How to improve effectiveness of supply chain management at sanofi pastour in vietnam

12 HQ: Headquarter /Global office of Sanofi Pasteur S.A in Lyon, France 13 D&S: Demand and Supply 14 IO: Industrial Operations 15 FDA: Food and Drug Administration 16 MTS: Make to Stock

MBQPM4

“DOAN MINH CHAU”

“HOW TO IMPROVE EFFECTIVENESS OF

SUPPLY CHAIN MANAGEMENT AT

SANOFI PASTEUR IN VIETNAM”

MASTER FINAL PROJECT

MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT

Ho Chi Minh City (2014)

STATEMENT OF AUTHENTICATION

I, Doan Minh Chau, hereby declare that this assignment is prepared by myself in completion of Master in Quality and Business Performance Management Program (2012-2014) in Ho Chi Minh City, and that I have not submitted this material, either in whole or in part, for a degree at this or any other institution

ACKNOWLEDGEMENT

I would like to thank Mrs Vo Thi Phuong, Chief Representative of Sanofi Pasteur S.A Representative office in Ho Chi Minh city, who gives a lot of support for my continuous learning and allows me to access to company’s data and reports to complete this case study, and thank to my colleagues who provide me the relevant information and data mentioned in this assignment

I would like to send my gratitude to Pro Jacques Martin for guiding and advising me

on structure and presentation of discussion topic, my gratitude is also sent to all professors who gave lectures for MBQPM 4 intake as knowledge transferred and experience learned from them help me to complete this assignment effectively

I will keep a good memory of our classmates MBQPM4, with all interactions, sharing knowledge moments we have passed together where I learned a lot from their experiences which are also very useful to my final report

And lastly, a big thank to my family for their patience, love and encouraging during my

quality journey with Solvay since 2012 till the completion of this assignment

TABLE OF CONTENTS

•Presentation of subject

•The importance of the subject

•Structure of presentation

Part I ANALYSIS OF SUPPLY CHAIN OPERATIONS:

CHAPTER 1: COMPANY BACKGROUND

CHAPTER 2: STRUCTURE OF SUPPLY CHAIN

Part II IMPROVING SUPPLY CHAIN OPERATIONS:

CHAPTER 1: INCREASING THE EFFECTIVENESS OF

SUPPLY CHAIN OPERATIONS

CHAPTER 2: IMPROVING DOWNSTREAM PROCESS

LIST OF ABBREVIATIONS

1 GPEI: Global Polio Eradication Initiative

2 GAVI: Global Alliance for Vaccine and Immunization

3 NGO: Non-governmental Organization

4 WHO: World Health Organization

5 PAHO: Pan American Health Organization

6 UNICEF: United Nations Children's Fund

8 JAICA: Japan International Cooperation Agency

9 GMP: Good Manufacturing Practices

software, systems and training

11FuturMaster: Software for Forecasting, Planning and Supply Chain Optimization

12 HQ: Headquarter /Global office of Sanofi Pasteur S.A in Lyon, France

13 D&S: Demand and Supply

14 IO: Industrial Operations

15 FDA: Food and Drug Administration

16 MTS: Make to Stock

18 NICVB: National Institute for Control of Vaccine and Biological of Vietnam

19 DAV: Drug Administration Division /Ministry of Health of Vietnam

20 CIF: Cost, Insurance and Freight

21 PMC: Preventive Medicine Center

LIST OF TABLES Part I ANALYSIS OF SUPPLY CHAIN OPERATIONS

Table 1.1: Organization chart of Sanofi Pasteur in Vietnam

Table 1.2: Distribution flow of vaccines in private and public market in Vietnam Table 1.3: Vaccine Customers Mapping

