(Graph No.4.G1: Various Phases of Growth Of Indian Pharma)shodhganga.inflibnet.ac.in/bitstream/10603/64158/13/13_chapter 4.pdf · 0.05 0.1 0.15 0.2 0.25 0 1 2 3 4 5 6 Y-Values Y-Values

CHAPTER 4

DATA COLLECTION & ANALYSIS

The efforts are put to present the data which would highlight the current situation in the domestic

market of Indian Pharmaceutical Industry. To highlight current situation of Indian Pharma

Industry, various data has been collected from various sources.

(Graph No.4.G1: Various Phases of Growth Of Indian Pharma)

This graph indicates the various phases of growth of Indian Pharma Industry since 1970,

took place until today & expected growth by 2020.

(Table No. 4.T1 : Various phases of growth of Indian Pharma)

PHASE PERIOD DEVELOPMENTAL PARTS

I Prior to

1970

Dominated by MNCs. Indian Patent Act absent. Indian Pharma

companies absent.

II 1970 Government control started. Indian Patent Act came into

existence. Drugs prices capped. Indian companies started

improving.

0

0.05

0.1

0.15

0.2

0.25

0 1 2 3 4 5 6

Y-Values

Y-Values

III 1980 Process development started. Production Infrastructure started

initial phase. Exports of drugs started from India.

IV 1990 Rapid expansion of domestic market. Research orientation.

V 2000 Innovation & research. New Indian Patent Act. Discovery

research. Contract research & manufacturing services.(CRAMS)

VI 2010 &

onwards

Clinical Trials. Bio-technology. Drugs discovery. Quality &

Regulatory has received immense attention. India is a forerunner.

(Table No. 4.T2: Indian Pharma Industry Domestic market-2014,Source: AIOCD, MIR,

2014)

Rank

No.

Name of the

company

Sales Value

for 2014

Rs.Crs

Domestic

market

share %

Domestic

market

growth

%

Commercial or

Materials

deptt. Located

at

1 Abbott Group * 5136 6.19 6.9 Mumbai

2 Sun Pharma 4524 5.45 15.3 Mumbai

3 CIPLA 4142 4.99 11.4 Mumbai

4 Zydus (+ biochem) 3604 4.34 8.7 Ahmedabad

5 Ranbaxy 3059 3.69 10.7 Delhi

6 Mankind 2991 3.60 12.5 Delhi

7 Alkem 2912 3.51 11.1 Mumbai

8 Glaxo Smith Kline * 2780 3.35 -4.0 Mumbai

9 Lupin 2767 3.33 12.2 Mumbai

10 Pfizer * 2472 2.98 12.7 Mumbai

11 Macleods 2406 2.90 26.6 Mumbai

12 Emcure (+zuventis) 2218 2.67 7.4 Pune

13 Intas 2179 2.63 15.9 Ahmedabad

14 Aristo Lab 2068 2.49 18.3 Mumbai

15 Sanofi * 2065 2.49 5.8 Mumbai

16 Torrent 1863 2.24 10.5 Ahmedabad

17 Glenmark 1820 2.19 15.2 Mumbai

18 Dr. Reddys 1755 2.11 9.0 Hyderabad

19 Micro Lab 1637 1.97 8.8 Bangaluru

20 U S Vitamins 1610 1.94 16.9 Mumbai

21 Ipca Lab 1478 1.78 18.6 Mumbai

22 Novartis * 1159 1.40 1.6 Mumbai

23 Alembic 1127 1.36 11.5 Mumbai

24 Wockhardt 983 1.18 1.7 Mumbai

25 FDC 839 1.01 5.2 Mumbai

26 MSD

(+FULFORD)*

822 0.99 15.3 Mumbai

27 Unichem 803 0.97 6.3 Mumbai

SUB TOTAL 61219 73.75

Indian Pharma

Total Market

83009 100.00 10.2

• The asterisk * marked are Multinational Companies.

• There are 27 top companies, contributing to 73.75% of Domestic Pharma Market.

• Overall Indian Market, for the year 2014, has grown to the extent of 10.2%.

• Out of 27 top companies, MNCs are 6. (Abbott, Glaxo,Pfizer,Sanofi,Novartis and

MSD group).

• MNCs share is 17.40% out of 73.75% of Domestic market.

• Indian Pharma companies which are innovative, are doing well and indicating

double digit growth—Sun Pharma, Mankind, Lupin, Macleods, Intas, Aristo,

Glenmark, U S Vitamin, Ipca Lab.

The above data clearly indicates that Indian Pharma Companies are doing extremely well

as compare to Multinational companies. Even, Indian Companies are showing a better

growth than MNCs. Hence for sustainability and maintaining growth factor, “Cost

Reduction” cannot be ignored.

4.2 MARKET SHARE OF MNCs & INDIAN COMPANIES IN THE

PHARMACEUTICAL INDUSTRY IN INDIA.

(Table No.4.T3 –Source: ORG 1978 & AIOCD, MIR 2013 & 2014)

Year MNCs % INDIAN %

1970 68 32

1978 60 40

1980 50 50

1991 40 60

1998 32 68

2004 23 77

2012 28.7 71.3

2013 27 73

2014 26.08 73.92

The above data clearly indicates, that, Indian Companies market share has gone up,

since,1980 and has been growing slowly but surely. Since 2013, the market share has

remained more or less constant.

Indian Pharma prices are lower than MNCs. More “Generic Products” are introduced,

affordable to common man of India. Quality and infrastructure of Indian Pharma is also

improved.

4.3 SALES FOR DIFFERENT THERAPEUTIC DRUGS FOR THE

YEAR 2014.

(Table No. 4.T4- Source: AIOCD/AWACS, MIR 2014)

Rank

No.

Therapeutic super group. Value of sales in

crs. For the year

2014

% of

share to

total

IPM

% of

growth

for the

year

2014

1 Anti-infective 13,272 15.98 6.0

2 Cardiac 10,363 12.48 10.7

3 Gastro-intestinal 9,534 11.48 11.40

4 Vitamins/Nutrients 7,537 9.08 11.10

5 Respiratory 6,481 7.81 10.4

6 Anti-diabetic 6,278 7.56 21.3

7 Pain/ Analgesics 5,912 7.12 9.3

8 Neurological/Central

nervous system

5,064 6.10 8.2

9 Dermatological 4,772 5.75 16.1

10 Gynecological 4,209 5.07 5.1

SUB- TOTAL 73,422 88.43

11 OTHERS 9,588 11.55

12 TOTAL IPM 83,009 100.00 10.2

• There are in total 20 different Therapeutic drugs made for convenient purpose,

considering the broad view.

• Out of 20 different therapeutic groups, 10 top groups contribute to the extent of

88.43% of the Indian Pharma Market (IPM), worth Rs.73,422 crs.

• The balance 10 groups contribute to the extent of 11.55% of IPM, worth Rs.9588

crs.

• It is worth noting that Anti-Diabetic group is growing by 21.3% and Cardiac by

10.7%. Both the groups are categorized as CHRONIC.

4.4 TOP 20 BRANDS OF INDIAN PHARMA MARKET

(Table No. 4.T5- Source: AIOCD/AWACS MIR, 2014)

Sr.No. BRAND COMPANY Major contents in brand Sales

Rs.Crs.2014

1 Mixtard Novo Human premix 387

2 Augmentin GSK Amoxycillin+clavulanic 285

3 Glycomet

GP

USV Glimeperide+Metformin 279

4 Monocef ARISTO Ceftriaxone 248

5 Becosules PFIZER Vitamin B complex 238

6 Corex PFIZER Chlorpheniramine+codeine 222

7 Volini RANBAXT Diclofenac 221

8 Revital RANBAXY Ginseng 220

9 Clavam ALKEM Amoxycillin+clavuanic 213

10 Lantus SANOFI Glargine 208

11 Dexorange FRANCO Ferrous combination 198

12 Liv 52 HIMALAYA Hepatic 181

13 Manforce MANKIND Sildenafil 178

14 Betadine WIN-MEDI Povidone-iodide 177

15 Galvus met NOVARTIS Vildagliptin+metformin 177

16 Skinlite ZYDUSCADILA Hydroquinone combin 173

17 Aciloc CADILLA Ranitidine 167

18 Taxim ALKEM Cefotaxim 162

19 Taximo ALKEM Cefixim 162

20 Moxikind

CV

MANKIND Amoxycilin+Clavulanic 161

• Top 10 brands have crossed Rs. 200 Crs.

• Next top 10 brands have more than Rs.100 Crs sales.

• Out of top 20 brands, 6 brands are of MNCs.

• In top 10 brands, 2 brands each are of PFIZER & RANBAXY

4.5 Top 15 Global Pharma Companies by Revenues of 2014.

(Table No. 4.T6-Source: Fierce Pharma news letter dt. 19.5.2015)

2014

Rank

2013

Rank

COMPANY 2014

Revenue $

2013

Revenue $

% Growth

Billion Billion

1 7 Johnson & Johnson 74.331 71.312 4.23

2 2 Novartis 57.996 57.335 1.11

3 3 Roche 49.86 48.53 2.74

4 1 Pfizer 49.605 51.584 -3.84

5 5 Sanofi 43.07 42.08 2.35

6 4 Merck 42.237 44.033 -4.079

7 6 Glaxo Smith Kline 37.96 41.61 -8.77

8 8 AstraZeneca 26.095 25.711 1.493

9 17 Bayer 25.47 24.17 5.10

10 - Gilead Sciences 24.474 10.804 126.53

11 11 Teva 20.27 20.314 -0.216

12 12 Amgen 20.063 18.676 7.43

13 10 AbbVie 19.96 18.79 6.23

14 9 Eli Lilly 19.615 23.113 -15.13

15 14 Bristol-Myers

Squibb

15.879 16.385 -3.088

1. Johnson & Johnson, Novartis, Roche, Pfizer have headed up the rankings for last

couple of years, albeit in varying order.

