Improving the accuracy of sales forecast a case study of OPV pharmaceutical company in vietnam

MASTEROFBUSINESS ADMINISTRATION HoChiMinhCity–Year2020... MASTEROFBUSINESS ADMINISTRATION SUPERVISOR:PHANTHIMINHTHU HoChiMinhCity–Year2020... 1.2.OrganizationCharts Figure1:OPVOrganizati

MASTEROFBUSINESS ADMINISTRATION

HoChiMinhCity–Year2020

MASTEROFBUSINESS ADMINISTRATION

SUPERVISOR:PHANTHIMINHTHU

HoChiMinhCity–Year2020

EXECUTIVESUMMARY

OPVisleadingpharmaceuticalcompnayinVietnamwhichhaveonefactorywithWHO-GMPc e r t i f i c a t e inDongNaiprovinceandlargedistributionnetworkinnationwide.Consequently,OPValwayscommitstoprovideproductswiththehighestinternationalstandardstocustomers

Firstly,weintroducethehistoryandtheorganizationchartofOPVpharmaceutical.Aboutoverview,OPVhasthelargestportfoliooftheregisteredpharmaceuticalproductsinVietnam,i n c l u d i n

g OTCandtheprescriptionformulationsacrossimportanttherapeuticclasses.Inthisthesis,weonlyfocusinanalyzingresponsibleandactivitiesofPlanningteamforunderstandingp r o b l e m s ofOPVpharmaceuticalcompany

Inthenextchapter,alloperationactivitiesinthedealer’schannelwillbeanalyzedtofindthep o t e n t i a l problemsthroughallsymptomsmanifestingoutsidewhichwecanobservationandperception.AccordingrealdataofOPVcombiningwithliteratureandtheory,wedemonstrateda n d pointedoutthecentralproblemofdealer’schannelthatarerawmaterialshortageandthisp r o b l e m alsoleadstolowperformanceanddon’tachievementtarget2018ofdealer’schannel

Thisthesiswereusedthetheoryinformedtoidentifythepotentialcauses,whichmadetherawm a t e r i

a l shortageindealer’schannelandinferredrootcauseisinaccuratedemandforecastingw h i c h basedonimpactedrangeandimportantlevel.Finally,wehavethecause-and-

effectd i a g r a m ofrawmaterialshortagethatpointedoutrelationshipofallfactorsfromsymptomsto

r o o t causeinissueofdealer’schannel

Wehavealsogivensomeidealsforthesolutiondesignbycomparingefficientandaccuracyb e t w e e n twodemandforecastingmodelthataresimplemovingaveragemethodandlinearregressionmethod.Inthisexperiment,weusedsalesdata2017forhistorydataandappliedt w o demandforecastingmodelforpredictsalesforecast2018.Afterthat,wewouldcomparet h e resultswiththesalesactualsalesdatain2018forfindthebettersolution.Atthelast,nexto n e providessomeidealsforthedesignofchangeprocessindemandforecastofdealerchannel,t o beusedfortherealizationofthesolution

Tobecontinuedwiththesuggestedplanfordeployinglinearregressionmethodindemandforecastingthatwereexpressedandexplainedclearlyonthischapter.Wedetailallstepsfromt h e datapreparationtotrainalldepartmentsaboutthenewdemandforecastprocedureandexecutethelinearregressionmodel.Atthelast,evaluationandadjustmentwillbedoendofy e a r toensurethemodelalwaysimprovementandefficiency

Intheconclusion,basedonaquantitativeandaqualitativeanalysisofsalesresult2018ind e a l e

r ’ s channel,wecanbeconcludedthatthemainproblemindealer’schannelofOPVisshortageofrawmaterialandtherootcauseofmainproblemisinaccurateforecasting.Ther e s e a r c h aimdtoidentifytheeffectiveforecastingmethodsfordealer’schannelbyusinglinearregressionmodelandtheresultsindicatedthatthismodelisimprovementinmoreaccurateandm o r e efficientthanothermodel

Thenextpartwereshowedthedetailsoftwotypesofdatausedinthisthesisthataresecondaryd a t a wascollectedfromquantitativedatasuchasfinancialreports,salesreports,policies, andp r i m a r y datawascollectedfromqualitativeresearchandusedthein-

depthinterviewasthem a i n method.Additionally,wealsoattachedresultsofexperimentinmakingdemandforecastingbyusinglinearregressionmodelandsimplemovingaveragemodel

Finally,thisisthelistofallthearticlesandallthejournalsthatwereusedinthisthesis.Thosei n f o r m a t i o

n usedforverifyinganddemonstratingthepointedoutproblemsandcausesthatareurgentandimportanceinthedealer’schannelofOPVaswellassuggestedsolutionissuitablea n d reasonableforsolvingthemainproblem

1 CHAPTER1:INTRODUCTION 4

1.1 CompanyBackground 4

1.2 OrganizationCharts 4

2 CHAPTER2:PROBLEMIDENTIFICATION 8

2.1 ProblemContext 8

2.2 IdentifyingandDiagnosingTentativeProblems 10

2.2.1 Shortageofproduct 11

2.2.2 Theprolongedcompletiontimeofsalesorders 12

2.2.3 Thehighrateofoverduesalesorders 13

2.2.4 Highcompetitiveprice 14

2.3 VerifyingTentativeProblems 15

2.4 Identifythecentralproblem 21

2.4.1 Highcompetitivepriceproblem 21

2.4.2 Thetardyworkprogressinproductionplanningtask 22

2.4.3 Thecentralproblemisrawmaterialshortage 23

3 CHAPTER3:CAUSEVALIDATION 25

3.1 Potentialcauses 25

3.1.1 Potentialcause1:Ingredientisoutofdate 25

3.1.2 Potentialcause2:Deliverydelay 26

3.1.3 Potentialcause3:Materialisusedforanotherproduct 27

3.1.4 Potentialcause4:Shortnoticefromplanning 28

3.2 Rootcausevalidation:Inaccurateforecastingcause 29

4 CHAPTER4:ALTERNATIVESOLUTIONS 32

4.1 Thefirstalternativesolution:theforecastingmethodbasedonthesimplemovingaverag e(SMA)technique 33

4.2 Thesecondalternativesolution:theforecastingmethodbasedonthelinearregressiont e c h n i q u e 34 4.3 Comparisontwomethods 35

