Case study
1
Final assignment:
case study
Due date: 5pm, Friday 23rd October 2020
Percentage of overall grade: 26%
Submission method: Moodle
Document type: Microsoft Word only
Purpose
The purpose of this assignment is to apply the concepts covered in class as well as the information and details from
your own research to a business scenario. This assignment has, therefore, both a theoretical and a practical
component.
Instructions
An analysis of the Pfizer case study forms the basis for this assessment task. Read the case study and write a brief
essay to answer the following question:
How does Pfizer manage supply chain complexity?
You may consider the following questions in your essay:
What makes Pfizer’s supply chain a complex supply chain?
Which technological tools has Pfizer implemented?
How does the implemented technological tools enable Pfizer to address supply chain complexity?
How does the implemented technological tools support the flows of goods and information?
What are the benefits of the implemented technological tools for Pfizer?
Since the essay is expected to build a coherent and logical argument, listing the above questions and providing
answers is NOT appropriate.
You should integrate as many course concepts as possible into your discussion but ensure that you remain focused
on the main question (How does Pfizer manage supply chain complexity?). The use of diagram(s) that support your
argument is encouraged and will be rewarded, in particular diagrams that you have developed yourself (e.g. a
diagram that shows how Pfizer’s supply chain works or a diagram that illustrates how technology supports Pfizer’s
supply chain operations). Please place your diagram(s) close to the relevant text and make sure that your essay text
discusses them to show their relevance (e.g. “Figure 1 shows that…”).
MGSYS101-20B
Digital Business and Supply Chain Management
2
You are required to complete this assessment task on your own. Please use a 12-point font and a 1.5 spacing. The
word count is 1,000 words (+/-10%) from the first word of the introduction to the last word of the conclusion (i.e.
excluding diagrams and the list of references). Please include your essay’s actual word count on the cover page of
your assignment.
All sources must be properly acknowledged by using the APA referencing style. The University of Waikato Library
has put together a selection of resources to help you (http://www.waikato.ac.nz/library/study/referencing/
styles/apa). Your list of references should include a minimum of:
– 6 references taken from the material used in class (e.g. slides, readings, case studies, videos);
– 1 academic article;
– 2 Internet sources (other than the academic article);
– The Pfizer case study.
The case study should be referenced as follows:
– In text: (Dupin, 2013) or Dupin (2013) explains…
– List of references: Dupin, C. (2013). Nurturing a healthy supply chain. American Shipper, January, 6-10.
The lecture slides should be referenced as follows:
In-text:
– (Jefferies, 2020) or According to Jefferies (2020)…
OR
– (L’Hermitte, 2020) or According to L’Hermitte (2020)…
List of references:
– Jefferies, D. (2020). Number and title of the specific lecture in italics [PowerPoint slides].
https://elearn.waikato.ac.nz/.
OR
– L’Hermitte, C. (2020). Number and title of the specific lecture in italics [PowerPoint slides].
https://elearn.waikato.ac.nz/.
Lecture slides from previous lecturers or semesters cannot be used. Please make sure that you include the correct
session number and title in your references. When using more than one lecture of Dannie or Cecile, add a lower
case letter (a, b, c, etc.) immediately after the year to differentiate the references:
– (Jefferies, 2020a) or According to Jefferies (2020a)…
– Jefferies, D. (2020a). Number and title of the specific lecture in italics [PowerPoint slides].
https://elearn.waikato.ac.nz/.
The full marking criteria are presented in the table below. Please ensure that you submit your essay by the due date
as late submission penalties apply (as per the paper outline).
