Final Report ABBOT
Final Report ABBOT
Final Report ABBOT
Term Report
1. M. HASSAAN AHMED KHAN (1948) 2. BILAL AHMED PARACHA(2228) 3. WAQAS SALEEM (2142) 4. M. SAAD KHAN (2074) 5. ABDUL RASHEED SONIJA (2066)
Submitted to:
MR. SOHAIL MAJEED
Abstract
In this report the process of supply chain management, supply chain management structure, material flow of the Abbott laboratories Pakistan Ltd is being discussed, furthermore supply chain relationship is also discussed in details with having context of building relationship on long-run basis. In the lights of significance of relationship among the management and suppliers of certain issues and remedies are also being included in this report. Distribution of ABBOTT, import material and export of product with respect to role of indenter and benefits of indenter which also facilitate the buyers and suppliers with mutual gain or win win respective. Policies are also being discussed in details and recommendation is also considered in this report.
We dedicate this report to our Faculty Mr. Sohail Majeed Iqra University Gulshan Campus. Mr. Sohail challenged us to do work on an organization in context of supply chain management and successfully we collect information, gather and present the information in professional way. With clear vision and
determination plus the support of Mr. Sohail, we able to make report on a centralized organization namely as ABBOTT, therefore we all group members like to dedicate this report to Mr. Sohail Majeed.
CONTENTS
Abstract ...........................................................................................................................................2 Table of Figures..............................................................................................................................6 INTRODUCTION..........................................................................................................................7 COMPANY PROFILE .........................................................................................7 SUPPLY CHAIN MISSION ................................................................................7 ABBOTTS SUPPLY CHAIN STRUCTURE .............................................................................8 SUPPLY CHAIN PROCESS ................................................................................................9 MATERIAL MANAGEMENT DEPARTMENT .....................................................................11 APPROVED DEMAND FORECAST ..............................................................13 APPROVED SUPPLY PLAN ............................................................................13 MASTER PRODUCTION SCHEDULE ..........................................................13 MATERIAL MANAGEMENT PLANNING ...................................................13 BID SHEET .........................................................................................................14 BID SHEET + INDENT TO IMPORT LC ......................................................14 APPLICATION FOR OPENING LC: ......................................................................15 INDENT OR PERFORMA INVOICE .............................................................16 DELIVERED FORMS BY BANKER TO IMPORTER ..........................................16 PREPARATION OF L/C BY BANKER .................................................................16 WORKING OF MATERIAL FLOW ...............................................................17 RELATIONSHIP MANAGEMENT ..........................................................................................19 DEVELOPING RELATIONSHIP WITH SUPPLIERS ................................20 Supplier performance evaluation tools .....................................................................21 ROOT CAUSE ANALYSIS ...............................................................................21
MATERIAL CLASSIFICATION .....................................................................24 LOCAL PURCHASING ....................................................................................24 IMPORT PURCHASING ..................................................................................25 INDENTER .........................................................................................................25 IMPORTED RAW MATERIALS ....................................................................25 ADVISING BANKS of ABBOT PAKISTAN...................................................26 FEW SHIPPING COMPANIES THROUGH WHICH ABBOT PAKISTAN IMPORTS RAW MATERIALS ..................................................................26 EXPORT ..............................................................................................................26 ABBOT DISTRIBUTION CHANNEL ......................................................................................27 ABBOTT POLICY FOR SUPPLIERS ......................................................................................28 DOCUMENTATION AND INVOICING ........................................................28 RESTRICTIONS ................................................................................................28 RETURN ......................................................................................................................29 CONDITIONS FOR RETURNING RAW MATERIALS ..............................29 RETURN OF MATERIAL ORDERS (MOS) ................................................29 WASTAGE HANDLING ...................................................................................29 RETURN OF FINISHED ORDERS (FOS) ....................................................30 OBSERVATION AND RECOMMENDATION .......................................................................31 References .....................................................................................................................................33
Table of Figures Figure 1. Supply Chain Structure. .................................................................................................. 8 Figure 2. ....................................................................................................................................... 10 Figure 3 Supply Chain Process (cont.) ......................................................................................... 10 Figure 4. Material Flow. ............................................................................................................... 12 Source Reportbd.com.. . ................................................................................................................ 15 Source: Gartner Consulting; 2001. ............................................................................................... 20 Figure 5 Abbot Distribution Channel. . ........................................................................................ 27
INTRODUCTION
COMPANY PROFILE
Abbot Laboratories (Pakistan) Ltd, The firms main core activities are to trade in, produce and market based pharmaceutical, dietary, indicative, medical (hospital) and consumer products and facilitates toll-manufacturing services. It functions in two divisions Pharmaceutical and other. Pharmaceutical division produce, trade in and markets research based pharmaceutical products registered with the ministry of health and provides toll-manufacturing services. Other divisions includes importing, manufacturing and marketing diagnosing equipment, testing kits, consumer healthcare, nutritional and hospital products. The companys pharmaceutical products include Kalaricid, Erthrocin, Hytrin, Epival, Brufen, Entamizole, protium and Forane. The other products include Ensure, Pediasure, Pedialyte, Formance etc (Abbott Company Info, 2010).