5 CHAPTER5:ACTIONPLAN 38

6 CONCLUSION 40

7 SUPPORTINGINFORMATION 41

8 REFERENCE 53

9 APPENDIX 57

1 CHAPTER1:INTRODUCTION

1.1.CompanyBackground

Forover65years,OPVhasbeenaleaderinthePharmaceuticalsectorinVietnam.OPVp r o d u c e

s manufacturingservicesformultinationalcompanies.TheOPVfactoryisWHO-

andmarketsOPVbrands,developsproductsforthirdpartydistributors,andprovidescontract-GMPc e r t i f i e d andoperatestohighestinternationalqualitystandards

Additional,OPVfactoryhascapabilitytoproducemanydifferenttypesofproducts(drugs,liquid,solid,creamandointment).Theproductionequipmentandfacilitiesareinvestedtomeett h e requirementsinhighqualitystandardswhichexpectedfromOPVmultinationalpartners

Asaresult,OPVhasbecomethepartnerofchoiceofworldleadingpharmaceuticalcompaniesi n c l u d i

n g MSD,GSK,Johnson&JohnsonandOtsuka.Furthermore,thebusinessismanagedb y atalentedprofessionalteamwhobringdeepindustryexpertiseandhighethicalstandardstoeverythingwedo.OurstaffareamongstthebestinVietnamandwevaluethemascriticalt oOPV’ssuccesssothatOPVhasthelargestportfolioofregisteredpharmaceuticalproductsi nVietnam,includingOTCandprescriptionformulationsacrossimportanttherapeuticclasses

OPVhasdedicateditselftocontinuouslyimprovingitsoperationstomeetcurrentinternationalq u a l i t y standardsandtoprovidereliableprofessionalservicestoitscustomers,bothlocalandmultinational.Finally,OPVwillcommittoimproveaccesstoaffordablemedicinesandhelpp a t i e n t s “StayhealthybycombiningtechnologiesoftheworldandthetraditionsofVietnam”

1.2.OrganizationCharts

Figure1:OPVOrganizationChart

Source:OPVAnnualReport2018

OPVcompanyhavethesixprimarydivisionswhichpresentsfortheimportantaspectsinthep h a r m a c e u t i c

a l companythatare

- RegulatoryAffairsDivisioni s a c c o u n t a b l e f o r licensinga n d m a i n t a i n i n

g p h a r m a c e u t i c a l productsofOPV.TheyresponsibleforcompliancewiththepoliciesofD r u g AssociateVietnam-DAVinallOPVactivitiesandOPVproductportfolio

- CommercialDivisionisaccountableforsalesperformanceofOPVandengagecorec u s t o m e r s incompanyactivityaswellasmaintaingoodrelationwiththecustomerstoimprovethecompanyimageinfieldandinfrontofthecustomers

- SupplyChainDivisionisaccountableforallsupplychainactivitiessuchassupplyplanning,demandplanning,inventorymanagement,importplanning&forecasting,w a r e h o u

againstpre QualityDivisionisaccountableforallproductionactivitiesaredeliveredtotheOPVs t a n d a

r d ofqualityanddrivescomplianceinaccordancewiththeapplicableregulatoryrequirements,theOPVQualityManagementSystem,Policiesandwrittenproceduresandindustrybestpractices

- ProductionDivisionfocusesonensuringthatallOPVproductsareproducedtotheh i g h e

s t standardsofquality,safetyandefficacyandareavailablewhenneeded.ProductionDivisionisaccount able i nmaintaining andhandlingadvanced p h a r m a c e

u t i c a l manufacturingequipment,andsoftwarethatcontrolsmanufacturinge q u i p

m e n t followingGMPdocumentationandotherformalized,rigorousprocedures

- Support&OperationDivisionisthecentralcoremanagementfunctionofOPVwhichinvolvesmanagingpeople,equipment,technology,information,andalltheotherr e s o u r c e sneededintheproductionofgoodsandservices

OPVarecommittedtooperatingatthehigheststandardsofcorporategovernance.Mostofsystemsandprocessesarewell-

definedtoensureminimumwastageoftimeandmoney.Webelieveourgovernancestructureunderpinsourabilitytodeliverthecompanystrategytocreatelong-

termvalueandbenefitforourshareholdersandstakeholders.‘Efficiency’wasaddedasa partof‘OPVCoreValue’.

Inthisthesisscope,wewillgodeeplytothestructureofthePlanningDepartmentwhichholda c c o

u n t a b l e inorganizingproductionaccordingtodemandandqualitystandardsaswellasc o m m i t t

i n g materialsandequipmentareavailablewhentheProductionneededandensuringeverythingrunssmoothly

Figure2:PlanningDepartmentOrganizationChart

Source:OPVOrganizationChartThetotalheadcountofPlanningdepartmentisfouremployeesthatincludeonemanagerandt h r e e staffswiththespecificationandresponsibilitybelow:

- PlanningManagerareinchargeofdevelopingthestrategiestoincreaseproductione f f i

c i e n c y andoutputinwhichisresponsibleforcreatingabetterworkflowthatusesc o m p a

n y resourcesmoreeffectivelyandoverseeallaspectsallproductionprocessandr e c o m m e n d changesasneeded.Additionally,productionplanningmanagerssharei n f o r m a t i o naboutthefutureproductionchangeswithothermanagersandworkcloselyw i t h othermanagersofotherdepartmentstoensureacohesiveshippingprocess

- PlanningStaffisresponsiblefortheaccuracyandtimelinessoftheproductionprocessb y maintaininganaccurateinventoryofitemsproduced,aswellasensureallcompanyandindustrystandardsandregulationsarefollowed.Dutiesincludeaspecificfocusont h e materialsandgoodsrequiredintheproductionphase,ensuringtheworkingr e q u i r e m e n t s isproperlymaintainedinordertohaveoptimalperformance