2. For the first time, “Gilead Sciences”, a biotech company has been ranked 10th, with

skyrocketing sales of $ 24.474 billion. Growth of 126.53%, over the last year.

3. Teva a well-known company as “Generic Company” has struk $ 20.3 billion in

revenue.

4. De-growth is indicated by Pfizer, Merck, GSK, Teva , Eli-Lilly & Bristol Myers

Squibb.

5. Well -known companies are indicating de-growth in last 2-3 years, mainly due to

important products are off-patent. Over & above this the R &D products line is getting

dried up.

This is an opportunity for the Indian Pharma Industry to come up speedily in

Generics, especially for off-patented products and also discover new products.

4.6 EXPORTS OF PHARMACEUTICALS

1. The major players of Indian Pharma Market export API (Bulk Drugs) and

Formulations to both regulated and unregulated market. The larger exporters are

Ranbaxy, Glenmark, CIPLA, Sun Pharma, Lupin, IPCA, Wockhardt etc.

2. The exporters like Aurobindo Pharma, Shasun, Orchid,Hetetro Drugs, Neuland, Divis

& Ind-swift are specialized in bulk-drugs manufacturing and they do export to regulated

and unregulated markets.

3. India exports to 200 countries the pharmaceuticals products.Pharma exports is growing

at a compounded annual growth of 22%.

4. Out of total exports, US exports accounts for 28%, followed by 18% to EU and 17% to

South Africa. Almost 63% of Pharma exports is to these three countries.

In order to increase Exports, the organization has to remain competitive in terms of

QUALITY and PRICE. To sustain, it is obvious, that, organizations focus on

“cost reduction”. Reduction in cost without impairing the Quality is a difficult job.

This can be certainly be achieved, by using tools and techniques of cost reduction.

Many organizations practice them regularly.

Of course, while achieving the reduction not only Materials Department is valuable,

but other departments like R & D, Production, and Human Resources are equally

valuable and organization needs to focus their importance and efforts in that

direction. No doubt, Materials Department can contribute a lot, since they spend

organization’s money for procuring Materials of various needs, Equipment etc.

(Graph No.4.G2: Indian Pharma Market-Growth in future-Mckinsey report)

(Source- McKinsey Report: Sept.2014)

4.7 FUTURE GROWTH OF PHARMA INDUSTRY

• Indian Pharma Market is set for “above average” growth.

• Currently Indian Pharma Market is having its market share in the pattern of

72% Generic, 9% OTC products, and 19% Patented.

Organizations moving to leadership need to focus on 3 factors—

(1) Launch more innovative products and not “Me Too” products.

(2) Enhance channel management, enhance merchandising capabilities i.e. efficient

and effective distribution, retailing and logistics.

(3) Cost Reduction is one of the ways and need, in today’s context to improve

efficiency and effectiveness.

(4) Inventory control, Return management, Warehousing, Third party logistics

(3PL), Transportation, Reverse logistics are the crucial areas and Grey areas where

cost reduction can be captured with concerted efforts.

0

10

20

30

40

50

60

70

80

2009-USD 12.6 bln 2012-USD 35 bln 2020-USD 55 bln 2025-USD 70 bln

Series 1

Series 2

Series 3

4.8 HYPOTHESIS TESTING

[I] H0: Use of tools and achievement of Cost reduction are independent of

each other.

To test this hypothesis following questions from Questionnaire were taken into consideration.

Part B: Cost Reduction: Q. 4

Part E: Other departments: Q.2

From Part B , average cost reduction achieved during 2011-12 and 2012-13 in the slabs “Upto

Rs.5 Crs”, “Rs.5-10 Crs”, “Rs.10-15 Crs”, and “aboveRs. 15 Crs” by companies were

considered.

In part E the various options were classified into tools and techniques. The table of tools was

as follows

(Table No.4.T7 : Tools used for cost reduction)

Sr. No. Tools

1. Cause & Effect

2 Pareto Law

3 Control Charts

4 Brainstorming

5 Why? (5Times)

Responses to above tools were in ranks according to priority. Top priority (Ranks 1to 5) were

considered.

Two way tables were constructed showing frequencies as number of factories as follows.

Title: Distribution of organizations according to Cost reduction achieved and Tools used

to achieve cost reduction.

(Table No. 4.T8: Tools used & cost reduction achieved)

Cost

reduction

achieved

Tools used to achieve cost reduction

Cause &

Effect

Pareto Law

Control

Charts

Brainstorming

Why?

(5Times)

Upto 5 Crs 5 4 1 4 2

5-10 Crs 2 2 - 2 -

10-15 Crs 1 1 1 1 -

above 15crs. 5 3 - 1 1

Independence of attributes “Use of tools” and “Achievement of Cost reduction” was tested

using Chi-square test.

To apply Chi- square test the above table was reduced to 2X2 table by grouping adjusting rows

and columns. Thus the Observed Frequencies[O] were as given below.

(Table No. 4.T9: Frequencies used for cost reduction tools)

Cost reduction\Tools used

9 7

14 6

( Table No. 4.T10 :Table of Expected frequencies for the cost reduction tools.)


10.22222 5.7777789

12.77778 7.222222

The Chi-Square Statistic was calculated by the formula ∑[(O-E)^2/E]

The level of Significance used was 5% Degrees of Freedom: 1

Critical Value: 3.841459 Test statistic value: 0.72842809

Decision: Since Calculated Value < Critical Value

H0 is accepted.

Conclusion: Use of tools and achievement of Cost reduction are independent of each other.

[II] H0: Use of Techniques and achievement of Cost reduction are independent of each

other.


Part B: Cost Reduction: Q. 4

Part E: Other departments: Q.2

From Part B , average cost reduction achieved during 2011-12 and 2012-13 in the slabs “Upto 5

Crs”, “5-10 Crs”, “10-15 Crs”, and “above 15 Crs” by companies were considered.

In part E the various options were classified into tools and techniques. The table of Techniques

was as follow:

(Table No.4.T11: Table of techniques used for cost reduction)

Sr. No. Techniques

1 P D S A

2 Six Sigma

3 T Q M

4 T P M

5 Analysis of Variance

(ANOVA)

6 Benchmarking

7 KAIZEN

Responses to above Techniques were in ranks according to priority. Top priority (Ranks 1to 5)

were considered. Two way tables were constructed showing frequencies as number of factories

as follows.

Title: Distribution of organizations according to Cost reduction achieved and Techniques

used to achieve cost reduction. (Table No. 4. T 12)

Cost

reduction

achieved

Techniques used to achieve cost reduction

P D S A Six

Sigma

T Q M T P M

Analysis

of

Variance

(ANOVA)

Benchmarking KAIZEN

Upto 5 Crs 1 1 2 3 2

5-10 Crs 1 1 1

10-15 Crs 1 1 2 2

above 15

Crs

3 3 1 4

Independence of attributes “Use of Techniques” and “Achievement of Cost reduction” was

tested using Chi-square test.

To apply Chi- square test the above table was reduced to 2X2 table by grouping adjusting rows

and columns. Thus the Observed Frequencies [O] were as given below.

Table of Observed frequencies for techniques used for cost reduction. (Table No.4.T13)

Cost reduction\Techniques

used

6 6

8 9

Table of Expected frequencies for techniques used for cost reduction.(Table No. 4.T14)


5.793103 6.206897

8.206897 8.793103



Critical Value: 3.841459 Test statistic value: 0.02436975


H0 is accepted.

Conclusion: Use of Techniques and achievement of Cost reduction are independent of each

other.

[III] H0: Behavioral pattern of employees and efforts put by the management are

independent of each other.


Part D: Motivation: Q. 8 Part D: Motivation: Q.9

Responses to above Techniques were in 0’S AND 1’S according to applicability.

Two way table was constructed showing frequencies as number of factories as follows.

Title: Distribution of organizations according to HIDDEN factors at “Organizational level

“affecting cost reduction and HIDDEN factors at “Employees level” affecting cost

reduction. (Table No.4.T15)

E\O O1 O2 O3 O4 O5 O6 O7 O8

E1 5 3 4 5 4 3 3 4

E2 4 2 3 4 3 2 3 4

E3 4 3 4 4 4 3 3 3

E4 3 2 2 4 2 1 2 3

E5 4 1 2 5 2 2 2 4

E6 1 1 1 1 1 1 1 1

E7 3 3 3 3 3 4 2 3

E8 2 1 1 2 1 1 1 2

E9 1 1 1 1 1 1 0 0

O: Factors at Organizational level, E: Factors at Employees level

(Table No.4.T16: Hidden factors at employees’ level)

E1 No appreciation

E2 No opportunity to learn

E3 No conducive atmosphere

E4 No enough compensation

E5 No specific training given

E6 Cognitive Dissonance

E7 Discouraged for experimentation

E8 Discrimination

E9 Unfair practices

AND

(Table No. 4. T17: Hidden factors at organizational level)

O1 Absence of proper culture

O2 High Tension Environment

O3 Vague Decisions

O4 Appropriate Policies not in place

O5 Appropriate Policies are in place but not implemented.