Table 1.4: Vaccine’s public and private market 2005-2012

Table 1.5: Vaccine market 2012 in Vietnam

Table 1.6: Long range planning 2012-2017

Table 1.7: Vaccine manufacturing timeline

Table 1.8: Forecast is the first step in supply chain process flow

Table 1.9: Make to Stock Model

Table 1.10: Vaccine Manufacturing Process

Table 1.11: Distribution of vaccine mapping

Table 1.12: Vaccine temperature monitoring

Table 1.13: Product allocation planning

Table 1.14: List of SP products in supply constraint in 2013

Table 1.15: Ishikawa diagram for root cause analysis

Part II IMPROVING SUPPLY CHAIN OPERATIONS

Table 2.1: Risk assessment flow chart

Table 2.2: Pareto chart on causes of vaccine storage

Table 2.3: Moving –average forecast calculated over 4 months’ period

Table 2.4: Stock coverage end of month

Table 2.5: Root cause identification list

Table 2.6: Rolling forecast structure

Table 2.7: Demand Model Reporting 2012-2013

Table 2.8: Product technical complaint tracking

Table 2.9: Rationalization for direct importation model

Table 2.10: SP Operations Key enablers

Table 2.11: SP Balance Scorecard

This assignment aims to discuss the supply chain operations at Sanofi Pasteur S.A., a vaccine manufacturer, to see how important the effective supply chain management contributes to the overall performance of the company It is important to analyze existing constraints that impact the supply chain operations and to suggest solutions to improve the effectiveness of the supply chain management in order to increase the quality of service provided to Customers, to maximize profitability and to maintain competitive advantage in both private and public health sector in Vietnam market This assignment is divided into 2 parts: the First part introduces an overview on Sanofi Pasteur S.A, business context in which the company operates as well as critical issues faced by the company which give negative impact on customer satisfaction, following

by root-cause analysis The Second part proposes possible solutions and prioritized action plans to improve the effectiveness of the supply chain management, with strong focus on downstream processes to continuously improve and innovate to stay competitive in the market

An overview on supply chain operations at Sanofi Pasteur S.A.is described hereafter in the First part of this assignment It covers the company mission, internal, external factors driving its business objectives in Vietnam market; the supply chain structure covering production cycle and distribution of vaccine in the market as well as critical issues faced by the company which give negative impact on customer satisfaction, following by root-cause analysis

Part I ANALYSIS OF SUPPLY CHAIN OPERATIONS

CHAPTER 1: COMPANY BACKGROUND

1 Vision/ Mission/Organization

Sanofi Pasteur S.A (hereafter referred as to “SP”) is a French company who discovers, develops, produces and distributes human vaccine and biological products SP is the largest company entirely dedicated to vaccines The company provides more than one billion doses of vaccine each year, making it possible to immunize more than 500 million people across the globe With a broad and balanced presence in emerging markets, SP employed approximately 105 000 employees in 110 countries The 2009 net sales of Global performance are 29.3 billion Euros with 6.3% increase compared to

2008 on a reported basis

A world leader in human vaccine industry, SP offers the broadest range of vaccines protecting against 20 infectious diseases caused by viral diseases such as: yellow fever, mumps, poliomyelitis, measles, rubella, influenza, hepatitis A and B, rabies, Japanese encephalitis, chicken pox and by bacteria diseases such as pertussis, diphtheria, haemophilus influenzae typ b infections, meningococcal meningitis, pneumococcal infections, tetanus, tuberculosis, typhoid, cholera…

Every day, the company invests more than 1 million Euros in research and development of innovated products such as dengue fever, Japanese encephalitis and new pediatric combo vaccines SP has entered in partnership with GPEI1, GAVI Alliance2, NGOs3 and international institutions including WHO4, PAHO5, UNICEF6, International Red Cross and others partners for active global disease prevention program

With the Vision “A world in which no one suffers or dies from a vaccine preventable disease”, SP commits to protect and improve human health worldwide by:

• Providing superior, innovated vaccines for the prevention and treatment of diseases

• Playing an active role in the immunization community to maximize vaccination

Marketed in Vietnam since 1992, SP plays an active role in the immunization community to increase public health awareness and makes innovated vaccines available for the market needs In the last 3 years, SP supplied to Vietnam market more than 2 million doses of vaccines, annual turnover increased from 12.8 Mio USD in

2011 to 15.3 Mio USD in 2013 The turnover is expected to be triple in 2016 by introducing new vaccines to the market