TheplanningdepartmentplaysacentralroleinthemanufacturingandtheproductionforOPVorganizations,thisprocesscanberesponsibleforOPVsuccessorfailureinthesecoreareasofresponsibility.Therefore,PlanningdepartmentshouldbetheonetocommitthatOPVgoodsa r e producedontimefordistributioninaprofitablemanner.ThisleadtothegoalofPlanningd e p a r t m e n t istoensurethesmoothandcost-efficientflowofOPVproductionoperations

Insummary,theroleofPlanningdepartmentistoensurethatmaterialsandequipmentarea v a i l a b l ewhenneededandthateverythingrunssmoothlysothatPlanningdepartmentinvolvesw h a t toproduce,whentoproduceit,howmuchtoproduce,andmore

TheOPVbusinessinVietnamwithapproximately300employees,focussesonbringingthep r e s c

r i p t i o n medicinesandhealthcareproductstoVietnamesepatientsandconsumersthrought h r e edistributionchannelasbelow

- RetailChannel:OPVsalesteamsdirectsellanddistributetheproductsunderOPVb r a n d s topharmcystores(forOTCproducts)andtohospitals(forETCproducts)

- DealersChannel:OPVfactoryproducestheproductsunderOPVbrandsaccordingtos a l e s ordersofthedealersandthedealerswillselftomakesalepolicybasedontheirb u s i n e s s andtheirresource

- ContractManufacturing:ThepartnerssuchasMSD,GSK,J&Jwillprovidematerialf o rOPVfactoryproducestheproductsunderpartnerbrandsbasedoncontracttermsb e t w e e nOPVandpartners

Inboundaryofthisthesis,weonlyresearchtheperformanceofthedealerschannelin2018bya n a l y z

i n g salesresultsdatacombiningwiththeoryandinterviewresultsfromheadofrelatedd e p a r t m e n t s todefinetheissuesandsuggestthesolutionsforperformanceimprovement

TheTydolproducttemporarilyrelievesthecommonc o l

frommildtomoderateincluding:toothache,painofosteoarthritis,headache,s o r e throat,p a i n i n coldandf l u ,

d y s me n o r r h o e a , migraine,painaftervaccinationort o o

t h extraction

Until2018year,OPVonlyhaveapprovalvisaofDrugAdministrationOfVietnam(DAV)forTydolproductinthedistributionthroughdealerschannel.ItmeansthatTydolproductofOPVo n l y distributesindealerschannelandoncontrary,theagentsonlysaleTydolproducttothec u s t o m e r s aswell

Inthedevelopmentstrategyfor2020–

2025period,OPVwillstepupagentsnetworkextensiona n d willplantogettheapprovalvisaformoreOPVproductwhichbedistributedthroughd e a l e r s channelbecausethestiffcompetitionfromrivalsinotherchannelsandthechangesinm a n a g e m e n t policyofVietnamgovernmentinpharmaceuticalmarket.Thataredevelopments t r a t e g y ofOPVduringperiod2020–

20225,OPVallocatealmostallresourcestosupportthed e a l e r s andimprovesalespolicyfordealers

2 CHAPTER2:PROBLEMIDENTIFICATION

2.1 ProblemContext

In2018,OPVhaveagoodgrowthyearespeciallytheoutstandingperformanceofthecontractm a n u f a

c t u r i n g teambutunfortunatelytotalsalesrevenueonlyachieves312.1billionVNDanda p p r o x 96.5%ofsalestarget2018(325.7billionVND)thereforetotalsalesrevenuein2018d o e s notmeetsalestargetofBoDin2018

Unit:VND’Billion

AllOPV

TargetR

ev e n u e2018

ActualRevenue2018

Diff

e r e ntA c tu a l 18 v s Target 18VND’ Billion %

qualityofOPVproducts.FromthatOPVhasfocusedtodevelopindealerschanneltopushs a l e s growthwithoutstiffcompetitionfromrivalsasinretailchannel.However,revenue2018o f dealerschannelstilldon’tmeetexpectationofBoD(shortage13.4billionVNDvstarget)

Thesalesresultoffirstsixmonths2019comparingbetweentargetandactualasbelow

Unit:VND’Billion

AllOPV

ActualRevenue2018

TargetRevenue2019

ActualR

ev e n u e2019

Thepoorperformanceindealerschannelcontinuetoshowinsalesresultoffirstsixmonths2 0 1 9 byonlydealerschanneldoesnotachievetarget(shortage2billionVNDvstarget).

Firstly,thetargetofBoDin2018willbeanalyzedtoensureOPVsalesteamcouldachieveb a s e d oncurrentresourcesofdealerschannelwithoutnewagentsdevelopment

r om 2017

Newin20

Moveto2019

Table3:SalesordersofDealer’schannelin2018

Source:OPVSalesPerformanceReport2018Theactualrevenueofdealerschannelin2018is118.4billionVNDincluding78salesordersd e l i v e r ycompletionwhich27salesordersremainedfrom2017andonly51salesordersisnewi n2018.However,totalsalesordersofdealerschannelhavein2018thatare103correspondingw i t h 147.1billionVNDrevenueanditishigher15.2billionVNDthanthetargetofBoDis

131.9billionVND

Incaseofexclusionsallproblemsalesorderswhichhavestatusincancelorholdthenthetotalr e m a i n i n g revenueis141.2billionVNDandstillhigher9.3billionVND(approx.7%)thans a l e s targetis131.9billionVND.Thisleadtodealerschannelwerebeablenotonlyachieveb u t alsoovertarget2018ifallsalesordershavebeencompleteddelivery

Secondly,thetargetofBoDin2018isrealisticsothattheperformanceindealerschannels h o u l

d beconsiderationfordefiningtheissuesintarget2018achievementofBoD

Figure3:Comparisonofmonthlysalesbetweenactualandtargetin2018

Source:OPVSalesPerformanceReport2018

Theactualsalesin2018forallOPVchannelsis312.1billionVNDandlowertherevenuetarget2018ofOPVis325.7billionVNDinwhichtheperiodtimefromJantoMay,thesalesr e s u l t s seemtobegoodbecausethesalesresultpermonthslightlyhigherthanrespectivesalet a r g e t Afterthat,thesalessituationstartstodeclineincreasinglyfromJun