O6 Absence of OPENNESS

O7 CRITICISM prevails.

O8 No “role-models” in the organization

Independence of attributes of HIDDEN factors at “Organizational level “affecting cost reduction

and HIDDEN factors at “Employees level” affecting cost reduction were tested using Chi-

square test.

To apply Chi- square test the above table was reduced to 5X4table by grouping adjusting rows

and columns. Thus the Observed Frequencies[O] were as given below.

(Table No. 4.T18: Observed frequencies for hidden factors)

E\O O1 O2 O3 O4

E1 8 9 7 7

E2 6 7 5 7

E3 7 8 7 6

E4 10 13 7 11

E5 13 13 13 10

(Table No.4.T19: Table of Expected frequencies for hidden factors)

E\O O1 O2 O3 O4

E1 7.83908 8.908046 6.948276 7.304598

E2 6.321839 7.183908 5.603448 5.890805

E3 7.08046 8.045977 6.275862 6.597701

E4 10.36782 11.78161 9.189655 9.66092

E5 12.3908 14.08046 10.98276 11.54598



Critical Value: 21.02607

Test statistic value 1.98792


H0 is accepted.

Conclusion: Behavioral pattern of employees and efforts are independent of each other.

.

4.9 PART A

1. Number of employees in the organization.

(Graph No.4.G3: Employment in Pharma Organizations under research study)

1. 71% organizations are employing less than 10000 employees, whereas, 29% are employing

more than 10000.

2. General trend in Pharma organization is that

manufacturing 12 to15%, & in R&D 8 to 15%.

3. Talented & well educated employees are available in immense in India for Pharma sector.

Good facilities of Pharma education is the main reason for such availability and employment.

4. However attrition rate is also very high. For some organizations it is to an extent of 33%. HR

policies, culture of the organization, compensation, respect to employees, vision and growth o

the organization matters in controlling an attrition rate.

02 Sales Revenue and Materials consumed:


2. General trend in Pharma organization is that 60% employees are in the field, followed by

manufacturing 12 to15%, & in R&D 8 to 15%.


cation is the main reason for such availability and employment.


policies, culture of the organization, compensation, respect to employees, vision and growth o

the organization matters in controlling an attrition rate.

02 Sales Revenue and Materials consumed: (Graph No.4.G4)


60% employees are in the field, followed by


cation is the main reason for such availability and employment.


policies, culture of the organization, compensation, respect to employees, vision and growth of

• Abbott, GSK (Glaxo Smith Kline) & Sanofi are MNCs in Indian Pharma Industry and

when their ratio of material consumption to Sales Revenue is observed, it would be as

follow:

• Abbott for 2012 is 57.64%, for the year 2013 it is 58.33%. This % is unusually higher

than other organizations mainly due to traded stocks purchased by them is immense, as

compare to other organizations. One reason is their MNC policy to go for outsourcing

and second reason is, they do not have enough manufacturing capacity of their own in

India. Third reason is, manufacturing cost of traded items is incurred too!

• In case of GSK, it is 39.99% & 47.46% for the years 2012 & 2013 respectively.

• In case of Sanofi it is 46.03% and 43.73% for the year 2012 & 2013 respectively.

In general, in Pharma Industry, the materials cost ranges between 35 to 45%.

It also depends upon business models of an organization & therapeutic segments of an

organization. If product-mix is more falling under DPCO, then materials cost would be

higher since profit margin is extremely low. If products are of CARDIAC or

ANTIDIABETIC, then cost of materials is negligible. Hence total product mix, vis-à-vis

0

500

1000

1500

2000

2500

3000

Abbott 2012 Abbott2013 GSK 2012 GSK 2013 Sanofi 2012 Sanofi2013

Series 1

Series 2

Series 3

business of formulations, bulk drugs, intermediates & specialty chemicals matter the

most.

(Graph No.4.G5: Sales revenue & materials consumption)

• Some of the other organizations where ratio of materials consumed against sales revenue

for the year 2013-14 is shown in the above graph.

0

2000

4000

6000

8000

10000

12000

Alembic

13-14

CIPLA 13-

14

Ipca 13-14 Lupin 13-

14

Novartis

13-14

Pfizer 13-

14

Unichem

13-14

Series 1

Series 2

Series 3

• Alembic- 41.56% CIPLA

Lupin Lab- 34.18% Novartis

The materials consumption for the aforesaid organizations is in the range of 33% to 42%.

This is the general trend in the Indian Pharma Industry

This implies the scope of Materials Man

design, early involvement of vendors, negotiations, warehousing, inventory control,

manufacturing, transportation, reverse logistics to distribution

encompassing the entire to & fro flow of m

03. (Graph No.4.G6: Number of

(Table No. 4.T20: Manufacturing units and organizations under study)

Sr.

No.

Organization Number of

manufacturing

units in India

1 Abbott * 2

2 Alkem 9

41.56% CIPLA- 38.71% Ipca Lab- 37.13%

34.18% Novartis- 40.66% Pfizer- 33.45% Unichem


This is the general trend in the Indian Pharma Industry.

This implies the scope of Materials Management for cost reduction right from product


manufacturing, transportation, reverse logistics to distribution among

encompassing the entire to & fro flow of materials.

Number of manufacturing units in India)

(Table No. 4.T20: Manufacturing units and organizations under study)

Number of

manufacturing

units in India

Sr.

No.

Organization Number of

manufacturing

units

8 Lupin Lab 9

9 Novartis * 1

33.45% Unichem-35.04%


agement for cost reduction right from product


among all segments

Number of

manufacturing

units in India

3 Alembic 2 10 Pfizer * 2

4 CIPLA 34 11 Sun Pharma 9

5 Glaxo * 1 12 Sanofi * 1

6 Glenmark 12 13 Unichem 6

7 Ipca Lab 16 14 Wockhardt 8

• It can be observed that organizations that are top in Pharma business in totality including

domestic & exports are having more numbers of units. e.g. CIPLA, Ipca & Glenmark.

This is followed by Sun Pharma ,Alkem etc.

• Organizations having more number of units are having diversified business within the

Pharmaceuticals. Like- Formulations, Bulk drugs, Intermediates, Specialty chemicals,

exclusive units for exports due to technical demands or regulatory needs.

• Indian companies are doing very well in domestic and exports; hence their involvement

in the business is more. They are expanding, entering into new markets & hence

obviously building the capacity.

• MNCs like Glaxo,Pfizer,Novartis, Sanofi and Abbott are having very less units , this is

very much appropriate to the existing business model. MNCs with long term strategy in

mind would not like to create more liabilities. In case they want to wind-up, it becomes

easy to dismantle an operation. Over and above this, one more observation is that, MNCs

have not expanded their business in terms of expansion in manufacturing units. Their

sales revenue has gone up. They manufacture at Indian Pharma Small Scale Units or

sometimes at the top Pharma organizations’ facilities, usually called as THIRD PARTY

LOGISTICS (3PL). This is to avoid operation expenses and no creation of liabilities.

• In India many of the facilities of manufacturing are approved by US-FDA. Current

report say almost 100 units are approved for formulations, bulk drugs and intermediates.

• Along with US-FDA, there are other regulatory like MHRA,UK ; Australia, South Africa

etc. These regulatory have also passed the manufacturing units.

Once regulatory passes manufacturing units, marketing can do it’s export very well.

(Graph No. 4.G7 : Business operations of organizations under study)

4. BUSINESS OPERATIONS:

• Out of sample of 14 organizations, all the organizations are in Domestic formulations.

• All the organizations indicate that, they are also in EXPO

mainly due to their MNC status and global

Quarters in Global.

• Out of 14 only 7 are in bulk drugs domestic business and 6 are in export business as well.

This indicates that all the organizations are not in bulk drugs business, mainly due to R &

D and second reason is viability. MNCs like GSK (Ank

PFIZER (Chandigarh Plant) have stopped business of bulk drugs long time back, due to

Business operations of organizations under study)

BUSINESS OPERATIONS:

Out of sample of 14 organizations, all the organizations are in Domestic formulations.

organizations indicate that, they are also in EXPORT of formulations

mainly due to their MNC status and global policy on exports laid down by their Head

Out of 14 only 7 are in bulk drugs domestic business and 6 are in export business as well.


s viability. MNCs like GSK (Ankleshwar plant, Gujarat) and


Out of sample of 14 organizations, all the organizations are in Domestic formulations.

RT of formulations, except 2

laid down by their Head-

Out of 14 only 7 are in bulk drugs domestic business and 6 are in export business as well.


leshwar plant, Gujarat) and


competition with Indian companies & unviability. GSK sold their plant to Gle

back in 2001 and PFIZER

• Intermediates Business--

special technology, prices wise very competitive, have earned reputation in the market for

respective intermediate segment & are LEADERS in the segment

5. NUMBER OF APPROVALS RECEIVED BY ORGANIZATIONS:

(Graph No.4.G8 : Various approvals received by the organizations)

• All the organizations have received

practice of “Good Manufacturing” is

banned to export to US

plant being banned year after year. This is a major blow for

of foreign exchange. Not only that,

for sub-standard supply of drugs.

competition with Indian companies & unviability. GSK sold their plant to Gle

and PFIZER had to dismantle the plant in totality.

very few organizations are active. Organizations who are having


respective intermediate segment & are LEADERS in the segment, sustain for long time.