In Vietnam, SP has its representative office registered and operated in Ho Chi Minh city with main activities:

- Carry clinical studies for registration purpose

- Register and renew market authorization

- Promotion marketed products

The representative office is structured in form of business unit within Sanofi Group in Vietnam with 4 main cross functions: Sales/ Supply/ Marketing/ Medical with flat organization chart shown in Table 1.1 below

BU - Vaccines

Business Unit Director

Sales manager Supply chain

manager

Group Product manager

Medical manager

Table 1.1 Organization chart of Sanofi Pasteur in Vietnam

Source: Sanofi Pasteur Vietnam

The representative office cannot carry direct commercial activities in Vietnam as regulated by Laws thus the distribution of SP products is handled through local distribution network Foreign companies do not have the right to import directly vaccines to Vietnam yet, thus SP has entered into exclusive distribution contracts with Vietnamese distributors, one for the North Vietnam (Redpharco Ltd.) and the other for the Center and the South of Vietnam (May Cosmedic JSC) to distribute vaccines to hospitals, preventive medicine centers for privates sales or to EPI7 importer for public sales

Table 1.2 below describes distribution flows to import vaccines to Vietnam market

Table 1.2 Distribution flows of vaccines in private and public market in Vietnam

Source: Sanofi Pasteur Vietnam

The health system in Vietnam is quite complex and is divided into 2 separate segments: Treatment and Prevention Below picture 1.3 describes the vaccine universe through the existing health system In Treatment segment, only 21% of public hospitals open their own vaccination room, while 70% of vaccination centers rooms are belonging to public Preventive segment organizations such at Preventive Medicine Centers (PMC)

at national, regional and provincial level The rest of 9% is located in private hospitals and Key Account companies

Table 1.3 Vaccine Customers Mapping

Source: Sanofi Pasteur Vietnam

Vaccine products are classified to be used in Prevention segment, and the vaccine market is divided in private and public market

• Public market provides free vaccine for primary vaccination to children up to 12 months of age The product used in the EPI is mostly sponsored by GAVI,UNICEF or local producer SP has dated its long cooperation with Vietnam EPI since 2004 for the supply of typhois and measles vaccine

Although the sales of vaccine to EPI program decreased in 2012 as local producer can produce measles vaccine, but there still have room for improvement as large number of vaccine needed to be included in Public program such as Inactivated Polio vaccine, Flu, Pneumococcal Conjugated vaccine, Human Papilloma virus and Dengue

Table 1.4 below shows the repartition of SP turnover between public and private segment from 2005 to 2012

Table 1.4 Vaccine’s public and private market 2005-2012

Source: Sanofi Pasteur S.A

• Private market is mainly supplied by international manufacturers as local manufacturer cannot produce yet high quality and innovated vaccines The end users must pay out of their pocket for these vaccines The economic development generates emergence of a growing mid and upper class boosting the demand for Private market vaccine consumption The private market is driven by innovated products such as Human Papilloma Virus, Rotavirus and combination based vaccines for children… SP maximized its sales over the last 3 years despite a gap

in the product portfolio

In Asia, SP ambition is to lead the vaccine market in 2016 with innovated products such as Japanese encephalitis and dengue fever vaccines which are still under clinical trials phases in Vietnam The production of vaccine as biological products is a very complex and difficult process that Vietnamese manufacturers cannot be able to produce innovated and combination based vaccines yet due to failure in quality aspect This favorable factor attracts international investment thus foreign manufacturers can enter the vaccine market easily and be able to growth their market share in a very dynamic market

Below Table 1.5 reflects the repartition of 2012 market share between main players in Vietnam vaccine market, in which SP holds 21% of the market share, its main

competitor is GSK with 24% market share, followed by Novartis and Merck at 16% market share, and the rest are for local and Indian players:

Table 1.5: Vaccine market 2012 in Vietnam

Source: Sanofi Pasteur S.A

SP ambition is to reach the sales out to the market in 2017 to 47 Mio USD (Table 1.6) with successful introduction of innovated products in both public and private market