Totalsalestargetandactualrevenueofeachchannelin2018asbelow

Figure4:Salestargetachievementofallchannelsin2018

Source:OPVSalesPerformanceReport2018Comparisonthesalestargetachievementin2018betweensaleschannels(Retail,DealersandC o n t r a

c t Manufacturing),theDealerschannelhaslowestachievementratewithcompletion8 9 8 % ofthetarget(correspondingto118.4billionrevenuevs131.9billiontarget)againstwith9 9 6 % byOPVBrandsinRetailchannel(correspondingto165.2billionrevenuevs165.8b i l l i o n target)and101.6%fromOPVContractManufacturing(correspondingto28.4billionr e v e n u e vs28billiontarget)

UnderperformanceinDealersChannel

Theconclusionthatthelowperformanceindealerschannelhasleadedtofinalsalesresultonly

118.4billionVNDandlower13.5billionVNDthanthetargetrevenueofBoDin2018is131.9b i l l i o n VND.Finally,thesymptomis“salesperformanceindealerschanneldoesn’tmeetsalest a r g e t ” orbebrieflycalled“underperformanceindealerschannel”

2.2.IdentifyingandDiagnosingTentativeProblems

ThisthesisusesdatafromtheinterviewscombiningwiththesalesdataofOPVtofindanda n a l y s i sthepotentialproblemswhichmakeunderperformanceindealer’schannelby2018.W etaketheinterviewwithMr.Nhân-BusinessDevelopmentManager,Ms.Trinh-PlanningManager,Mr.Nik-

ProductionManagerandMr.Thắng-CEOofĐạiPhátCorp–

DealerofOPVbecausewedesireobservationfrombothdirectionsthatareinternalandexternal.A d d i t i o n a l , wealsoanalysisthesalesdatain2018tohavemorequantitative

dataforanoverviewabouttheproblems

Thesymptomis“underperformanceindealerschannel”andthesecondarydataisshownthatt h i s isissuesofOPVanddonotissuesofthedealerssothatwejustinterviewonedealerwhichi stheDaiPhatcompanyforrepresentingallthedealersofOPV.Furthermore,alltheinterviewq u e s t i o n s ofdealersonlyusetoverifyandconfirmthesecondarydatawhichalreadymanifestt h e problemsofOPVdealerschannelfully.

2.2.1 Shortageofproduct

ThedealerschannelofOPVgettotal76newsalesordersin2018butOPVonlycompleted51s a l e s orders(approx.67%)andstillremained17salesordersforongoingandpostponeto2019( a p p r o x 22%).Additional,theholdandcancelstatusinthesalesordersproblemsrelevantlatei nProductionoccupied10%with8salesorders

Figure5:TotalnewsalesordersofDealer’schannelin2018

Source:OPVSalesPerformanceReport2018Thisresultshowsthatdealerschannelhave76newsalesorderscorrespondingtorevenueis

108.4millionVNDbutthemanufacturedproductquantityonlyenoughdeliveredfor51saleso r d e r s correspondingtorevenueis79.7millionVNDthatoccupiesapproximately67%totalq u a n t i t y and74%totalrevenueofnewsalesordersin2018

Accordingly,thequoteintheinterviewofBusinessDevelopmentManagerpointedoutthat

OPVdon’thavesafetystockpolicyclearlyforTydolproductsowearealwaysshortageofTydolproductforurgentordersorduringpeaksalesseasonsuchas3monthsendofyear

andCEOofĐạiPhátCorpcomplainedabouttheshortageofTydol

TheshortageofTydolproductmakeuschallengesinsigncontractandkeepcommitmentwitho u r customers

Astheresult,theshortageofTydolproductisrealproblemofOPVdealer’schannelin2018w h i c h leadstothelowperformanceofdealer’schannelespecially3monthsendofyear2018

Sales Order Production Planning OPV’s

ThedealersfeedbackgoodincommunicationofOPVsalesandsupportfordealersbutthetimet ocompletetheordersaresolongandregularlyoverduedeadlinedelivery

Ms.Trinh–PlanningManagertalkedaboutthisissueaffectingherteamperformancethat

Wehaveeffortsduringtheyearformakingthebestproductionplanandkeepingsafetystockpolicyinretailchannelandcontractmanufacturingbutwefailedincompletedordersofdealersontime

Themanufacturingstagedeterminessalesordercompletiontimewhichis12weeksmaximumb u t almostthesalesordershadontimedeliverytodealersthatweretakenmorethan3monthsf r o m depositdatetoreceivetheOPVproductsfully.Indeed,itissoalongtimeandinfluencet obusinessplanningforbothOPVandthecustomersalso

2.2.3 Thehighrateofoverduesalesorders

Totalsalesordersdeliveryin2018is78inwhich27(approx.34.6%)isremainingsalesordersf r o m 2017and51(approx.65.4%)isnewsalesordersof2018.Actually,thelargequantitieso f remainingordersfrom2017isseriousissue,whichdirectstolowperformanceofsalesteam

Figure7:Thetotalsalesordersdeliveryin2018

Source:OPVSalesPerformanceReport2018Furthermore,in51newsalesorderof2018havedeliveredthenthenumberofsalesordersc o m p l

e t e d on-timeis37(approx.73%)and14foroverdueraterespectively(approx.27%)

Figure8:Thedeliverystatusofnewsalesordersin2018

Source:OPVSalesPerformanceReport2018

Wehavewonmoretendersandmoreproductconsumptionin2018butOPVdidn’tcompleteo u r ordersontimesothatsomeordersmustmovetonextyearandtherevenuecan’tmeetourexpectation

Mr.Nhân–BusinessDevelopmentManagermentiondaboutsatisfactionofagentsin2018that

ThedealersfeedbackgoodincommunicationofOPVsalesandsupportfordealersbutthetimet o completetheordersaresolongandregularlyoverduedelivery

ThisshowsthatoverduerateofsaleordersinOPVisveryhighduetotherateover27%

( a p p r o x 14salesorders)andthisproblemseriousaffectedtothesatisfactionofagentswhichl e a ddealer’schanneltoinefficientoperationsin2018

2.2.4 Highcompetitiveprice

Tydol500productofOPVusesfortreatmentincoldandfluwhichonlysalethroughdealersc h a n n e l andcoldisoneofthemostcommondiseasesthatmostofVietnamesepeoplehavec a u g h t atleastoneinayearthereforeit’shotandpopularproductintheVietnammarket

Infact,Mr.Thắng–CEOofĐạiPhátCorp–

DealerofOPValsoconfirmedthehighdemando f productforcoldandflutreatmentinthemarketby2018that

Priceperbox

Pricepercaplet

TheTydol500producthashigherpricethanBiragan500mgofBidipharwhencomparewithn i n e productbrandsofothermanufacturersinsamesalesegmentanddirectrivalsofTydol.