OF APPROVALS RECEIVED BY ORGANIZATIONS:

(Graph No.4.G8 : Various approvals received by the organizations)

All the organizations have received GMP certification that indicates

practice of “Good Manufacturing” is followed. However many plants from India are

by US-FDA. The statistics indicate an increase

plant being banned year after year. This is a major blow for exports business

hange. Not only that, huge penalty is also paid by some of the organizations

standard supply of drugs. In this, the reputation is also at stake.

competition with Indian companies & unviability. GSK sold their plant to Glenmark way

very few organizations are active. Organizations who are having


sustain for long time.

certification that indicates the minimum

followed. However many plants from India are

indicate an increase in numbers of

business and earning

huge penalty is also paid by some of the organizations

• Some of the Indian Pharma organizations are practicing TQM. None is successful in

receiving “QUALITY” certification as DEMING PRIZE. Main reason is, cultural

change does not take place at top management level and obviously change does not take

place in the whole organization. The efforts put are futile in terms of RETURNS at all

fronts.

• Out of 14 organizations, only 6 organizations are approved for ISO 9000. ISO 9000 series

of standards is generic in scope. This can be applied to SERVICE sector or

MANUFACTURING sector. In simple terms, the standards require an organization to

say what it is doing to ensure quality, then do what it says & finally document or prove

that it has done what it said.

• Many organizations are lacking in the system. We have seen consequences of it –US-

FDA and other regulators have banned some of our Indian Plants. This largely affects

EXPORT business, earning of foreign exchange and moreover reputation. Ultimately, in

Pharma Manufacturing, system matters.

• Out of 14 organizations, only 5 organizations are approved for ISO 14000.International

Organization for Standards (ISO) developed standards for an environmental management

system, which is known as ISO 14000.The standards addressed the process rather than

the end goal. The different standards like- environmental auditing, environmental

performance evaluation, life cycle assessment , environmental labeling, environmental

management systems etc. are covered in ISO 14000.

• ISO 14000 assumes that cultural transformation through employee involvement and

responsibility would occur, from the bottom up rather than dictates from the top. It would

improve environmental performance of planet earth. It would a build a consensus that

there is a need for environmental management system.(EMS).

• Very few organizations have taken up seriously on Environmental Management. There is

a lack in seriousness at corporate level as well as at Government level. Environmental

laws are NOT AT ALL taken seriously, in India.

06.(Table No 4.T21: Therapeutic Segments of Organizations under study.)

Therapeutic Segments of

Organization

Out of 14

companies,

presence of

companies

% of Companies

present in

therapeutic. (Out of

14 companies)

Anti-allergic * 9 64.28571

Anti-Biotics * 14 100

Anti-Malaria 6 42.85714

Anti TB 4 28.57143

Anti-Aids 4 28.57143

Anti-Retroviral 5 35.71429

Auto Immune 2 14.28571

Cardiac * 13 92.85714

CNS * 12 85.71429

Diabetic * 12 85.71429

Dermatology 9 64.28571

Gastrointestinal * 10 71.42857

Gynecological * 11 78.57143

Genetics 1 7.142857

Hormone 7 50

Neutraceuticals 8 57.14286

Ophthalmology 5 35.71429

Oncology 8 57.14286

Pain/Analgesics * 14 100

Respiratory * 11 78.57143

Vitamins/Minerals 10 71.42857

Pediatric 4 28.57143

Veterinary 2 14.28571

Vaccines 1 7.142857

• As per AIOCD-AWACS’s report, the therapeutic segments Of CARDIAC, ANTI-

INFECTIVES, ANTI-DIABETIC, and GYNECOLOGICAL, PAIN/ANALGESICS,

CNS, all the aforesaid therapeutics together share 88% of Indian Market.

• This tallies with above observation. Almost all the organizations are very much in these

therapeutic segments. Their presence in these therapeutic segments indicates that

customers’ needs are met by them. Also, they have share in the majority of the

therapeutic segments.

• Current Indian Market scenario indicates that CARDIAC & ANTI-DIABETIC along-

with CNS (Central Nervous System) are showing growth year after year.

• Organizations concentrating in these sectors are doing very well in terms of revenue and

profits in the domestic market as well as in the exports market.

• Almost all the top Pharma Organizations are in these therapeutic segments and are

concentrating their efforts in R & D for new drugs discovery and new drugs delivery.

07: TECHNOLOGY

A) In your organization procurement is viewed as:

P1: Cost Centre P2: Part of Strategic team

P3: A resource to save money P4: An innovator that impacts all areas of

Business.

(Table No.4.T22: Organizations view procurement from different perspectives)

Sr.

No.

Particulars Number of

respondents

% of respondents

1 Cost Center 4 29%

2 Part of strategic team 2 14.28%

3 Resource to save money 0 0 %

4 An innovator that impacts all areas

of business

1 7.14%

PROCUREMENT IS VIEWED AS:

(Graph No. 4.G9: Organizations look at ‘Procurement’ from different perspectives.)

1. 29% of the respondents view ‘Procurement’ as ‘Cost Center’.

2. 22% of the respondents view ‘Procurement’ as ‘Part of strategic team & a resource to save

money.

3. 14.28% of the respondents view ‘Procurement’ as ‘cost center as well as part of strategic

team’.

4. However, no respondent view plainly ‘Procurement’ as only a source of cost saving.

This implies that an outlook of an industry is changing. Materials management is no more seen

only as cost center but a strategic one, saving resource and an innovator that would impact the

entire organizational aspects.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Series 1

Series 2

Series 3

B) In your organization (INFORMATION)

T1 Very little, processes are still very

T2 Within the department as part of procurement tool kit

T3 Across the organization to all end users

T4 Integrated into all of organizational activities to pr

Value.

(Graph No.4.G10: Technologies “IT” used in procurement is viewed as

36%

7%

7%

Technologies used in Procurements viewed as

T1

(INFORMATION) technology used in procurement:

Very little, processes are still very labor intensive.

Within the department as part of procurement tool kit.

Across the organization to all end users.

ll of organizational activities to provide transparency & drive

(Graph No.4.G10: Technologies “IT” used in procurement is viewed as)

7%7%

7%

0% 0%0%


T2 T3 T4 T1,T2 T2,T4 T3,T4

procurement:

ovide transparency & drive

29%


1. Processes still being very labor intensive- 7%

2. within the department as part of procurement tool kit-7%

3. Across the organization to all end users-29%

4. Integrated into all of the organizational activities to provide transparency & drive value- 36%

5. Partly labor intensive & partly within the department as procurement tool kit-7%

6. Partly departmental & partly integrated into organizational activities-7%

7. Partly across the end users and partly integrated into organizational activities-7%

Indication is 84% organizations are using SAP or any other software, integrating all the activities

of organization and that of Materials Management. This reduces time, efforts, makes work

speedier with accuracy. Also, helps to take correct decision.

In other words, top organizations in Pharma Industry are using latest & sophisticated IT-software

to sustain the competition in the Global Market.

C) Technologies used are :

CT1- ERP CT2- Procurement

CT3- Request for Quotation CT4- Integrated Payment to suppliers

The above observation is being supported by the data collected in this addressed question. The

answers received speak for themselves supporting the above conclusion.

1. 21% are using exclusively ERP. That means all the activities of organization are integrated.

2. 43% are integrated in totality until the payments to the suppliers are made. That means

right from quotation floating, procurement, production, storing, till payments to suppliers are

made being done thru’ IT help. Usually SAP or some other software being used.

3. 36% balance are not in very sophistication but are using customer-friendly software which

may be suitable for their current needs.

This indicates, top Pharma organizations are using latest IT technology to remain & sustain the

competition. This is very positive from business point of view.

(Graph No. 4.G11: Technology used & coverage in process of procurement)

D) Any Comments on technologies?

1.72% respondents are very happy, indicating Excellence and fineness in the software selected

and being used and practiced throughout the organization.

2. 28% respondents are suggesting “need for the improvement”, whereas 7% respondents are

indicating suitability of the software being used.

3. The organizations lacking in the system need to upgrade the IT system to match with the

current scenario and competition in the domestic as well as international market.

technologies?


and being used and practiced throughout the organization.

% respondents are suggesting “need for the improvement”, whereas 7% respondents are

indicating suitability of the software being used.


on in the domestic as well as international market.


% respondents are suggesting “need for the improvement”, whereas 7% respondents are


on in the domestic as well as international market.

(Graph No.4.G12: Respondents view on IT technology being used in the organization)

Part B : COST REDUCTION

Q.1. Do you take specific goals for Cost reduction at corporate level every

All the companies i.e. 100% take specific goals for Cost reduction at corporate

Level every year.

Q.2. Do you assign specific goals to Materials Department

All the companies i.e. 100% assign

Year .

Q.3. What is the approach of top management towards cost

(Graph No. 4.G 13: Approach of top management based on


Part B : COST REDUCTION

Do you take specific goals for Cost reduction at corporate level every year?

the companies i.e. 100% take specific goals for Cost reduction at corporate

pecific goals to Materials Department every year?