Table 1.6: Long range planning 2012-2017

Source: Sanofi Pasteur S.A

The following analysis on internal, external factors such as SWOT/ PESTLE/ PORTER DIAMOND will give an overview on SP position in the dynamic and fast changing vaccine market in Vietnam and help to understand the business strategies, objectives applied by SP to well adapt to changes and gain sustainably competitive in the market

2 SWOT/ PESLTE / PORTER DIAMOND ANALYSIS

2.1 SWOT analysis

STRENGHS

1 Branded products & French

manufacturing Leader in rabies market

2. Good efficacy & safety vaccine profile

Wide range portfolio offered for infant,

toddler and adult

3. Long term cooperation, partnership with

Health Authorities, Healthcare Centers,

Health Organizations (WHO, GAVI,

NGOs …)

ADVANTAGES/ DISAVANTAGES

Products with European origin have the advantage to gain tender at hospital / health centers

Doctor and parents prefer to choose high quality and safety vaccine due

to safety vaccination issue

Satisfy the vaccination need of

1 Trade activity in Vietnam is limited due

to limited scope of representative office

activities

2 Products portfolio is not competitive

due to lack of innovated products

Distribution is managed by local distributors thus the control over promotion campaign, sales policies, and quality of product is always challenging

Innovation products must be introduced as soon as possible in Vietnam to regain market share

OPPORTUNITIES

1 High endemic country of rabies,

encephalitis, measles, rubella…

diseases

2 Economic growth generates emergence

of middle and upper class with high

income

3 Expanded Program for Immunization

(EPI) needs to reach recommendation of

WHO on Vietnam immunization

planning

4 New Law will permit foreign companies

to import directly in future

High demand to prevent against diseases to reduce health, economic burden

High demand of vaccination of quality product

Opportunity to develop and growth

in public market

Improve distribution network capability / new importation model

THREATS

1 Rabies market is matured

2. Competitors launched similar products

with new technology

3 Discount policy offered by competitors

Challenge to expand & grow

Replace current SP product, seek for immediate innovation

Loose market shares

2.2 PESLT Analysis

POLITICAL

1 Stable politic environment

2 Zero tax exemption for imported

vaccine/biological products

3. Strict price control by MOH8

4 International Health organization has

strong influence on public health sector

such as WHO, JAICA9, UNICEF…

Long-term cooperation with MOH/WHO on vaccination guidelines and enrollment in health insurance package

Difficult to revise the price for sales

1 Population: 90 M inhabitants Urban

population is only 31% vs 69% for

rural population Birth cohort : 1.5M

babies/ year

2 Low awareness in vaccination against

diseases, people focus on treatment

only

3 Lack of government resource & fund to

follow-up and monitor safety and good

practices in EPI vaccination program

Possibility to expand market in rural areas where vaccines are still not yet

affordable in some poor provinces

Possibility to cooperate with EPI to provide education & training on safety vaccination to the healthcare workers in provinces, as well as

vaccination awareness to lay public

TECHNOLOGICAL

1. Chinese investment on new vaccine

plant construction in Vietnam: from

2013-2015 for pharmaceutical

production, from 2016 onwards:

vaccine production

2 Fast using of internet in nationwide

Possibility to cooperate with them to implement local packaging of our vaccines in the future

Possibility to virtually approach Customers

ENVIRONMENTAL

1. Intensive competition among rabies

players in the market

2. Innovated mumps and pneumococcal

vaccine will be introduced by

competitors in 2014

Accelerate the registration of SP new profile of rabies vaccine to gain competitive advantage