Consequently,thepriceofOPVproductisslightlyhigherpriceassameasotherproductbrandsm a d e inVietnamwhichbeingsoldinmarket

2.3.VerifyingTentativeProblems

Rajesh,Kumar,Kumar(30)suggestedthemodelforinfluenceofthestrategicissuesinthep h a r m

a c e u t i c a l supplychaintothecompanyperformanceswhichpointouttwomaingroupsi s s u e s consistingresourceandprocess.Inthefacts,theresourcegroupandprocessgrouparei m p o r t a n c e factortoaffectdirectlytheperformanceofsaleschannelandsalesteams

Figure9:TheperformanceframeworkinPharmaceuticalCompany

Source:Strategicissuesinpharmaceuticalsupplychains:areview(30)

Thismodelcoversallactivitiesofthepharmaceuticalcompanywhichareacombinationofprocesses,organizationsandoperationsinvolvedinthedevelopment,designandmanufactureo f pharmaceuticalproductsbutthephenomenonofOPVisunderperformanceindealer’sc h a n n e l sothatwewilleliminatethefactorsunrelateddealer’schannelbelow

Sales Order Production Planning OPV’s

- Greensupplychainmanagement(SCM)intheProcessgroupencouragestheproactivep r a c

t i c e s suchastherecycling,reclamation,reverseslogisticsandremanufacturingforl o w

e r theenvironmentalpollutionandraiseecologicalefficiency(38).Thereforeitisn’trelativewiththefailureinachievingthe2018targetofOPVdealer’schannel

Finally,theremainitemsinProcessgroupareinventorymanagementandleanmanufacturingp r o c e s

s thatwillcoverproblemsindealer’schannelofOPVinwhichtheleanmanufacturingp r o c e s s isimprovementofmanufacturingoperationsthroughaLeanManagementapproach(8).Therefore,weshouldreplacementbyinventorymanagementandmanufacturingprocessforg e n e r a l viewintheproblemsofOPVdealer’schannelby2018

ThesalesprocessprocedureinOPVdealer’schanneldescribeasbelow

Figure10:OPVDealer’schannelsalesprocessprocedure

Source:OPVSalesPolicyandRegulationThecontractexecutioncomprises2mainstagesthatarethedepositmoneystepduring2weeksa f t e r signedcontractthenthemanufacturingsteptakes10weeksforcompletionandlogisticsstageisinappendixtermsofcontract.Forthisreason,thetentativedeliverytimelineinOPVc o n t r a c t manufacturingisonly

12weeksandtheagentsmustselftoarrangeshippingmethodsf o r goodsreceiptatOPVfactorybecausethelogisticsdonotcoverinthecontractterms

BusinessDevelopmentManagerstatedtentativetimeforprocessingsalesordersasbelow

WespecifiedthedepositdateiswhenOPVreceived70%ofsalesorderamountanddeliveryd a t e iswhenOPVcompletedtheproduction.Ittakesaround12weekstotalforprocessingofasalesorderandthelogisticconditionsisn’tbelongtocontractterm

In2018,OPVhave27ordersintotal37newsalesorderson-timedelivery(accounted73%),w h i c h havemore12weeksforsalesorderscompletionandtherateis93%with13ordersint o t a l 14newsalesordersoverduedelivery

timeandoverduedeliveryofnewsaleso r d e r s issolongandOPVactuallyneedstoevaluatetheactivitiesinthemanufacturingprocessf o r reducingthecompletiontimeandimprovingoperationsefficiency.

Thebackordersisthetotalnumberoftheorderswhichthecustomershavesentthathavenotyetbeenshippedoutandwasalsoovertheduedateoftheorders(35).Thebackorderisoneexampleofthesystemwhereinfirmproducestheproductafterreceivinganorderfromthec u s t o m e r andtheyrepresentastarkcontrasttothetraditionalMake-to-

stock(MTS)systemw h e r e firmanticipatesdemandandsatisfiesitfromfinishedinventory(32).Abackorderoccursw h e n theproductisnotavailabletomeetthecustomer’sdemandtodayandtheproducingfirmp l a c e s anorderonthefuturecapacitytoproducetoday’sdemand(6).Thebackordersimpactons a l e sdirectlybecausethefirmsneedmoredaytocompletetheordersandthecustomersdonots a s t i s f a c t i o n topostponepurchasetoalaterdate(6).Consequently,thebackordersisthenewp r o b l e m becauseoverdueofsalesordersaresohighanddeliveryofsalesordersaresolong

FollowingMr.Thắng–CEOofDaiPhatCorpsaidforduedateofsalesordersin2018thatis

Thedemandofantipyreticisverygoodin2018yearthereforeDaiPhatalwaysfallintosituationofnoproductforsellingduetoOPVfrequentchangedthecompletiontimeofordersf o r extendingdeliverytimeandwecompelledtoagreeinthiscase

Similarly,Mr.Thắng-CEOofĐạiPhátCorpemphasizedthat

Insome

peaktimeofsales,weevencontinuetobookmorealthoughstillbeawaitingthedeliveryforconfirmedorders.Particularly,somecasesmustcancelandorderagainwithlargerquantityduetounallowchangeaccordingOPVregulations

SalesPolicyandRegulationdeterminedthatcontractwillcompleteduring12weeksbecausew e justused40%designedcapacityoffactorysoproductionwillbefinishedwithin2weeksi n allsituations.Additional,materialsuppliersalreadycommiteddeliverytimearound8weeks.