All the companies i.e. 100% assign specific goals to Materials Department every

What is the approach of top management towards cost reduction?

h of top management based on strategy for cost reduction)


the companies i.e. 100% take specific goals for Cost reduction at corporate

Materials Department every

for cost reduction)

(Graph No. 4.G 14: Approach of t

The above responses recorded indicate the following:

14%

29%

long term

Unstructured

Approach of top management according to

Approach of top management according to process)

The above responses recorded indicate the following:

57%

short term both

Structured

86%

Unstructured

14%

Approach of top management according to

process

(a) Every year all the organizations in Pharma Industry take the goal for cost reduction. This

indicates an importance of the subject matter for each and every organization. No respondent has

denied that goal is not taken.

(b) Every year “specific goals” are given to Materials Department. All respondents have

assertive answer for this. This indicates two important matters, one is goal for cost reduction &

second it is assigned to “Materials Department” for its accomplishment. Materials Department is

no more COST CENTER but is seen as PROFIT CENTER. Many wonders can be achieved by

Materials Department since they spend organization’s purse. 35 to 45% approx. is spent in

procurement of Materials for consumption. This includes money spent for traded items.

There is huge scope for cost reduction and all the respondents are very positive on this

front.

(c) Generally, the approach of management towards cost reduction is long term (57%) & in few

cases it could be long as well as short term also(29%). Very few cases could have only short

term approach (14%).

(d) Most of the respondents have indicated that process of cost reduction is well structured. That

means system, process, accountability, repercussions, reviews, long term effects are well

considered. 86% are in favor of this. In some cases may be, (as per respondents’ view 14%),

unstructured process takes place. In my opinion & with personal experience it is true. This may

be to overcome business exigencies &/or certain steps required to be taken for organization’s

benefits to respond to circumstantial issues.

(e) The approach of top management is never exclusively at business level. This indicates that

only PROFIT-LOSS is not a prime area for cost reduction. This is a very positive and matured

sign of an industry. The corporate level goals are maximum-36%, at exclusively operational

level are 22%, at combined level of corporate plus operational plus business level and other

combination –of corporate& operational level are 21% each.

Q.4. Cost Reduction achieved

(Table No.4.T23: Distribution of Companies according to cost reduction achieved

wise.)

2011-12

Upto 5 Crs. 4

5 -10 Crs 3

10-20 Crs 2

above 20 Crs 4

*(Projected)

(Graph No. 4.G15: Graphical presentation of cost reduction achieved)

A. All the organizations are indicating that, cost reduction is achieved. However, no respondent

was pretty sure on the figures. Many have responded just to answer the question and/or to satisfy

an interviewer, and also to satisfy ego of the respondent.

B. Nevertheless, figures are indication of achievement of cost reduction.

C. One of the respondents was pretty sure on the figure of Rs.20 crs, the reason being they have

appointed a consultant (MNC) in their organization & was requested to restructure the Materials

Department and implement cost reduction program

0

1

2

3

4

5

6

Upto 5 Crs. 5 -10 Crs

Cost reduction achieved by no. of

companies in last 3 years

Distribution of Companies according to cost reduction achieved

12 2012-13 2013-14*

3 3

2 2

4 3

4 6

(Graph No. 4.G15: Graphical presentation of cost reduction achieved)


figures. Many have responded just to answer the question and/or to satisfy

an interviewer, and also to satisfy ego of the respondent.

B. Nevertheless, figures are indication of achievement of cost reduction.

pretty sure on the figure of Rs.20 crs, the reason being they have


Department and implement cost reduction program.

10-20 Crs above 20 Crs

Cost reduction achieved by no. of

companies in last 3 years

2011-12

2012-13

2013-14

Distribution of Companies according to cost reduction achieved year


figures. Many have responded just to answer the question and/or to satisfy

pretty sure on the figure of Rs.20 crs, the reason being they have


D. Many organizations were keeping CONFIDENTIALITY on the actual figures, however all

were agreeing to accomplishments to the extent of 80 to 90 %.

E. Other than respondents many of the working professionals were not aware of the actual

figures of cost reduction achieved in their own organization itself.

Q.5. How do you ensure that : � Ongoing process � Monthly Review

“Cost Reduction” is achieved � Quarterly Review � Half Yearly

As per determined goals? � Annual Review

On horizontal axis methods were taken. The methods were numbered as follows

1: Ongoing process, 2: Monthly Review 3: Quarterly Review.

4: Half Yearly Review 5: Annual Review

(Graph No. 4.G16 : Review methods adopted to achieve cost reduction)

0

0.5

1

1.5

2

2.5

3

3.5

lNo

. o

f co

mp

an

iese

Observation indicates the methodology adopted by

reduction achievement, in order to ensure that targets are met and

remedies are sought for.

1. 64.28% are in practice of MONTHLY & ANNUAL REVIEW.

2. 35.71% are in practice of QUARTERLY &

3. 50.0% are indicating cost reduction in their organization is

The review process adopted indicates seriousness of top management in taking cost reduction as

“GOAL” and it’s accomplishment.

Q.6: How the “process” of cost reduction

(Graph No.4.G 17: Process of cost reduction)

Approach 1- 57% deploy “Top

various departments/sections/divisions.

Approach 2 -29% deploy “Down

later taken as a consolidated figure for cost reduction.

Observation indicates the methodology adopted by various organizations to review cost

reduction achievement, in order to ensure that targets are met and if required appropriate

64.28% are in practice of MONTHLY & ANNUAL REVIEW.

35.71% are in practice of QUARTERLY & ANNUAL REVIEW.

3. 50.0% are indicating cost reduction in their organization is an “ongoing process”.


“GOAL” and it’s accomplishment.

f cost reduction handled for the entire organization?

(Graph No.4.G 17: Process of cost reduction)

57% deploy “Top-Down”. Target taken at corporate level and then delegated to

various departments/sections/divisions.

deploy “Down-Top”. Target is well debated at all the levels/departments and

later taken as a consolidated figure for cost reduction.

various organizations to review cost

if required appropriate

“ongoing process”.


organization?

Down”. Target taken at corporate level and then delegated to

Top”. Target is well debated at all the levels/departments and

Approach 3- 7% have responded that the cost reduction is discussed as and when felt & then

tried to implement and achieve.

Approach 4- 7% have the combination of approach 1&2 i.e. Top

This focuses on one important thing that, cost reduction is taken as a ritual and not in casual

form. Approaches could be different but ultimate goals are same.

Q.7- How cost reduction achieved is validated in y

(Graph No.4.G 18 : Methods adopted to validate cost reduction)

Benchmarking

Compare with Target

Compared with previous figure

1. 15% compare cost reduction achieved with target.

2. 7% compare cost reduction achieved with previous figures.

3. 50% compare with target as well as with previous figures.

4. 14% benchmark &/or compare with target.

5. 7% benchmark &/or compare with previous

7% have responded that the cost reduction is discussed as and when felt & then

7% have the combination of approach 1&2 i.e. Top-Down & Bottom


Approaches could be different but ultimate goals are same.

ction achieved is validated in your organization ?

(Graph No.4.G 18 : Methods adopted to validate cost reduction)

Benchmarking – M1

Compare with Target- M2

Compared with previous figure-M3

compare cost reduction achieved with target.

2. 7% compare cost reduction achieved with previous figures.

3. 50% compare with target as well as with previous figures.

4. 14% benchmark &/or compare with target.

5. 7% benchmark &/or compare with previous figures.

7% have responded that the cost reduction is discussed as and when felt & then

Down & Bottom-Up.


6. 7% use any of the combinations.

7. No-one is using EXCLUSIVE method of benchmarking.

The most important matter is “cost reduction” is not done for the sake of doing. It has been

validated. The process of validation would differ from organization to organization & perhaps

case to case. This speaks about seriousness of top management’s approach towards the entire

process of cost reduction done in the organization.

Q.8. What are the major causes your organization is facing to practice cost reduction?

(Please rank 1 to 10 from following priorities. Number 1 is Higher Priority and

Number 10 is lowest Priority) (Please Rank Them according to Priority)

(Table No.4.T24: Rating for major causes forcing organizations to go for cost reduction)

Cause/Rank 1 2 3 4 5 6 7 8 9 10

1 Recent changes in Market Dynamics 8 1 1 2 1 0 1 0 0 0

2 Competition from Generic Drugs

2 3 5 1 3 0 0 0 0 0

3 Increased bargaining power of large customers

0 3 1 1 2 2 1 2 1 0

4 Drugs price control order ( DPCO)

2 3 4 1 0 0 1 0 0 3

5 Reduction of the effective patent Protection

Period of new drugs.

0 0 0 0 3 4 2 2 1 1

6 Patent Expiry of good old drugs.

1 2 0 1 2 1 3 2 0 1

7 Introduction of new & cheaper drugs in market

0 0 2 4 1 2 1 4 0 0

8 Easily Accessible outsourcing

0 1 0 7 2 1 0 2 1 0

9 New Drugs Delivery system

0 0 1 0 1 0 3 1 7 0

10 Introduction of new & more effective Drugs 0 0 1 1 1 2 1 1 0 6

Out of 10 major reasons mentioned above, 5 reasons are conspicuous for practicing cost

reduction.