Lose market share of our two equivalent products

LEGAL

1. Direct import right shall be grant to

foreign companies

2 Tender classification issued by MOH

gives favorable condition for innovated

products

3 Unclear guidance on clinical trial of

new vaccine; complicated registration

requirements and processes to renew

registration process of new products

Subject to intense regulation requirements

Time consuming impact on availability of vaccine in the market

2.3 PORTER’ S DIAMOND

FACTOR CONDITIONS

1 Rabies vaccine was first innovated and

manufactured by Louis Pasteur in France

over more than a century Branded

products thanks to late dated history of

rabies vaccine manufacturer

2 Main production sites located in Europe,

US, Canada… meets GMP10 standards

Rabies vaccine is WHO pre-qualified

product

3. Strength in geographical diversity of SP

production facilities SP has major

production facilities in France, Italy, US,

Canada, China, India, Thailand,

Argentina, and soon in Mexico

4 SP must continue to invest in

state-of-the-art technologies to meet market

growing demand

Competitive advantage: we are the first who develop cell culture rabies vaccines which is safer and more effective in comparison with old brain tissue vaccines from competitors Increase customer’s truth & satisfaction

Good criteria to gain tenders at Hospitals Meet regulatory demands for register and renew products

Help to optimize the production capacities to meet anticipated demands for current and new vaccines

Only innovation is imperative to sustain SP leader position and expand the market

DEMAND CONDITIONS

1. Middle and upper class of high income

patients can afford now to high quality

vaccines as they are afraid of the serious

adverse reactions caused by old

generation vaccines

Market expansion in Asia where there

is high demand of quality vaccine products

RELATED AND SUPPORTING

INDUSTRIES

1. With implementation of subsidiaries in

most South East Asia countries, SP

processes a wide range of distribution

network

2. Existing regional advisory boards in

public health such as rabies, flu…and

existing local network of Pasteur

Institute in Vietnam

3. Local factories in the North and the

Center produce local vaccines for EPI

program

4. International logistic company operates

effectively in pharmaceutical field

Help to secure vaccines just in time in case of shortage

Facilitate knowledge management in healthcare community: Update and sharing best local practices and scientific information among Asian countries to provide practical data base on diseases treatment

Opportunity to cooperate in local packaging project to reduce distribution cost

Opportunity to cooperate to enhance distribution network in case of business expansion

FIRM STRATEGY, STRUCTURE AND

RIVALRY

1 Leader in rabies market Commit to

supply safe & efficacy products to

prevent and reduce the fatal rate caused

by rabies disease

2. Organization focuses on Customers

Strong Leadership management

Devoted Sales team to promote SP

products Strong Support Functions team

(Marketing, Supply, Medical)

Competitive advantage in term of quality of product & branding image

of Louis Pasteur

Flat organization facilitating quick reporting and decision making process Limited headcount challenges sales expansion in remote provinces

FIRM STRATEGY, STRUCTURE AND

RIVALRY (continued)

3. Strong competition by Indian & Chinese

competitor (02 competitors with 02

substitute products with very low &

attractive price)

Double loop learning to solve issue in the short term to defend the market share Prioritize regulatory objectives

to faster the registration of new vaccines to regain the leader position

Develop and expand of new market to

generate more sales

1 Strategy No 2:

Develop customer relationship

management to maintain loyalty and

seek for partnership opportunity

This approach analyses in more details of the business environment by looking through the whole business processes It helps us to maximize our capability and resources to develop 2 strategies:

1.Strategy No 1:

Focus on business excellence and optimize organization effectiveness to accelerate clinical trial and faster registration of new vaccines to re-gain the market leader position and secure

In the Chapter 2 below, the structure of SP supply chain operations will provide a common understanding on several steps to be involved in vaccine supply chain operations as well as associated challenge which impacts the availability of vaccine in the market

CHAPTER 2: STRUCTURE OF SUPPLY CHAIN OPERATIONS

1 From product to delivery process:

Vaccine development is very different from drug Vaccines are biological products made from living microorganisms with very complex manufacturing processes In order to have the product available to be distributed to the market, the supply chain structure involves many steps through initial sales forecasting, material and components procurement planning, production organization, quality test control, batch release by health authorities to packaging, transportation, distribution and finally quality stability, adverse reaction follow-up after distribution

We will go through four main steps of vaccine supply chain “ Control-Deliver” to see how vaccine is produced and distributed to the end-Users

Forecast-Produce-1.1 Demand Forecast

Vaccine are biological products which are used for prevention against diseases, not for treatment thus the sales forecast is usually based on historical sales data and marketing planning in each country and plays a trigger role for industrial operations in order to avoid over or under production

