The
MBA program in Supply Chain Management
at NC State University is unique among business
schools. With the support of the Supply Chain
Resource Consortium, an industry/university
partnership, the program brings the industry into
the classroom, involving students, faculty and supply
chain professionals in finding solutions to the
real industry problems. This project-based approach
to education reflects the new model for business
schools described by Peter Drucker.
For
more information...
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Peter
Drucker...
"Management is a practice, like medicine;
and the model should have been the medical school,
where the bulk of the teaching, especially the most
important teaching of the M.D. in his or her residency,
is performed by practitioners. Unlike medicine,
where you can bring sick patients into the classroom,
business education does not allow you to bring an
organization into the classroom. You can, however,
bring experience in through your faculty and students.
Business educators should be out as practitioners
where the problems and results are."
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6/19/03
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SPECIAL NOTICE!!
Your
Risks and Responsibilities
You may think the Sarbanes-Oxley legislation
has nothing to do with you. You'd be wrong.
by Ben Worthen, CIO.com
The Sarbanes Oxley Act, described
in the article linked above, has potentially
huge implications for supply chain managers.
Clearly, the ramifications of this act
will have considerable impact on the measurement
of supply chains. Most managers do not
accurately assess processes that take
place with alliance partners, customers,
and suppliers. Thus, Sarbanes-Oxley potentially
impacts not only information, but accuracy
of that information relative to statements
of worth of internal and external assets
as well. Most companies struggle to measure
their own internal assets, let alone collaborative
activity and jointly-owned assets.
Rob
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Problems
Facing the New
Pharmaceutical Industry:
Part I
by Rob Handfield |
As
the 21st century begins, the pharmaceutical
and biotechnology industry has entered
an era of explosive growth in innovation,
investment and competition. At the same
time, both established players and new
entrants are facing significant challenges
from the weak economy, downward pressure
on prices, intense public scrutiny of
ethical and business practices, and increasing
regulation(1). Some of the problem areas
resulting from these challenges include
the following:
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The
costs of developing a New Chemical
Entity (NCE) have been rising without
a corresponding increase in Return
On Investment (ROI). At the same time,
the downturn in the equity markets
has caused investors to focus more
on business models and current earnings
rather than innovation and the potential
for future blockbuster products(2).
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With
a large number of new entrants at
the low end of the industry and a
trend towards mergers and acquisitions
that has led to larger, more integrated
firms with broad reach across the
industry, there is an increasingly
competitive business environment that
has created further pressure on companies
to quickly build successful product
portfolios(3).
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The
need to satisfy the naturally different
mindsets and cultural demands that
exist between the scientific research
and operational areas of a firm results
in internal organizational pressure
that can hinder the successful adoption
of new technologies and development
of new products(4). |
The
specific reasons for these problem areas
are as many and varied as there are firms
in the industry, but there are some common
themes that can be seen:
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Genomics,
proteomics and other new information-based
biotechnologies have helped make the
drug discovery process more efficient,
but implementing such technologies
can require significant up front and
ongoing investment. For example, a
large pharma firm might be expected
to spend $100M annually on genomics-related
technologies(5). Despite the promise
of these new technologies, true increases
in productivity are often not realized.
According to a senior IT director
from a large pharmaceutical company
recently, one reason for this is that
much of the “low hanging fruit”
has already been identified and picked,
so tools such as High Throughput Screening
(HTS) are not yielding the same results
as they did earlier(6).
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New
technologies coupled with intense
merger and acquisition activity in
the industry has led to structural
changes in the competitive environment(7).
The seeds planted by genomics and
biotechnology has begun yield a new
crop of smaller companies that focus
on a few instead of tens to hundreds
of simultaneous NCE development projects.
These companies tend to be more agile
than the industry giants and can exploit
their core expertise with a particular
disease or therapeutic category. This
has caused the industry giants to
look at ways in which they can gain
some of the advantages of the entrepreneurial
environment that exists in these new
biotech companies. For instance, GlaxoSmithKline
has recently announced that it is
re-organizing its R&D units to
create six Centers of Excellence in
Drug Discovery that will allow for
more flexibility, better allocation
of funding, and improved productivity(8).
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Finally,
the effectiveness of new technologies
can be hindered unless the company
has put serious effort into developing
and implementing change management
processes throughout their organizations(9).
As a senior IT director we interviewed
pointed out, there are essentially
three types of people in a pharmaceutical
company: the true research scientists,
the sales force, and everyone else(10).
The first two groups are usually the
most demanding in their technology
needs, and in fact are often looking
for ad hoc solutions that can be quickly
built to meet an immediate need. In
the case of research scientists in
particular, they typically take an
experimental approach to problem solving
where they discover a problem, ask
a question, conduct an experiment,
and once there is an answer, move
on to a new question that will perhaps
require a new set of tools. This contrasts
with the traditional approach to building
an information system or business
process, where the primary goal is
to design something that can be re-used
for many different types of problems(11).
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The
bottom line for the industry was summarized
by Steven Seget in his report on pharmaceutical
innovation: “A company’s ability
to innovate and effectively produce portfolios
of innovation assets will determine its
ability to generate premium returns in
the future(12).” That is, a company
must be able to use its entire value chain,
which might include partnerships and outsourcing
arrangements, to carry the innovation
process from conception to production
in such a way that profitability is maximized.
How can pharmaceutical survive given this
challenge? Find out in my next installment
in two weeks….
Sincerely,
Rob Handfield
References:
(1) Devitt, Blake (2003). Executive
Prophesies Vision for the Future.
Pharmaceutical Executive. Retrieved March
14, 2003 from
(2) Armstrong, Brian M. (2002). Investors’
Ultimatum. Pharmaceutical Executive.
Retrieved March 14, 2003 from
(3) Seget, Steven (2002). Pharmaceutical
Innovation: An Analysis of Leading Companies
and Strategies. Reshaping the Value Chain
(p. 19). London: DataMonitor, PLC.
(4) Overby, Stephanie (2002). They Want
a New Drug. CIO. Retrieved March 14, 2003
from http://www.cio.com/archive/101502/drug.html
(5) Seget, Steven (2002). Ibid. (p. 18).
(6) Interview conducted by C. Kesler with
a senior IT director (name withheld per
company policy) at on March 7, 2003.
(7) Seget, Steven (2002). Ibid. (p. 19).
(8) Devitt, Blake (2003). Ibid.
(9) Overby, Stephanie (2002). Ibid.
(10) Interview conducted by C. Kesler.
Ibid.
(11) Overby, Stephanie (2002). Ibid.
(12) Seget, Steven (2002). Ibid. (p. 19).
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