air, road, rail and sea transportation facilities. The government offers tax incentives for direct foreign investments. Labour conditions are fairly stable. There are top class educational facilities and there is sufficient electricity, water and drainage.

On considering these factors, there are of course still many issues that have to be considered before embarking on this route. These include enlisting architects to determine the type of building that suits the site, testing and pilot running equipment to avoid unwarranted delays, constant communication between various areas that are involved in the project, investigating the logistical implementation, as well as analysing the training needs of the new set up.

It becomes clear from this analysis that when thought about in a comprehensive manner and implemented properly, the choice of a plant or an office location can indeed have an impact on an organisations bottom lime. The pharmaceutical industry was used as a case in point but this is certainly applicable in many industries, be they local or international, big or small.

Dr Douglas Boateng is the Founder, President and CEO of PanAvest International a 5PSCM niche business advisory, education, training, coaching and mentoring company. Dr Boateng’s goal is to assist companies to profitably extend their market reach through the application of long term innovative, Business Development Logistics and Supply Chain Management solutions. Dr Boateng is a FELLOW of the (a) Institute of Directors-UK & Southern Africa (b) Chartered Management Institute -UK (c) Chartered Institute of Logistics and Transport-UK and the (d) Institute of Operations Management-UK.

He holds a Doctorate in Engineering Business Management (University of Warwick-UK ) Focus: - Industrial Engineering, International Logistics and Supply Chain Management and an MSc Industrial Logistics (University of Central England-UK, 1991) and a postgraduate diploma in Transport planning and logistics management from Cranfield University.

The role of Information in enhancing total quality management and sustainable company

Introduction

As businesses strive towards optimum efficiency, Total Quality Management (TQM) has become an integral part of driving organisational processes and ultimately their financial success. Operating in today’s turbulent business environment has compelled organisations to scrutinise their business functions and determine how IT can enhance their TQM programmes and contribute to the bottom line.

Most business literature concurs that an organisation’s success depends on its products and services, its business processes and its people. The processes are the means whereby the organisation fulfils its goals and it is imperative that they work in the most efficient way possible and this is where TQM comes into play.

In essence, TQM aims to synchronise the elements of quality performance across the business. It strives for continuous improvement of the organisation and the elimination of wasted effort. Similarly, it could be thought as a means of ensuring that every job process is carried out in the right manner the first time and every time.

This is a concept that is applicable in any kind of organisation and across all departments within the organisation, especially the pharmaceutical industry. Due to the nature of the products, this is a zero defect industry and no errors are allowed in the final product. This may seem obvious, but one of the factors that separates it from other industries relates to the fact that not every product can be live tested to see whether it works. For example, if a printed circuit is faulty, the customer will find out and take it back and possibly have it replaced. A drug however has to always be fit for its intended use.
Use of Information Technology

There is no doubt that Information Technology has changed the way that organisations conduct their business operations, consequently there has been a dramatic increase in the use of information technology in TQM programmes. In part this has reflected the increased recognition by the pharmaceutical industry of its strategic importance for profitability and survival. The decline in real costs of computers and the growth in the number of standard software packages have contributed to this recognition.

There are a number of ways that information technology can facilitate the implementation of TQM, such as the ease of information dissemination. Successful TQM relies heavily on how information moves around the organisation. It is a way of feeling the pulse in order to pre-empt crises, avoiding major conflicts and trying to keep things running smoothly. Through IT, most unit managers

can keep everyone on site informed of major challenges within the organisation.
The use of IT in TQM has even more advantages, including the improvement in material flows through timely data acquisition, improved links with suppliers, reduction of required warehouse space, better obsolescence, integration of functional areas, market research in information technology, product design, and finally, field, performance and process data.

Caution!

As with any manmade system, there are some problems that may arise as a result of using Information and Technology in TQM. The use of IT programs requires the database to be highly accurate and in most instances this has not been the case, which results in mistrust of the system.

Other potential problems relate to the integration of people across geographical boundaries. Linking people into processes around the world through terminal and wide area networks can be challenging, with different cultures playing a significant role.

In addition, the pace of technological change is far beyond the industry’s comprehension. As one starts to get used to one system, a new system or an upgrade of the existing system comes onto the market, making it virtually impossible for some operators on site to master certain software.

Summary

Finally, experience has shown that all TQM programmes require management support and financial resources to be allocated to the appropriate training needs of employees. A potential problem with the latter is that if training needs are not met, employees end up learning how to use the software from their colleagues and often pick up their bad habits. Without total management buy in, it is likely to be more challenging to get employees to be enthusiastic about the programmes.

Dr Douglas Boateng is the Founder, President and CEO of PanAvest International a 5PSCM niche business advisory, education, training, coaching and mentoring company. Dr Boateng’s goal is to assist companies to profitably extend their market reach through the application of long term innovative, Business Development Logistics and Supply Chain Management solutions. Dr Boateng is a FELLOW of the (a) Institute of Directors-UK & Southern Africa (b) Chartered Management Institute -UK (c) Chartered Institute of Logistics and Transport-UK and the (d) Institute of Operations Management-UK.

He holds a Doctorate in Engineering Business Management (University of Warwick-UK ) Focus: - Industrial Engineering, International Logistics and Supply Chain Management and an MSc Industrial Logistics (University of Central England-UK, 1991) and a postgraduate diploma in Transport planning and logistics management from Cranfield University.

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