Lead time for vaccine production is 24 months, below picture presents the manufacturing timelines of a batch of vaccine: for example the products which were sold in 2009 have been started to be produced in 2007, and in 2009 we started producing bulk for 2011 demand, then finished products were filled and packed in

2010 to ensure the stock for sales in 2011

Below picture 1.7 describes the manufacturing timelines which requires accurate forecast to drive production operations

2009 2010 2011

Sales 2010

Sales 2011

Sales 2009

Filling 2009

Bulk 2011

Bulk 2010

Filling 2011

Pack

2011 2008

Bulk

2009

2007

Table 1.7 Vaccine manufacturing timeline

Source: Sanofi Pasteur International

Sales forecast and demand planning are processed through internet based system with SAP11 and FuturMaster12 tools These tools help to collect and interchange electronic data between global operations and its 140 subsidiaries Sales forecast, inventory levels, shelf-life data for 650 SKUs collected from subsidiaries are consolidated and validated at corporate level to balance the demand and the supply forecast The control

of these data will help to identify critical situation such as write-off, stock-out… to better monitor the distribution planning

Lead time to deliver a confirmed order takes 6 months Most of product life cycle is 36 months, except flu and serum against rabies is only 12 months A horizon forecast of

36 months must be anticipated to commit an order to be delivered on time to the market Forecast is the very first step in supply chain process to monitor the balance of supply and demand within this 36 months horizon

Commercial Team Country

Client

Supply

Table 1.8: Forecast is the first step in supply chain process flow

Source: Sanofi Pasteur International

On monthly basis, Headquarter (HQ)13 and its subsidiary hold the Demand and Supply (D&S) 14 meeting to capture and validate all the needs of the customer in relevant

market The sales forecasted the actual month (N) will be analyzed in comparison with data registered in the previous month (N-1), any variance must be documented with inputs from sales & marketing to rationalize the Demand validation at Industrial

Operations level

These inputs are very important for Industrial Operations (IO)15to plan the procurement

of active ingredients and immediate products IO needs to take decision to pack the semi-finished product or not 6 months in advance to respond to a firm Demand from Customers There is little flexibility to modify the Demand once it is communicated to

IO A firm Demand cannot be cancelled in the horizon of 3 months

Additional demand which is not validated during D&S meeting will not be responded except there is buffer which is unused from other markets However, there is also high uncertainty on the outputs released as quality of biological products is trigger to the quality process control The release of one single batch is not highly committed as planning due to these constraints As a consequence, inputs from downstream part play

a very important role to ensure outputs from upstream part along the supply chain The next sourcing and purchasing part must take also inputs from forecast to establish and monitor the procurement planning appropriately

1.2 Sourcing and Purchasing

As earlier mentioned, the sales forecast plays trigger role to the procurement planning

of active ingredients and immediate products At corporate level, SP has centralized all procurement and purchasing activities and established global and long term sourcing and purchasing contracts with its suppliers, sub-contractors in Europe and Asia Pacific

to control the cost, quality and delivery time of critical items such as material, components… for manufacturing process

The internet-based purchasing information and enterprise resource planning tools are applied to plan and control the procurement process to ensure just in time delivery of these materials Accuracy forecast will help SP to benefit low cost of purchased materials and balance the demand and supply components, immediate products for production process and reduce storage and overhead cost to control this stock The supplier’s factory is subject for quality inspection to ensure the compliance with GMP and FDA16 requirement on quality aspects Every single process must be

validated as from regulatory perspective; any kind of vaccine for human use needs a market authorization in relevant market destination Thus strict terms and conditions on selection criteria are also applied for these suppliers in order to strictly control the suppliers’ outputs to meet regulatory requirements on quality Different requirements from regulatory aspect for each country describe the complexity of manufacturing process

1.3 Manufacturing

With more than 13 manufacturing sites worldwide, the main sites are based in France, Canada and US Recently, SP has expanded three more sites in India, China and Mexico to better serve these potential emerging markets need