Vendors
Price
Sample
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Institution
Distributors
Export
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BID SHEET
A bid sheet is a low cost effective sheet in which there are quotations from different suppliers and on the bases of that low cost suppliers are selected comparing their LANDED COST.
It includes: Representative/Agent Name of manufacturer and country Vendor status Quotation date Foreign currency Duty Landed cost/kg Local currency Exchange rates Cost and freight
Then after getting the bid sheet orders are finalized and there is a request for an indenter. After the request of an indenter the bid sheet along with the approved indenter is send for approval to the finance department.
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Source Reportbd.com.. .
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Eligibility of the goods to be imported. The L/C must not be opened in favor of the importer. Radioactivity report in case of food item.
Survey reports or certificate in case of old machinery is required. Bank of the importer is called LC Issuing Bank. Then issuing bank inform its corresponding bank, called Advising Bank or Confirming Bank located in exporters country to advice and the credit forward to the exporter and simultaneously officer makes LC opening vouchers (Import Procedure., 20042010).
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based and is run afterwards by the material planning section. Availability of raw materials and packaging materials is checked. Inventory is checked and if there is shortage of items than they are locally purchased. For items, which are to be imported, have a different procedure to follow. Inquiries are sent to all the local suppliers who then forward the request to the approved and unapproved vendors. After the quotations have been received, a bid sheet is made consisting of all the approved vendors along with their quotations and selection is made on the basis of low price, past record and them being approved. If the price quotation of an unapproved vendor is more to our liking than that vendors items are to be first approved by the Quality Assurance, which usually takes up to 5 to 6 months. After, the vendor has been approved than he is likely to be selected if his price quotations are according to our requirement. An indent is received by the supplier, which shows the confirmation of the orders and contains terms, which are to be followed. The bid sheet and the indent are then sent to the imports section for letter of credit.
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RELATIONSHIP MANAGEMENT
Relationship management is a feasible tactic to the industry in terms of social, environmental and economic feasibility and can facilitate a positive role to sustainability and also help to satisfy customers and stakeholder likings (Blau, 1963; Darwin 1994; (Darwin, J. Duberley, and P. Johnson, 20000;MacNeil, 1978; MacNeil, 1985; Rousseau and J. M. Parks, 1993). It provides the understanding to accomplish sustainable, continuing relationships in long and difficult contracts by a modification process (Kumaraswamy and J. Matthews, 2000). Although there are some possible benefits of relational tactics (for instance, relationship management) have received recommendable strong likings (see (Phua, 2006 for example). According to Gartner Consulting, Supply relationship management can be stated as a set of methodologies and practices needed for interacting with suppliers of products and services of varied criticality to the profitability of the enterprise. (Gartner: 2001, p.2) In context of supply relationship management we observed and like to describe the supply relationship management as understanding of developing mutual instant relationships with preferred strategic suppliers, the rationale is to add certain features that could boost the relationship while business performance can be improved as the companies employed themselves in a network atmosphere for shared benefit and enhance the possibility of making profitable new earnings together.
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As far as Abbott is concerned, they understand the significance and by means the relationship between the buyer and supplier is one of the most important aspects of the activity structure for them. Therefore, in this relationship various buyer operations entail in the course of action with the supplier relationship with the purchasing department, R&D, logistics, after market, finance and managerial functions. It is significant that a buyer chooses those suppliers which provide maximum value to the industry and therefore, it is essential for a buyer to check the compatibility issues of suppliers and assess them respectively (Megan E. Bross & Guangbin Zhao, 2004).