01- Recent changes in Market dynamics is major reason and 60% respondents have rated it as

number 1.

02- Competition from Generic drugs is other reason & 30% respondents have rated at number

3.

03- Drugs price control order is other reason.

04- Introduction of new and cheaper drugs in market

&

05- Easily accessible cheaper outsourcing is other major reason.

Q.9. What are the tools / techniques used specifically by Materials Department?

(Graph No. 4.G 19A: Tools & Techniques used & preferences)

Data indicates from Graph No 4 G

1. 100% respondents use ALTERNATIVE MATERIALS.

2. 79% respondents use other methods of BRAINSTORMING, CHANGE IN

SPECIFICATIONS WITHOUT AFFECTING QUALITY & CREATIVITY.

3. 86% respondents use CREDIT IMPROVISATION.

(Graph No.4.G19B: Tools & Techniques used & preferences)

4 G.19-A of “Tools and Techniques” that,

ALTERNATIVE MATERIALS.


SPECIFICATIONS WITHOUT AFFECTING QUALITY & CREATIVITY.

respondents use CREDIT IMPROVISATION.

(Graph No.4.G19B: Tools & Techniques used & preferences)


Data from Graph 4 G 19-B of “Tools & Techniques” indicate that,

1. 93% respondents use COST PRICE ANALYSIS.

2. 79% respondents use CUTTING DOWN

3. 64% respondents use CUTTING DOWN COST ON STORAGE SPACE.

4. 50% respondents only use ERP system for cost reduction.

5. 79% respondents use IMPORT SUBSTITUTION.

(Graph No. 4.G19C: Tools & Techniques used & preferences.)

of “Tools & Techniques” indicate that,

1. 93% respondents use COST PRICE ANALYSIS.

2. 79% respondents use CUTTING DOWN COSTS ON TRANSPORTATION MODES.

CUTTING DOWN COST ON STORAGE SPACE.

4. 50% respondents only use ERP system for cost reduction.

5. 79% respondents use IMPORT SUBSTITUTION.

(Graph No. 4.G19C: Tools & Techniques used & preferences.)

COSTS ON TRANSPORTATION MODES.

The data from Graph 4.G19-C provides following information:

1. 86% respondents use INNOVATIVENESS.

2. 100% respondents use INVENTORY CONTROL.

3. 71% respondents use INVENTORIES REDUCTION.

4. 29% respondents use hike in SCRAP RECOVERY.

5. 36% respondents use JUST IN TIME.

(Graph No.4.G 19D: Tools & Techniques used & preferences)

provides following information:

1. 86% respondents use INNOVATIVENESS.

2. 100% respondents use INVENTORY CONTROL.

3. 71% respondents use INVENTORIES REDUCTION.

4. 29% respondents use hike in SCRAP RECOVERY.

respondents use JUST IN TIME.

(Graph No.4.G 19D: Tools & Techniques used & preferences)

The received data from Graph No.4

1. 100% respondents use NEGOTIATIONS & NEW VENDORS DEVELOPMENT.

2. 71% respondents use LEAD TIME ANALYSIS & MATERIALS HANDLING.

3. 93% respondents use PACKAGING ECONOMICS.

(Graph No.4.G 19 E: Tools & Techniques used & preferences)

received data from Graph No.4. G19 D illustrates following:


respondents use LEAD TIME ANALYSIS & MATERIALS HANDLING.

3. 93% respondents use PACKAGING ECONOMICS.

(Graph No.4.G 19 E: Tools & Techniques used & preferences)


respondents use LEAD TIME ANALYSIS & MATERIALS HANDLING.

Table 4. G 19-E shows that following ‘T

1. 100% use OUTSOURCING.

2. 86% use WASTAGE CONTROL

3. 79% use STANDARDISATION & VARIETY REDUCTION.

4. 71% use SUPPLIERS’ EARLY INVOLVEMENT.

5. 43% only use TENDERING & VALUE ENGINEERING.

6. 29% only use REVERSE AUCTION.

Q. 10. How would you rate the importance given to creativity in your organization?

E shows that following ‘Tools & Techniques’ are used in a manner:

2. 86% use WASTAGE CONTROL & YIELD IMPROVEMENT.

STANDARDISATION & VARIETY REDUCTION.

4. 71% use SUPPLIERS’ EARLY INVOLVEMENT.

5. 43% only use TENDERING & VALUE ENGINEERING.

ly use REVERSE AUCTION.

How would you rate the importance given to creativity in your organization?

are used in a manner:

How would you rate the importance given to creativity in your organization?

(Graph No. 4.G 20 : Rating ‘Importance of Creativity’ in the organization)

Observation clearly indicates that,

1. 50% Respondents feel that their organization is STRONGLY CREATIVE.

2. 36% Respondents feel that their organization is MODEST CREATIVE.

3. 15% Respondents feel that their organization is MEDIUM CREATIVE.

4. However, no Respondent felt that one’s organization is NOT

Q. 11.How would you rate the importance given to

Your organization. (Graph No. 4. G 21: Rating importance of innovativeness)

(Graph No. 4.G 20 : Rating ‘Importance of Creativity’ in the organization)

Observation clearly indicates that,

that their organization is STRONGLY CREATIVE.

2. 36% Respondents feel that their organization is MODEST CREATIVE.

3. 15% Respondents feel that their organization is MEDIUM CREATIVE.

4. However, no Respondent felt that one’s organization is NOT CREATIVE.

Q. 11.How would you rate the importance given to “INNOVATIVENESS” in

(Graph No. 4. G 21: Rating importance of innovativeness)

VATIVENESS” in

(Graph No. 4. G 21: Rating importance of innovativeness)

1. 43% feel STRONGLY INNOVATIVE is their organization.

2. 21% feel MEDIUM INNOVATIVE is their organization.

3. 36% feel MODEST INNOVATIVE is their organization.

4. No Respondent feels that organization is NOT at all INNOVATIVE !

1. 43% feel STRONGLY INNOVATIVE is their organization.

INNOVATIVE is their organization.

3. 36% feel MODEST INNOVATIVE is their organization.

4. No Respondent feels that organization is NOT at all INNOVATIVE !

PART C: SERVICES

Q.1. How the Procurement of services

(Tick only one)

1. Fully Materials Management Dept.

2. Partly by Materials Management

3. Fully by Administration Dept.

4. Partly by Materials Management

5. Partly by Materials Management,

requires it.

(Graph No. 4.G 22: Mode of practicing ‘Procurement of services’)

From the said details of the Graph, indications are as follow:

A. 56% are having combination of partly MATERIALS MGT., partly by ADMINISTRATION

& partly by CONCERNED DEPT.

B. 29% by fully MATERIALS MGT.

C. 15% are having combination of partly by MATERIALS & partly by ADMINISTRATION.

Fully Materials Management Deptt.

Partly by Materials Mgt & Partly by Administration

Deptt

Fully by Administration Deptt.

Partly by Materials Mgt & Partly by Concerned

Department who requires It.

Partly by Materials Mgt, Partly by Admin & Partly by

concerned Deptts who requires it.

PART C: SERVICES

How the Procurement of services is practiced in your organization?

agement Dept.

Partly by Materials Management & Partly by Administration Dept.

Fully by Administration Dept.

Partly by Materials Management & Partly by Concerned Department who requires it.

ly by Materials Management, Partly by Admin & Partly by concerned Dept.

(Graph No. 4.G 22: Mode of practicing ‘Procurement of services’)

From the said details of the Graph, indications are as follow:

are having combination of partly MATERIALS MGT., partly by ADMINISTRATION

& partly by CONCERNED DEPT.

by fully MATERIALS MGT.

are having combination of partly by MATERIALS & partly by ADMINISTRATION.

Fully Materials Management Deptt.

Partly by Materials Mgt & Partly by Administration

Fully by Administration Deptt.

Partly by Materials Mgt & Partly by Concerned

Department who requires It.

Partly by Materials Mgt, Partly by Admin & Partly by

concerned Deptts who requires it.

4

0

0

2

rned Department who requires it.

artly by concerned Dept. who

are having combination of partly MATERIALS MGT., partly by ADMINISTRATION

are having combination of partly by MATERIALS & partly by ADMINISTRATION.

8

Q.2. How much money is spent on ser

Less than Rs. 100 Crs

Between Rs. 100 Crs to Rs.

Between Rs. 250 Crs to Rs

Between Rs. 500 Crs to Rs

Above Rs. 1000 Crs.

(Graph No.4.G 23: Organization’s

a. 29% are spending less than Rs. 100 crs.

b. 43% are spending between Rs. 100 crs. & Rs.250 crs.

c. 21% are spending between Rs.250 crs.& Rs.500 crs.

d. 7% are spending between Rs.500 crs. & Rs.1000 crs.

e. No Respondent is spending above Rs. 1

Less than Rs 100 Crs

Between Rs 100 Crs to Rs 250 Crs



Above Rs 1000 Crs.

How much money is spent on services by your organization?

100 Crs.

. 100 Crs to Rs.250 Crs

250 Crs to Rs. 500 Crs

500 Crs to Rs. 1000 Crs

(Graph No.4.G 23: Organization’s ‘SPENT’ on services)

29% are spending less than Rs. 100 crs.

43% are spending between Rs. 100 crs. & Rs.250 crs.

21% are spending between Rs.250 crs.& Rs.500 crs.