Depending on the type of vaccine, it takes 6-24 months to produce a single batch The production cycles are much longer than the traditional pharmaceuticals industry due to the need for quality control of biological products and around 70% of manufacturing process is taken up by quality control

SP applies make to stock (MTS)17 model to produce vaccine for mass distribution of standard packaging products in Europe, Latin America, South Africa, Asia Pacific…and make to order (MTO)18 (below Table 1.9) to produce specific orders for public market in Canada, USA and Mexico, especially pandemic flu for US government

Table 1.9: Make to Stock Model

Source: Sanofi Pasteur International

Two main processes which must be carried out to produce a batch of vaccine are bulk manufacturing and finishing operations Picture 1.10 below shows the process mapping

to produce and distribute vaccine to market:

Packaging Finish Goods

Distribution

Subsidiary or distributor

packaging

Table 1.10: Vaccine Manufacturing Process

Source: Sanofi Pasteur International

1.3.1 Bulk manufacturing takes 6-15 months and includes:

* Cell cultures (cell construction-cell banking-cultivation)

* Harvesting

* Fermentation–based manufacturing followed by a variety of separation

processes to purify the vaccine

1.3.2 Finished operations include:

* Formulation with adjuvant/ stabilizer followed by vial or syringe filling

(including lyophilization in the case of live virus vaccine) normally takes 6-10 months;

* Labeling, packaging and controlled storage takes 1-4 months;

* Distribution takes 2-4 weeks At this final step, the cold chain must be constantly maintained during all stages, from distribution to vaccine

administration to patients

In the above Table 1.10, from production to shipment, unique product faces unique challenge Each production step is associated with specific challenge that can impact the availability of product The most important step during and following manufacturing is quality control, as without quality certificate release by this process, the vaccine should not be strictly distributed to the market

1.4 Quality control

Quality control takes 70% of time of the whole manufacturing process, in which every one in three people is involved in quality control There are more than 50 control tests are required during vaccine batch production Sterility control takes 14 days on average and possibly takes longer if any variation is reported This is essentially due to the lengthy and stringent testing requirements to ensure the safety and efficacy of the final product

Every vial or syringe is needed to be inspected for product or container/ closure defect, packaged with insert into cartons, and stored while awaiting regulatory release and ship

to customers A significant impact of the elimination of the preservative, their removal has had a great cascading impact on the manufacturing and supply of vaccines and has consumed a great deal of technical and engineering effort as well as capital investment

to resolve and deliver existing products to consumers in new forms

Depend on each country regulatory requirement; a certificate of analysis released by manufacturer is enough to start distributing process At the end of this stage, the vaccines on demand will be packages and distributed to international markets

1.5 Distribution

Vaccines are shipped by airplane from France to Vietnam at strict controlled storage from 20C to 80C during transportation SP has externalized the logistic part through global master contract with international forwarders such as DHL, Kuehne and Nagel

to benefit of competitive tariff and reduce logistic cost

Local distributors of SP handle the importation and logistic service to distribute SP vaccines in their exclusive territory Distribution fees include customs duties, logistic, storage, import permit …to handle and deliver vaccines to Customers Each of them

has its own partnership with local forwarder to have express ground services to minimize the time spent on customs process to transport vaccines as quick as possible

in cold chain vehicles to distributor’s warehouse The samples taken from each shipment must be sent to NICVB19 in Hanoi for local safety tests The vaccine must be stock in quarantine from 1-15 working days and during this period, distributors will have to complete the local re-packaging with Vietnamese insert notice to be in compliance with local regulatory requirements before selling vaccines to the market

Table 1.11: Distribution of vaccine mapping

Source: Sanofi Pasteur International

As vaccines are biological products, the cold chain must be monitored and controlled strictly from the reception at the airport until the delivery to Customers storage Below Table 1.12 describes is the temperature data monitoring from 20C to 80C during transportation and storage to ensure its quality before distribution to Customers

Table 1.12: Vaccine temperature monitoring Source: Sanofi Pasteur International

The distributors’ warehouse and cold chain management system must be validated by