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most of the time depends on mechanism, which the supplier facilitates (Megan E. Bross & Guangbin Zhao, 2004). Relationship is a two way process in which communication coordination entailed both suppliers and company therefore, ABBOTT is using tools which help the firms to identify the performance and level of coordination of the suppliers with ABBOTT.
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CORRECTIVE ACTIONS AND PREVENTIVE ACTIONS (CAPA) If suppliers found to be having errors, then ABBOTT by employ CAPA and CAPA provide feedback by which suppliers can correct the wrong actions or for any instance if uncertainty occurs with the suppliers then ABBOTT generate a report of supplier which is known as CAPA report and then evaluates the performances of the suppliers after tenure of 3 months. If supplier consistently do mistakes and various errors occurs in between process then ABBOTT terminate that particular supplier from its Supplier List. ABBOTT employs this tool for problem solving issues of supplier and in order to build longer relationships. According to (CAPA / Remediation, 2010) CAPA involve in performing the following functions in ABBOTT: Stock of All remedial and Preventive Actions Created Internally Manage Different Types of remedial Actions Identify by Part #, Supplier, Specific NCMs, etc. Allocate Employees, Due Dates, and Approvals Customer Configurable Corrective Action text Report Types Closed Loop Corrective Action ISO 900X Compliant Corrective Action Records Revision Control of All Document Status Reversals Automatic Approval Requirements On-line Tracking and Electronic Approval Signature Capability Automated Input of Standard Text for Discrepancies or Audit Findings Code Segregation Capability by Document Type
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Unique Data Collection Capability via Customer Driven Pop-Up Screens Assure Effectiveness Through Scheduled Follow-ups Automatic Re-generation of Failed Corrective Actions Inventory of All Corrective and Preventive Actions Identify by Part #, Supplier, Specific NCMs, etc. Assure Effectiveness Through Scheduled Follow-ups Automatic Re-generation of Failed Corrective Actions Lessons Learned Database
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MATERIAL CLASSIFICATION
ABBOTT Pakistan classifies its materials according to the values or the cost of materials; basically they have allotted three grades or types to their materials: Grade A (very costly materials, e.g. erythromycin) Grade B (moderate cost, e.g. clathromycin) Grade C (least cost, e.g. bubble gum and artificial flavors like mint)
LOCAL PURCHASING
Local purchasing department of Abbott Laboratories Pakistan deals with local vendors concerning:
Designing FP Plastics, Al-Ahad Plastics, Thermoplas (Korangi) > Lead Time 30 Days
PrintingAmmara Commercial Printing (Memon Goth, Malir) > Lead Time 30 Days Packaging Saima Packaging (Korangi Industrial Area) > Lead Time 30 Days Slicing Aluminum foils - Muhammad Corporations, Gulshan -e- Iqbal Cartons Sultan Packages (Dalmiya, Karachi) > Lead time 7 Days Cartons King Packages (Lalukhait, Karachi) > Lead Time 7 Days Cartons - Decent packages (S.I.T.E Area) > Lead time 7 Days Dextrose Rafhan Industries (Faisalabad) Pseudo - Alpha Chemicals (Lahore) Essential Chemicals (Lahore)
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IMPORT PURCHASING
ABBOTT Pakistan has indenters through which they place their orders to the respective manufacturers of raw materials Some of the Indenters of ABBOTT Pakistan are: .Rasheedsons - KHI Munico Associates - KHI S. Aijazuddinn - KHI Arfeen - KHI
INDENTER
An indenter is a local supplier or the middle party, we also call them as an agent who gives information to the manufacturer and tells then to arrange the material. They have link with the manufacturer and paid commission by them. Basically the benefits of having indenter as compared to have direct dealing with suppliers is that Time Saving Less risk Easy to push locally available agents Easy to find variety of manufacturers
Relationship Management Abbott Aluminum Seals and PV Vaasen, Flexible Packaging Holland Artificial bubble gum IFF Holland Supplier for Sugar - Malayam Malaysics, Malayasia Sodium Sulphate Merck, Germany
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Then after this process the LC is send to the concern suppliers and indenters and then they set the raw material to be shipped, shipment is done through different shipping company and this part is dealt by the imports department.
FEW SHIPPING COMPANIES THROUGH WHICH ABBOT PAKISTAN IMPORTS RAW MATERIALS
P&O NEDLLOYD MAERSK SEALAND HOPAG LLOYD
EXPORT
ABBOTT Pakistan fulfills the demand of countries like: South Africa Sri Lanka Thailand Bangladesh Malaysia Indonesia Syria
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RESTRICTIONS
There are few rules and regulations that are very important for the company and distributors to abide by them in order to avoid any mishap or confusion.