7% are spending between Rs.500 crs. & Rs.1000 crs.

No Respondent is spending above Rs. 1000 crs.

4

6

3

1

0

Q.3. Do you take specific goals of cost reduction for procuring services?

At Corporate level

At Business level

At Operation level

At Concerned Dept. Level

(Graph No.4.G 24: Levels and cost reduction in services)

A. 30% Respondents take the goals of cost reduction at

B. 29% Respondents take the goals of cost reduction at

C. 26% Respondents take the goals of cost reduction

D. 15% Respondents take the goals of cost

LEVEL.

Q.4. Which method is adopted for procurement of the following services?

(Table No. 4.T 25: Services procured by the organizations on ‘Exclusive’ source basis)

At Operation level

26%

At Concerned

Deptt. level

Do you take specific goals of cost reduction for procuring services?

At Concerned Dept. Level

(Graph No.4.G 24: Levels and cost reduction in services)

. 30% Respondents take the goals of cost reduction at BUSINESS LEVEL.

B. 29% Respondents take the goals of cost reduction at CORPORATE LEVEL.

C. 26% Respondents take the goals of cost reduction at OPERATION LEVEL.

D. 15% Respondents take the goals of cost reduction at CONCERNED DEPARTMENT

d for procurement of the following services?


Number of Companies

Method

At Corporate level

29%

At Business level

30%

At Operation level

At Concerned

Deptt. level

15%

reduction at CONCERNED DEPARTMENT


By

Outsource

1

By

Materials Mgt.

2

By

Other

3

Unit A MANUFACTURING

1. Services Utilities Supply 2 1 10

2. Utilities Maintenance 3 1 9

3. Machinery Maintenance 3 1 9

4. I / T 2 1 10

Unit B OFFICE

1. Services Utilities Supply 8 2 3

2. Utilities Maintenance 8 1 4

3. Sales Promotion 0 6 8

4. Insurance Service 1 1 12

5. Market Surveys 5 0 9

6. I / T 3 1 9

7. Hotel Booking 1 1 11

8. Air / Bus / Trains Booking 3 0 10

9. Cafeteria 5 1 7

10. General office Maintenance 6 1 6

11. Capital items 1 9 3

12. Stationery & Misc. Purchasing 0 8 5

Unit C LOGISTICS

1. Transportation 7 3 4

2. Clearing & forwarding 9 4 0

3. Warehousing 3 2 9

4. I / T 1 2 10

(Table No. 4.T 26: Services procured by the organizations adopting more than one source)

Number of Companies

Methods jointly

By

Outsource &

Materials Mgt.

1, 2

By

Materials Mgt.

&Other

2, 3

Unit A MANUFACTURING

1. Services Utilities Supply 0 1

2. Utilities Maintenance 0 1

3. Machinery Maintenance 0 1

4. I / T 0 1

Unit B OFFICE

1. Services Utilities Supply 0 1

2. Utilities Maintenance 0 1

3. Sales Promotion 0 0

4. Insurance Service 0 0

5. Market Surveys 0 0

6. I / T 0 1

7. Hotel Booking 0 1

8. Air / Bus / Trains Booking 0 1

9. Cafeteria 0 1

10. General office Maintenance 0 1

11. Capital items 0 1

12. Stationery & Misc Purchasing 0 1

Unit C LOGISTICS

1. Transportation 0 0

2. Clearing & forwarding 0 1

3. Warehousing 0 0

4. I / T 1 0

Observations can be concluded as follow:

A- MANUFACTURING SERVICES (Utilities, Maintenance, I/T etc.)

1. A mere 7% respondents are using Materials Dept.

2. 14 to 21% respondents are using “outsourcing”.

3. 64 to 71% respondents are using other departments.

B- OFFICE SERVICES (Utilities, Maintenance, Sales promotion, Insurance, I/T,

Transportation, Cafeteria, Capital items, Stationery, Hotel booking)

1. 64% respondents are using Materials dept. for CAPITAL ITEMS.

2. 57% respondents are using Materials Dept. for STATIONERY /Misc. items

3. 43% respondents are using Materials Dept. for SALES PROMOTION.

4. For all other services, a mere 7% respondents are using Materials Dept.

5. For INSURANCE, MARKET SURVEYS, I/T, HOTEL booking, TRANSPORT booking

most of the respondents are using other departments. % of respondents vary from 57% to 86%.

C- LOGISTICS (Transportation, C&F, I/T)

1. A mere 14% to 29% respondents are using Materials dept.

2. Outsourcing is preferred for Transportation & Clearing & Forwarding.(50% and 64%

respondents respectively)

3. For warehousing & I/T, other departments are being used and preferred. (64% and 71%

respondents respectively.)

In combination the services are being procured by only “ONE” respondent, perhaps the

reason could be MNC’s policy or to keep minimum two vendors for each service or overall

procurement (more of traded items) is being thru’ outsourcing.

PART D: MOTIVATION

Q.1. How would you rate the efforts taken by Management to motivate employees for cost

reduction in your organization?

(Table No.4. T 27: Ratings for motivation to employees)

Rating No. of companies

1 Excellent 7

2 Very Good 4

3 Good 3

(Graph No. 4.G25: Respondents’ ratings for overall motivation in the organization)

A Excellent rating is given by 50% respondents.

B Very Good rating is given by 28

C Good rating is given by 21.5% respondents.

Efforts taken to motivate employees are being rated from GOOD, VERY GOOD to

EXCELLENT. No respondent has rated either POOR or FAIR.

Q. 2.How would you rate your Organiza

achieve cost reduction as TARGETT

(Table No.4.T 28: Ratings for motivation to employees to achieve cost reduction)

Rating No. of companies

1 Excellent 7

2 Very Good 5

3 Good 2

2

36%

3

14%

A Excellent rating is given by 50% respondents.

B Very Good rating is given by 28.5% respondents.

C Good rating is given by 21.5% respondents.


EXCELLENT. No respondent has rated either POOR or FAIR.

How would you rate your Organization that employees are good enough motivated to

achieve cost reduction as TARGETTED?


No. of companies

1

50%

14%


good enough motivated to


(Graph No. 4.G 26: Motivation to employees for achieving cost reduction)

A. 50% of respondents have rated EXCELLENT.

B. 36% of respondents have rated VERY GOOD.

C. 14% of respondents have rated GOOD.

D. Not a single respondent has rated

Organizations are rated high on motivating employees to achieve cost reduction as targeted. This

speaks about the seriousness of Management towards approach on cost reduction.

Q.3 Following could be the reasons for motivating employees fo

“Management Level” do you agree?

(Table No. 4.T :Reasons for motivating employees for achievement of cost reduction at

‘Management Level’.)

Sr.No. Reasons

2

36%

3

14%

(Graph No. 4.G 26: Motivation to employees for achieving cost reduction)

of respondents have rated EXCELLENT.

B. 36% of respondents have rated VERY GOOD.

C. 14% of respondents have rated GOOD.

D. Not a single respondent has rated POOR or FAIR.



Q.3 Following could be the reasons for motivating employees for cost re

o you agree?


1

50%

14%



r cost reduction at


No. of

Companies

1 Employees are totally involved & their participation is encouraged.

12

2 Employees are specially trained to achieve cost reduction 10

3 Employees are encouraged to generate new ideas.

14

4 Employees are encouraged for collaboration than competition

13

5 Employees are encouraged to learn from problems.

14

6 Employees are being empowered 13

(Graph No. 4.G 27: Reasons of motivation to employees)

Employees are totally involved & their…

Employees are specially trained to…

Employees are encouraged to…

Employees are encouraged for…

Employees are encouraged to learn…

Employees are being empowered

12

10

14

13

14

13

No. of Companies agreed the reason for motivating

employees for cost reduction at “Management Level”

• 100 % respondents agree that Employees are encouraged to generate new ideas.

• 100 % respondents agree that Employees are encouraged to learn from problems

• 93% respondents agree that Employees are encouraged for collaboration than

competition.

• 93% respondents agree that Employees are empowered.

• 86% respondents agree that Employees are totally involved & their participation is

encouraged.

• 71% respondents agree that Employees are specially trained to achieve cost reduction.

Training for cost reduction- may be there is a lot of scope. Possibly all the employees are

not trained to concept, implementation, methods etc.

Participation might not have been taking place to the fullest extent & thus a grey area.

Q.4. Following could be the reasons for employees getting motivated for cost reduction. Do

you agree?

(Table No. 4.T 30: Reasons for employees getting motivated for achievement of cost

reduction at ‘Employees’ level’)

Sr.

No

.

REASONS No. of

Organizati

ons

1 Employees feel that Organization is “Risk Pruned”. (Risk Taking Ability

is good of the organisation.

10

2 Employees feel that Organisation is “Risk Averse”. (Organisation is

not ready to take risk)

4

3 Employees feel that there is Creation of Trust among the employees. 13

4 Employees feel that management demonstrates respect for employees. 13

5 Employees feel that there is appropriate recognition for contribution. 14

6 Employees feel that management has sincere concern for employees. 13

7 Employees feel there is distinct mission taken by mgt.& highly involved. 12

8 Employees feel that there is challenging tasks for them. 12

9 Employees feel that there are values for meritocracy. 12

From the above table it can be safely concluded that

• 100% Respondents feel that Employees feel there is appropriate recognition.