SP quality officer and the quality agreement must also be integrated in the distribution agreement between two parties To ensure quality of the vaccine imported to Vietnam, Distributors cannot return the unsoldvaccine to SP, the products need to be destroyed locally according to Vietnam Health Regulations

Based on the sales trend from the market and SP marketing plan, distributors have to plan their rolling forecast to re-order for each product 6 months in advance due to production lead time A level of security stock has been agreed upon the 2 parties to ensure enough products for 3 months sales of strategic products Distributors pay directly to SP headquarter for the good purchased at a specific payment term from the invoice date, which enables them have flexible time to collect money from Customers and pay to SP

There is no retail market for vaccines due to strict control of Health Authority on CIF20price and selling price of vaccines to the market In the private market, the purchase of vaccines is implemented through tenders at Hospitals/ Preventive Medicine Centers (PMC21) (hereafter known as Customers) at both regional and provincial level Patients (end-Users) will come to these health organizations to get vaccination on doctor’s prescription As a result, failure to take part to Customer’s tender will create bottleneck

on supply of vaccines in the market

Operating in such a competitive and fast changing vaccine market, only effective supply chain management can helps SP to commit to timely respond to Customer demands However, in the last 3 years, SP experienced a lot of supply constraints which challenged the achievement of company objectives and impact Customer’s satisfaction The issue has been highly focused on management agenda and SP needs to identify critical issues and their root-causes analysis in order to find solutions to give possible answer to the question: “Which factors in the supply chain currently impact the Customer’s satisfaction, mostly due to shortage of promoted products and non-delivery on time of committed orders?”

It is very challenging for SP to Optimize Cost, Maximize Customer Service and Ensure Quality of vaccine produced Critical issues and root-causes analysis will be discussed

in Part 2 of this Chapter

2 Critical issues identification & analysis:

2.1 Shortage of product/ Failure to deliver on time

In the last 3 years, it was reported that mots of critical issues came from production and leads to stock-out of many products: tetanus, rubella, measles, mumps, serum anti-rabies, acellular pertussis-based combination vaccines… The delivery to international markets has been delaying and the supply is not highly committed Allocation situation has been applying for those products which impacted directly on company’s financial objective as well as customer’s loyalty

Distributors faced a lot of problems due to contracts breaking which generated big amount of penalties due to shortage of products under tender at hospitals and PMCs Face to face with Customers, SP sales team received a lot of complaints due to un-availability of promoted products, which impacted the vaccination schedules advised to end-Users

There is less flexibility for SP to communicate the supply capability and timeline on allocated products to Customers, which negatively impacts SP’s image as well as Customer’ s intimacy Critical impact is firstly resulted in loss of Customers as they are not happy when the products in need cannot be supplied on time, and finally it is difficult for SP to regain the market when the supply turns back to normal later

This critical situation urge for root-cause analysis for problem solving at both local and global level Major causes have been identified through brainstorming meetings with relevant stakeholders to identify root-cause of the supply constraints and suggest feasible solutions to reduce and eliminate the bottleneck in supply chain operations

2.2 Root-cause identification

The analysis of sales data reported from 2011-2013 shows that variance between actual performance and objectives mainly came from late delivery and shortage of products

Issue 2014

Production capacity

Shortage

Production capacity Product B

Table 1.13 Product allocation situation Source: Sanofi Pasteur Vietnam

The red, orange, green color to highlight the production capability such as red for product under shortage, orange for product with limited supply and green for product with no supply constraint

The below Table 1.14 listed all products with supply issue in 2013 and delivery was delay until today due to unavailability of vaccines It is challenging to predict precisely when the supply of allocated products will come back to normal condition Lack of visibility on the supply planning impacts on the reliability of SP and reduce Customer’s satisfaction Reason for delivery delay was caused by both production like Adacel and regulation constraints like Pneumo 23, Avaxim 160 (Table 1.14)

Production issue Regulatory issue

SUPPLY CONSTRAINTS - VIETNAM 2013

Production issue/ quota pending

Table 1.14: List of SP product in supply constraint in 2013

Source: Sanofi Pasteur Vietnam