Distributors cant go out of their area for sale. Discount policy should be followed according to companys instructions. Distributors should carry 6 weeks inventory at their side.
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RETURN
There are two types of returns, one associated with Finished Orders and the other associated with Material Orders.
WASTAGE HANDLING
There is only one dumping side in Karachi, Surjani town which is owned by the Government of Pakistan but it is not up to the standards set by the Parent Company (Abbott Int) that is why ABBOTT Pakistan does the dumping through a Private organization name ABASEEN (Pvt) Ltd which is a more costly as compare to the traditional process (Rs 30/= per Kilogram)
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RECOMMENDATION
There are no bar code sensors or any computerized system to count the Material arrival from consignment, all the counting is done manually by the supervisors. They should adopt any computerized customized software to do the counting procedure so it will save the time and there will far less chances of error. Contract among the suppliers and ABBOTT should be based on mutual consensus having flexibility with context of fixed pricing and no change in quantity. VMI (Vendor Manage Inventory) is an information system which help in managing inventory therefore, by employing this system ABBOTT can benefited with this system as if they lack inventory in urgency of demand then via this information system supplier can fulfill or satisfied the need of ABBOTT. Supplier can evaluate the inventory level periodically with the help of this information system. Reward System should base on half yearly basis. This will motivate the suppliers and helps in building stronger relation among suppliers and ABBOTT. Vendor Conference meeting should be held and so that they can share their problems on quarterly basis. Exchange of information In the stage of the new product development single info should be shared with suppliers. Provide ownership to the suppliers in terms developing new products.
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Finally, Abbott needs to implement e-purchasing system to improve the performance of the Supply chain. By implement the e-purchasing system Abbott will able to save the material cost up to 10% and improves efficiency by enabling the suppliers online.
And as the world is moving fast toward globalization, Abbott should try to implement
online selling.
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References
Abbott Company Info. (2010). Retrieved July 27, 2010, from http://companydatabase.org/c/ services-commercial-physical-biological-research/pharmaceutical-research-laboratories/ diagnostic-laboratories/medical-laboratories-research/services-testing-laboratories/healthcare-health/laboratories-limited/pharmaceutical-segment/abbott-laboratories-pakistanltd.html Blau, P. M. (1963). The Dynamics of Bureaucracy. Chicago: University of Chicago Press. CAPA / Remediation Management. (2010). Retrieved July 28, 2010, from http://www.iqs.com/ main/products/CAPARemediationMgmt Darwin, J. 1994. Networks, partnerships and strategic alliances. In unpublished working paper. Sheffield Hallam University: Sheffield Business School. Darwin, J., J. Duberley, & P. Johnson. (2000). Contracting in ten English local authorities: preferences and practice. The International Journal of Public Sector Management, 13(1), 38-57. Gartner Consulting SRM, Enterprises Drive Competitive Advantage through SRM, White paper prepared for PeopleSoft, San Jose, CA, April 16, 2001, pp. 1 14 Import Procedure. Import Process against LC. (2004-2010). Retrieved July 28, 2010, from http:/ /www.reportbd.com/articles/85/1/Import-Procedure-Import-Process-against-LC/ Page1.html Kumaraswamy, M. M., & J. Matthews. (2000). Improved subcontractor selection employing partnering principles. Asce Journal of Management in Engineering, 16, 47-57. La Londe, B. J. (1999). Activity Based Costing Best Practices. Retrieved July 28, 2010, from http:// fisher.osu.edu/supplychain/pdf_files/1999%20ABC%20Best%20Practices.pdf
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MacNeil, I. R. (1978). Contracts: adjustment of long-term economic relations under classical,neoclassical and relation contract law. Northwestern University Law Review, 854-905. MacNeil, I. R. (1985). Relational contract: what we do and do not know. Wisconsin Law Review, 483-525. Megan E. Bross, & Guangbin Zhao. (2004). SUPPLIER SELECTION PROCESS IN EMERGING MARKETS. Dissertation Abstracts, 3, 1-129. Phua, F. T. T. (2006). When is construction partnering likely to happen? An empirical examination of the role of institutional norms. Construction Management and Economics, June(24), 615-624. Rousseau, D. M., & J. M. Parks. (1993). The contracts of individuals and organizations. Research in Organizations' Behaviour, 55, 1-43.