Finally,thetotaltimeforasalesordercompletionis12weekswhichcomprisemanufacturings t e p is10weeksanddepositstepis2weeks.However,thedataoflead-

timenewsalesordersi n 2018andinterviewresultofCEODaiPhatCorphavedemonstratedthatthecompletiont i m e ofthealmostsalesordersareover12weeksandtakelongerasOPVcommitmentinthec o

n t r a c t soitmakesagentsshortageofgoodsforsellingin2018andleadstothebackordersw h i c h isthenewfactorbesidesthepossibleproblemsareshortageofproduct,highrateofoverduesalesordersandprolongedcompletiontimeofsalesorders

Thehighcompetitiveprice

ThebackordersShortageofproductHighrateofoverduesalesordersProlongedcompletiontimeofsalesorders

Underp e r f o r m a

n c e indealerschannel

Figure11:InitialCausesandEffectsChartThesecondarydatapointedoutthatthe“underperformanceindealerschannel”symptomiso n l

y relatedtoOPVanddonotissuesofdealersbecausethecompletedordersbyOPVislesst h a n thetotalorderswhichhavebeenplacedbydealersaswellasmarketdemandandbusinesssituationofdealersareverygoodwhichalreadyshowedbyshortageofTydolproductin2018.A s wehavementionedinbeginningofthischapter,thesecondarydatahavedemonstratedthep r o b l e m s ofdealerschannelfullysothatweonlyinterviewedDaiPhatCorpforrepresentingviewpointofdealersabouttheproblemsofOPVandalsoforconfirmingsecondarydataagain

Intheprevioussection,weonlyhaveremainingtwoitemsforanalyzingperformanceproblemso f dealer’schannelthatareinventorymanagementprocessandleanmanufacturingprocess.However,inventorymanagementand

distributionrequirementsplanningbydeterminingthed e m a n d s afterthataggregatedandimposedonappropriatewarehouse/

distributioncenters(33)a n d onlyappliedinretailchannelofOPVbecauseindealer’schannel,alldistributionactivitiesi n VietnammarketareexecutedbytheagentsthereforeOPVdonothavethepolicyforcontrolw a

r e h o u s e ofdealersandalsothedealer’scontractsdonotincludethedistributionterms.Int h e addition,allpotentialproblemsrelatedonlyrelatedtomanufacturingprocessduetothed u e dateofsalesordersbedeterminedbeforetheinventorymanagementprocess

Consequently,weeliminateinventorymanagementprocessandonlyfocusonmanufacturingp r o c e s

s forfindingthecentralproblem,whichleadstounderperformanceindealer’schannel

- Production:Afterallresourceforproductionactivitieshavereceivedcompletion,P l a

n n i n g teamwillinformtoProductionteamformanufacturing.Inthenext,thef a c t o

r y willstarttoproduceOPVproductsaccordingtoproductionschedulewhichhasa p p r o v e d byBoDandcomplyingtoqualitystandardofDAV.Totaltentativetimeoft h i s taskis2weeks

Tentativecompletiontimeofmanufacturingstageis10weeks.AsMr.N

ik–ProductionManagerofOPVexpressesthat

MyteamwillstartthejobwhenBusinessdevelopmentteaminformsthatthecustomerhasdepositedmoneyfollowingOPVrequirements.Inpreliminarystep,PlanningdepartmentwillrequestProcurementforpurchasingtherawmaterialsandfeedbacktomyteamaboutfullyreceivingrawmaterialsexpectationdate.Basedonthis,IwillpreparetheproductionplanandproposeHRtorecruitseasonalworkers.TheProductionstepwillstartwhenallrawmaterialsreceivedandwetook2weeksmaximumforcompletion.Afterfinishedgoodsrelease,Iinformt oBusinessDevelopmentteamforcontactingcustomerstogettheTydolproductassoonaspossible

Figure12:Deliverydetailsofnewsalesordersin2018

Source:OPVSalesPerformanceReport2018

Totalon-timedeliveryofnewsalesordersin2018is37(approx.73%)andoverdueis14( a p p r o x 27%)inwhichoverduenewsalesordersrelatedproductionplanningtaskaccounted1 3 (approx.93%oftotaloverdue)andonlyhave1orders(approx.7%oftotaloverdue)relatedp r o d u c t i o n taskaswellasnosalesordersrelatedthebothtasks

r d oftheOPVcontractwith43orders(approx.84%)occurredintheproductionplanningt a s k and1order(approx.2%)occurredinproductiontask

AsMr.Nik–ProductionManagerofOPVcomplainedthat

Productionschedulein2018frequentchangesbecauseofslowatpreparingresourceswhichrequiredforproductionespeciallyrawmaterialsmeantimeotherresourceswerealwaysready

Astheresult,theunusualhighlaterateinproductionplanningaffectstoproductionscheduleandleadtimeofsalesordersbecausetheproductiononlystartwhenallresourcerequirementsh a v e fully.Consequently,thedealerswereforcedtowaitalongtimethanduedateofcontractandsotheyhavetoagreeforsigningnewmaturitytermorterminatesalesorders

Alldemonstratedthat

thetardyworkprogressintheproductionplanninghaveimpactedi n d i r e c t l y tothesalesperformanceofdealer’schannelin2018throughgroupproblemswhichincludethebackorders,shortageofproduct,highrateofoverduesalesordersandprolongedc o m p l e t i o n timeofsalesorders

Figure13:UpdatedCausesandEffectsChart

CostperCaplet

RawMaterial

Thepriceofrawmaterialisincreasedhigherthan2017butOPVstillkeeptheproductretailpricein2018bymanyeffortsofproductionteamfordecreasingoperationcosts

However,theretailpricepercapletofBiragan500mg(approx.360VND)isstilllowerthanTydol500mg(approx.450VND)evenlower12%thancostofgoodssoldofTydol500mg( a p p r o x 407VNDpercaplet)