• 93% Respondents feel that Employees feel that there is a creation of trust among

employees & management has respect for employees, also management has sincere

concern for Employees.

• 86% Respondents feel that Employees feel there is distinct mission taken by management

& they are highly involved in that mission, also, employees feel there is a challenging

task & values for meritocracy.

• 71% Respondents feel that Employees feel that organization is “Risk Pruned” however

29% Respondents feel that Employees feel Organization is “Risk Averse”

These are good enough reasons for Employees to get motivated. This also speaks about

organization’s seriousness, sincerity and long term strategy towards Employees

motivation, growth and involvement.

Q.5. Which of the following methods get reflected in “Performance Appraisal” of

an employee in your organization ?

* Actual v/s Target - Performance is validated.

* Financial impact is validated, especially reduction in cost per unit

Or positive change in profitability or any other.

(Graph No.4.G 28: Performance validation-Actual v/s Target)

(Graph No. 4.G 29: Validation of financial impact for performance appraisal)

Even though organizations are motivating Employees for achieving cost reduction, it

seems from above observation that very hardly it gets reflected in Annual Performance

Appraisal.

29% respondents only agree that “Actual v/s Target” is validated & gets r

the Performance Appraisal. 71% have negative answer on this account.

71%

Actual v/s Target

86%

Financial impact is validated




29% respondents only agree that “Actual v/s Target” is validated & gets r


29%

Actual v/s Target - Performance is

validated.

Yes No

14%

86%

Financial impact is validated

Yes No




29% respondents only agree that “Actual v/s Target” is validated & gets reflected in


14% respondents only agree that Financial Impact is validated in terms of cost

reduction per unit on Finished Goods. 86% have negative answer to this.

This does not mean validation does not take place. It merely means achievement of cost

reduction is not reflected fully during the performance appraisal. Many organizations feel

that it is obvious contributions from Materials Management.

Q.6. How do your organization acknowledge employees for achievement of cost reduction ?

(Table No. 4.T 31: Acknowledgement to employees and various modes)

Sr.

No.

Method of acknowledging employee’s achievement No. of

Companies

% of

companies

1 Monetary Benefits are given / increase in perks

6

50

2 Promotion 2 14

3

Elevation

5

36

4 Special Awards / Bonus are given. 9 64

5 Certificates of Appreciation are issued. 9 64

6 Employees Tour / Travel Sponsored 3 21

7 Special Communication to all employees of Top

Management, of an achievement

7

50

# One can conclude that most of the organizations (50%) increase the salaries or perks of

employees.

# Special awards/bonus (64%) are given.

# Certificates of appreciation are issued. (64%)

# There is also special communication to entire organization of Employee achievement.

# Very few organizations promote/ elevate employees.

Q7. Do you think that in your organization

“Every Employee” contributes to cost reduction?

The respondents’ answer to this question is 50

culture is built in such a way that every employee thinks from cost reduction point of view. In

some organizations culture is yet to be developed.

(Graph No.4.G 30: Culture & cost reduction)

Q.8. In your opinion which could b

Affecting achievement of cost reduction /cost reduction target?

(Table No. 4.T 32: Responses on hidden factors at organizational level for not achieving

cost reduction.)

Sr HIDDEN factors at “Organisation Level”

50%

Do you think that in your organization culture is built in such

a way, that “Every Employee” contributes to cost reduction ?

communication to entire organization of Employee achievement.

# Very few organizations promote/ elevate employees.

Do you think that in your organization culture is built in such a way, that

“Every Employee” contributes to cost reduction?

respondents’ answer to this question is 50-50%. Some have responded informing that


some organizations culture is yet to be developed.

e & cost reduction)

s

In your opinion which could be the HIDDEN factors at “Organization Level”

of cost reduction /cost reduction target?

: Responses on hidden factors at organizational level for not achieving

HIDDEN factors at “Organisation Level” No. of

50%

Do you think that in your organization culture is built in such

a way, that “Every Employee” contributes to cost reduction ?

Yes No

communication to entire organization of Employee achievement.

culture is built in such a way, that

50%. Some have responded informing that


ation Level”

: Responses on hidden factors at organizational level for not achieving

% of

.

N

o.

compan

ies in

opinion

YES

organiz

ations

opining

YES

1 Absence of proper culture 6 43%

2 High Tension Environment 4 29%

3 Vague Decisions 4 29%

4 Appropriate Policies not in place 7 50%

5 Appropriate Policies are in place but not implemented.

5 36%

6 Absence of OPENNESS 4 29%

7 CRITICISM prevails. 3 21%

8 No “role-models” in the organisation 6 43%

9 Any other 1 7%

One can easily make inference that higher ratings are given to main four reasons;

1. 50% response that appropriate policies are not in place.

2. 36% response that policies are in place but not implemented.

3. 43% response for poor culture as well as no “Role-Models” in the organization.

4. However, one respondent has also talked about :

(a) Constraints of resources.

(b) Lots of documentation prior to implementation of cost reduction.

(c) Global policy laid down from Global Head Quarter.

These reasons perhaps could be due to MNC status of the respondent’s organization.

Q.9. In your opinion which could be the HIDDEN factors at “Employees Level”

Affecting achievement of cost reduction / cost reduction target?

(Table No. 4.T 33: Responses on hidden factors at employees’ level for not achieving cost

reduction.)

Sr.

No.

HIDDEN factors at “Employees Level”

No. of

organizations in

opinion YES

% of

organization

responding YES

1 No appreciation 5 36%

2 No opportunity to learn 4 29%

3 No conducive atmosphere 4 29%

4 No enough compensation 5 36%

5 No specific training given 7 50%

6 Cognitive Dissonance 2 14%

7 Discouraged for experimentation. 5 36%

8 Discrimination 2 14%

9 Vindictive approach of management 0 0%

10 Unfair practices 1 7%

The major HIDDEN FACTORS at employees’ level are:

1. Lack of TRAINING for cost reduction-50%

2. No appreciation-36%

3. Not enough compensation-36%

4. Discouraged from experimentation-36%

5. No opportunity to learn or no conducive atmosphere-29% each.

Part E: OTHER DEPARTMENTS

01. Which other departments are involved in significant contribution to cost reduction in your

organization?

(Table No. 4.T 34: Other departments contributing to cost reduction)

Sr. No. Departments No. of

organizations

% of

organization

opining YES

1 Research & Development 12 86%

2 Product Development 11 79%

3 Process Development 9 64%

4 Production 12 86%

5 Quality Control 8 57%

6 Sales & Marketing 8 57%

7 Distribution 9 64%

8 Human Resource 8 57%

9 Administration 8 57%

10 Finance 13 93%

The general opinion of Respondents is that, following departments contribute to cost

reduction. ( descending manner.)

1. FINANCE DEPT- 93%

2. RESEARCH & DEVELOPMENT & PRODUCTION-86%

3. PRODUCT DEVELOPMENT-79%

4. PROCESS DEVELOPMENT & DISTRIBUTION-64%

5. OTHERS- Q.C./HR/ADMIN/ SALES/MARKETING-57% each

(Graph No. 4.G 31: Other departments contributing to cost reduction)

Q 2: Rank the following tech

by organization &/or other departments.(

least priority)

(Table No. 4.T 35: Cost reduction techniques and priorities)

Sr. No. Techniques

1 Cause & Effect

2 Pareto Law

3 P D S A

4 Six Sigma

1211

No. of companies involving other

departments to contribute cost reduction

Rank the following techniques according to priorities practiced for

by organization &/or other departments.( Rank no.1 as top priority and Rank no.12 as

Cost reduction techniques and priorities)

No. of Companies

Priority Levels

I st II nd

Third Least

9 2 1 0

3 7 0

1

0 1 4 0

0 1 0 1

9

12

8 89

8 8

13

No. of companies involving other

departments to contribute cost reduction

No. of companies

niques according to priorities practiced for cost reduction

Rank no.1 as top priority and Rank no.12 as

Least

13

5 T Q M 1 0 0 0

6 T P M

0 0 0

0

7 Control Charts

0 0 1

0

8 Analysis of Variance

(ANOVA)

0 0 0

0

9 Brainstorming

1 1 4

0

10 Benchmarking 0 1 1 0

11 KAIZEN 1 0 2 0

12 Why? (5Times) 0 0 0 2

(Graph No.4.G 32 : Preference for ‘Cause & Effect’)

1

75%

2

17%

3

8%

Cause & Effect

1. The data indicates that most prefer “cause & effect” technique.75% respondents have given

FIRST priority.

2. 50% respondents have given SECOND priority to “PARETO LAW”.

3. 29% respondents have given THIRD priority to “PDSA” and “BRAINSTORMING”.

4. Few techniques like- SIX SIGMA, TQM, TPM, CONTROL CHARTS,

ANOVA,BENCHMARKING, FIVE TIMES WHY are not being practiced at all or have been

given low priority.

The Researcher’s observations during an interview time and during informal discussions and

chats on various occasions are captured in the next chapters in “Results & discussions” and also

in “Recommendations”.

Documents

(Graph No.4.G1: Various Phases of Growth Of Indian Pharma)shodhganga.inflibnet.ac.in/bitstream/10603/64158/13/13_chapter 4.pdf · 0.05 0.1 0.15 0.2 0.25 0 1 2 3 4 5 6 Y-Values Y-Values