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DSM Anti Infectives Innovation And Supply Chains A Synthetic Combination Case Solution
DAI is a public limited company based in the Netherlands. The company operates in three segments, namely, production of pharmaceutical raw materials, food processing, and manufacturing of performance materials (RSM, 2008). This case study pertains to DSM Anti-infectants, which is one of the most prominent businesses of DAI. DSM Anti-infectants produces raw materials for pharmaceutical companies and has organized its activities in four cluster groups (RSM, 2008). The two most important products of DSM Anti-infectants are antibiotics and penicillin. DSM Anti-infectants is a market leader in these two product categories (RSM, 2008). The company manages its activities by organizing its functions around business cluster groups.
Following questions are answered in this case study solution
Development of Change Plan for the Supply Chain
Conclusion & Recommendations
Case Analysis for DSM Anti Infectives Innovation And Supply Chains A Synthetic Combination
The case study analysis evaluates the organization of the DSM Anti-infectants' supply chain. Despite being a global leader in the antibiotics and penicillin product segments in the year 2006, the company incurred a net loss (RSM, 2008). The earnings-before-interest-debt-and-tax of the company was 16% (RSM, 2008). The case study analysis implements supply chain management concepts to the case study to derive the course of action for the company.
2. Development of Change Plan for the Supply Chain
The change plan for the supply chain of DSM Anti-infectants rests on the application of the supply chain management concepts on the case facts. The net loss on the operations is an astounding outcome for a market leader in the product category. The objective of the company is to bring the anti-infective business back to sustainable profit by the year 2010 (RSM, 2008). The company did report a record profit in the year 2007, but the sustainability of this profit is questionable unless improvements in the supply chain network are implemented.
i. Application of Total Quality Management
Total quality management is a supply chain management tool that reduces the variability in the cost and specifications of the output in a production process (Zijm, Klumpp, Regattieri, & Heragu, 2019). The production process followed by DSM Anti-infectants is different from traditional methods of producing penicillin and antibiotics. DSM Anti-infectants follow enzyme-based production methods while the competitors in India and China follow chemical-based production methods (RSM, 2008). China has a cost advantage for the production of penicillin and antibiotics over other countries due to the following factors:
Chinese government subsidizes the production of pharmaceutical raw materials.
The raw material of plant-based glucose is readily available in China, while other countries need to import this raw material.
The cost of human resources and energy is lower in China in comparison to DSM Anti-infectants current manufacturing centers.
The comparative colder climate of China favours the production of pharmaceutical raw materials (RSM, 2008).
It is no wonder the case study mentions the Chinese manufacturing facilities possess a 25% cost advantage over other manufacturing systems based in other countries (Pagano & Liotine, 2020). DSM Anti-infectants will need to license their manufacturing processes to exist factors in China to obtain this cost advantage. The licensing of the manufacturing to third-party manufacturers entails the implementation of a quality management system like Total Quality Management (TQM). The implementation of TQM will curtail the cost and will maintain the quality of the product (Belvedere & Grando, 2017). Following the implementation of TQM on the production facilities, the production data will be collected each hour. The data of the costs, time, and output attributes will be converted into Pareto charts (Yoshizaki, Martínez, & Argueta, 2019). The chart will help to identify the variables which are most important for cost and time overruns or adversely affects the quality of the output (Dani, 2019). Charting scatterplots and cross-functional process mapping are the parts of TQM that will enable both cost-saving and quality consistency for DSM Anti-infectants.
ii. Application of the Variability Network
Variability network in the supply chain is the study of the difference between the actual and the planned lead-time for the arrival of the raw material at the production facility (Wisner & Leong, 2019). The application of the variability network is highly important in the context of DSM Anti-infectants because of its geographically dispersed manufacturing facilities. DIA possesses a very complex product flow of raw materials and intermediate products. There are eleven active production sites operated by DIA in eight countries (RSM, 2008). The transportation and storage of both the raw materials and intermediate products is a sizeable component of DIA’s supply chain cost. There is considerable room for the optimization of this cost. The cost of transportation and storage of raw material and intermediate goods is of two forms: namely, carrying cost and reordering cost (Kim, 2018).
If DIA reorders its raw materials frequently and maintains low inventory levels, then the cost of the supply chain will be too high. If the company keeps a large inventory to save on its reordering costs, then the total cost of the supply chain will still be high (Management Association, 2020). The application of the variability network will optimize this element of DIA’s supply chain. This framework will enable the company to reduce its overall supply chain cost and reaching a balance between inventory carrying and reordering cost (Wisner & Leong, 2019).
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