ThatdemonstratedthehighcompetitivepriceisunsolvedprobleminthistimebecauseOPVa l s o Productionteamhasmadeallthingsforproductioncostlowestastheycanbutitisstillh i g h e r thanretailpriceofBiragan500mg.Moreover,theproductioncostnormmorerelatedtotechnologyandfacilityoffactorywhichisoverscaleofthisthesis

Additionally,BusinessDevelopmentManagershowedthecompetitiveadvantageofTydolp r o d

u c t that

ThecompetitivepriceofTydol500mgdonotimpacttosaleperformanceofdealerschannelbecausetheagentshaveseparatemarketshareaswellasdifferenttargetcustomerssothattheystillbulkorderedTydol500mgin2018withtheaveragepricewere42,995VNDperbox(approx.430VNDpercaplet)becausetheycansellTydol500mgwithhigherpricethanretailpricealsoincludingpriceofBiragan500mg

Hence,weeliminatedthehighpricecompetitivefactorinthepotentialproblemsduetolessa f f e c t tothedealer’schannelperformanceanditisunsolvedproblemsinthistimeduetomorerelateintechnologyandfacilities

2.4.2 Thetardyworkprogressinproductionplanningtask

Productionplanningdescribesthedesignandmanagementoftheentiremanufacturingprocess( i n c l u d i n grawmaterialschedulingandacquisition,manufacturingprocessdesignandscheduling,andmaterialhandlingdesignandcontrol)

(5).Ingenerally,productionplanningisg e n e r a l l y usedtodescribecollectiveprocessesofcapacityplanning,materialrequirementsp l a n n i n g , shopfloorcontrol,worksorderreleaseandcontrol( 28)andproductionplansareo p t i m i z e d withintheboundariesofmaterialandcapacityconstraints(2 6)

Especially,theproductionplanisconsideredasanoptimizedproductionplanwhenithasawiderangeofconstraints,includingrawmaterialsavailability,machinesandoperators’capability,servicelevel,securestocklevel(10).Onthecontrary,theproductionplanningmayc o u n t asinefficiencyandfaultwhenitcreatesmanyproblemstothelaterproductioninwhicht h e mainproblemsareoftenexcessfinishedgoodsinventories(19),thepoorcustomerservice(19),t h e insufficientcapacityutilization(19)andtherawmaterialshortage(10)

Figure14:LastUpdatedCausesandEffectsChartCEOofDaiPhatcompanymentionedaboutlackofTydolproductforsellingin2018

Thedemandofantipyreticisverygoodin2018yearthereforeDaiPhatalwaysfallintos i t u a t

i o n ofnoproductforselling

PlanningManageralsoexpressedaboutproblemofplanningforproductionofTydolthat

TherawmaterialshortageisreallyseriouscaseofOPVin2018formakingTydolproductbecausewehavetowaitalongtimetoreceiverawmaterialfullyforproductionandalsodealw i t h agentstopostponecompletiondate

BesidethatProductionManagersaidaboutsurpluscapacityoffactorythat

Theproductionschedulein2018frequentchangesbecauseofslowatpreparingresourceswhichrequiredforproductionespeciallyrawmaterialsmeantimeotherresourceswerealwaysreadyinwhichOPVuseoutsourcingHR

servicestoensureenoughseasonalworkersforproductionfastestandavailablecapacityoffacto

ryalwaysremained50%during2018aswellasOPVregularexecutemaintenancethemachinestopreventunplanneddowntimeoffactory.

ThedealersfeedbackgoodincommunicationofOPVsalesandsupportfordealers

ThisshowedclearlyinfeedbackofCEOofDaiPhatcompanyaboutcustomerservicethat

ThesalesserviceandaftersalesserviceofOPVareverygood.OPVsalesteamalwaysofferg o o d salespackagesformycompanyandalwaysreadytosupportansweringmycustomer’squestionsaboutTydolproduct

Forthisreason,poorcustomerserviceandinsufficientcapacityutilizationdonotmainfactorst o affectinperformanceofOPVdealer’schannelbecauseallthingsisgoodandavailabletoservethedealersdemand.Additional,theexcessfinishedgoodsinventoriesproblemwillbee l i m i n a t e d duetotherealcaseofOPVislackofTydolproductforselling.Finally,rawmaterialshortageismainproblemleadingtothetardyworkprogressinproductionplanningtask

2.4.3 Thecentralproblemisrawmaterialshortage

Theproductionplanningtaskinordertomeetrequiredquantityanddeliverydateisthechallengi

ng(7).Inthespecially,therawmaterialsishighestimportanceforpharmaceuticalm a n u f a c

t u r i n g andtherelativelylargestocksofactivepharmaceuticalingredientmustbeheldt o ensuregoodserviceandensuresmoothoperationattheinterfaceoftheseprocesses(33)

AccordingtotheexplanationofProductionManager,

Theproductionstepwillstartwhenallrawmaterialsreceivedandwetook2weeksmaximumf o r completion

Theleadtimeindeliveringordersonthepartofthesuppliersalsocausesdelaysandalldelays,n o mattertheirreasons,affectplanning,productionanddeliveringoffinishedproducts(11).Ina n y manufacturingprocess,atthebeginningofeveryproductionrun,itisnecessarytopreparealltherawmaterialsrequiredtocompletelotsizeofthefinishedproducts(38)sothatiftherawm a t e r i a l s haveproblemssuchaslateindelivery,failurequality, thenproductionplanningt a s k willcompletelateandproductioncannotstartthatarereasonsforhighrateofoverdues a l e s orders,prolongedcompletiontimeofsalesorders,shortageofproductsandbackorders

AccordingtheinterviewresultofBusinessDevelopmentManagersuggestedthat

IthinkthatOPVneedtobuildinventorypolicyofTydolproductwhichincludeminimuma m o u n

t ofrawmaterialavailabletoprovidethepreviousorderswhilethedepartmentsareprocessingandmanufacturingfornextorders.Thiswilldiminishthewaitingtimeinmaterialpreparationforproductionaswellasshortenorderscompletion

ThemainsupplierofrawmaterialinUShavetroubleswhichleadtolateindeliveryandOPVdonotregisterbackupsupplierwithDAVforTydolproductsoitwasmadeOPVtorawmaterialshortageforproductionin2018.TherawmaterialshortageisreallyseriouscaseofOPVin2018formakingTydolproductbecausewehavetowaitalongtimetoreceiverawmaterialfullyforproductionandalsodealwithagentstopostponecompletiondate.Whenthes u p p l y sourceofrawmaterialisdifficulty,itwillaffecttomyteaminpreparingproductionp l a n n i n g andadjustingproductionschedulefollowingupdatedprogressinrawmaterialdeliveryofsupplier.Thisistrulyahardworkformyteamin2018

Indeed,therawmaterialshortageswerefrequentlyconsideredaglobalissue,partlybecausel o n g orcomplexproductionchainsresultinjustalimitednumberofoperatingcompanies.Thep r o b l e m occurswhenmanyfinishedproductmanufacturersrelyonsubcontractorsthatinturna r e dependentonacertainrawmaterialproducer.Whentherawmaterialproducerfacesqualityi s s u e s intheirownproduction,therawmaterialisnotforwardedtothesubcontractorsandont othemanufacturers(14).Forthisreason,therawmaterialshortageswereobservedtobeacauseo f productionvariancesandunfilledcustomerorders(3)aswellasdemonstrateshortageofrawm a t e r i a l whichismainandcentralfactorcausingtardyworkprogressprobleminproductionp l a n n i n g taskbecausetheotherfactorsofproductionplanningisalwaysavailableandstable

Infact,therawmaterialshortageproblemhasbeenthehighestinfluenceleveltothep e r f o

r m a n c e ofOPVdealer’schannelthroughitsimportanceroleintheproductionplanningt a s k whichleadstotheissuesmakinglowperformanceinOPVdealer’schannelsuchasprolongedcompletiontimeofsalesorders,highrateofoverduesalesorders,shortageofp r o d u c t s andbackorders.Inshort,therawmaterialshortagewasmadetardyproductionworkp r o g r e s s especialinplanningtaskthatwascausedproblemsdirectlyimpactingdealerschannel

Figure15:FinalCausesandEffectsChartConsequently,theshortageofrawmaterialsisthecentralproblemintheOPVdealer’schanneld u e totheimportancelevelwhichmentionedinmanyliteraturesandidentifiedinrealdataofOPVaswellasrevealedthroughinternalinterviews

3 CHAPTER3:CAUSEVALIDATION

3.1.Potentialcauses

Tounderstandthemainreasonsbehindtherawmaterialshortages,AtilganandMcCullen(3)p r o p o s e dthecauseandeffectrelationshipsastoolsfordeterminingtheinteractionsbetweensuppliers,customers,andproducerinPharmaceuticalSectorasshownbelowandstatedthatint h e supplychain,problemsoccurringononesideofthechaincanactasacatalystforproblemso n theotherside.Inuncertaintycircleanalysis,rawmaterialshortageswereobservedtobeac a u s e ofproductionvariancesandunfilledcustomerorders(3)

Figure16:AnalysisforrawmaterialproblemsSource:Improvingsupplychainperformancethroughauditing:achangemanagement

perspective(3)

AccordingAtilganandMcCullen,rawmaterialshortageproblemwereclassifiedinto4causesgroupsthataredeliverydelay,materialisusedforanotherproduct,shortnoticefromplanningandingredientisoutofdate(3 ).Inthenextsection,wewillusedataforverifyingthoeriesandl i t e r a t u r e s tofindrootcauseofthepoorperformanceindealer’schannel

ThemainsupplierofrawmaterialinUShavetroubleswhichleadtolateindeliveryandOPVd o notregisterbackupsupplierwithDAVforTydolproductsoitwasmadeOPVtorawmaterialshortageforproductionin2018

ThosepointsillustratethatOPVoccurstheshortageofmaterialsupplyspecificallyinlackofactivepharmaceuticalingredient(API)toleadproductionprogressdisruptionontheOPVfactory,namelyoutofstockinrawmaterialandittotallydifferencesthanoutofdateini n g r e d e n t duetooverstockrawmaterialorinaccuratestockcontrolforduedate

Finally,weeliminateoutofdateiningredientinthepotentialgroupcausesbecauseitdoesnotc a u

s e s ofmaterialshortageforproductioninOPV

3.1.2 Potentialcause2:Deliverydelay

Aboutthedeliverydelaycause,notallthematerialsimportedfromtheoverseasmanufacturersa r e 100%producedbythembecausetherawmaterialsaresometimesorderedandcollectedf r o m someothercountriessothattherawmaterialmanufacturersusuallymaintainacertaina m o u n t ofstorageoftherawmaterials,buttheymayalsosufferfromtheshortageiftheyhavem o r e demandsfromcustomersinthesametimeandtheirsuppliershaveissues(29)

Ms.Trinh–PlanningManagerdeterminedthat

ThemainsupplierofrawmaterialinUShavetroubleswhichleadtolateindeliveryandOPVd o notregisterbackupsupplierwithDAVforTydolproductsoitwasmadeOPVtorawmaterialshortageforproductionin2018

Mr.Nik–Productionmanageralsoconfirmedthat

Planningteamfrequentlyinformedthattherawmaterialsupplyhaveissuesleadingtodeliveryl a

t e butIdon’tknowwhytheydon’thaveanysolutionforthisproblemalthoughitoccursinal o n g time

Thatweredefinedasthesupplydisruptionwhichmentionedthesuddenstopofsupplywhenu n e x p e

c t e d eventsoccur,themainsourcebecomestotallyunavailable.Obviously,thesupplyd i s r u p

t i o n isinfrequentriskbuthaslargeimpactonthewholesupplychainbecauseitcouldc u t offthecashflowandstoptheoperationoftheentiresupplychain(15)

Asaneffect,Huanghaveexaminedaboutperformanceofatwolevelsupplychainwithab a c k u p suppliertoaddresstheissueofsupplydisruptionconsideringconstantsupplyleadtimew i t h normallydistributeddemand(16)