http://www.waikato.ac.nz/library/study/referencing/styles/apa
http://www.waikato.ac.nz/library/study/referencing/styles/apa
https://elearn.waikato.ac.nz/course/view.php?id=40241
https://elearn.waikato.ac.nz/course/view.php?id=40241
https://elearn.waikato.ac.nz/course/view.php?id=40241
3
Marking criteria
0 → 40 50 → 70 80 → 100
Clarity and quality
of writing
Rambling, some
irrelevancies and
grammatical errors,
incomplete and/or illogical
statements
Reasonably succinct and
logical, simple and
understandable, mostly
error-free
Succinct and poignant, clear
and grammatically correct,
logical and coherent
statements
Understanding of
concepts
Limited evidence of
conceptual understanding,
description often incorrect
Reasonable coverage of
concepts, description not
completely correct
Complete comprehension
of concepts, description
correct and precise
Depth of argument,
justification and
illustration
List of points or sweeping
statements without
justification, no/little
evidence provided to
support conclusions, not
linked to practice or
illustrated by examples
To varying depth relevant
and reasoned argument,
justified through practice
and/or examples,
conclusions generally
supported
Conclusions supported by
high-quality and in-depth
analysis, comprehensive
justification illustrated
through appropriate
evidence and illuminating
examples
Structure,
organisation and
integration
No meaningful integration,
points and statements are
not brought together to
address question(s)
Generally organised to
facilitate understanding,
partially integrated
Logical structure used to
facilitate understanding,
points and statements
effectively linked together,
fully integrated
Research and
conformance to
referencing
standards
Inadequate evidence of
research, insufficient
number of references,
sources poorly
acknowledged, incorrect
referencing style
Some research, inadequate
variety/quality of
references, sources in the
main acknowledged
properly, inconsistent
application of the APA
referencing style
Appropriate level of
research, various and high-
quality references, all
sources properly
acknowledged, good use of
APA referencing style
6 AMERICAN SHIPPER: JANUARY 2013
P
fizer makes some
of the most impor-
tant and advanced
life-saving drugs in the world
and is redesigning its global
supply chain and delivery
system to achieve agility in
an increasingly complex and
competitive global market.
The industry’s traditional approach
to ma nagi ng f reig ht was becom i ng
q u ic k ly ove r w h el m e d by e x t r e m e
changes in the market place, includ-
ing pressures to cut costs, tapping into
challenging but important emerging mar-
kets, and managing an increasingly vast
array of new drugs in the supply chain.
There are also the challenges associated
with mergers of pharmaceutical manufac-
turers and their product lines.
Faced with this reality, Pfizer sought
a healthy dose of the latest information
technology to help facilitate and efficiently
manage the transport of numerous drug
shipments from manufacturing sites to
anywhere in the world.
To do this, Pfizer essentially “virtual-
ized” its supply chain so that its suppliers,
customers and transport providers, in
addition to itself, can track and trace the
movement of materials anywhere using
a common “cloud” technology platform.
While the network may change over
time, no new integrations are required of
Pfizer. The “cloud layer” insulates Pfizer
from the underlying physical changes and
allows network participants to be added or
removed rapidly. The virtualization of the
supply chain is what enables f lexibility,
responsiveness, and global information
exchange across the entire Pfizer value
chain. It captures, visualizes, analyzes and
manages Pfizer’s complex supply chain
network and gives the company and its
partners a single version of the truth against
which all stakeholders operate.
At the same time, Pfizer has used this
technology integration to dramatically
simplify its transportation purchasing to
just three third party logistics companies
— DHL, Panalpina, and UTi Worldwide.
Jim
Cafone
, vice president of supply net-
work services at Pfizer, said the company
employs GT Nexus to provide information
Nurturing
a healthy
supply
chain
Pfizer uses sophisticated IT, Pfizer uses sophisticated IT,
fewer 3PLs to deliverfewer 3PLs to deliver
products efficientlyproducts efficiently
worldwide.worldwide.
BY CHR IS DUPIN
6 AMERICAN SHIPPER: JANUARY 2013
8 AMERICAN SHIPPER: JANUARY 2013
LOGISTICS
hub services, and “every one of our provid-
ers connects to GT Nexus as dictated by
Pfizer’s requirements.”
Pfizer also uses analytical tools, devel-
oped by the Hub Group subsidiary Unyson,
which organize information in the system
and create “dashboards” that Pfizer’s lo-
gistics managers can use to see trends in
their supply chain and identify service and
savings opportunities.
That information allows Pfizer subject
matter experts to “turn data into action,”
said Jeff Jagiela, director of transport and
logistics services at Pfizer. “Our regional
and global transportation experts can run
the business in the way that it needs to be
run based on the needs of our customers.”
“Pfizer manages its complex network
with 15 global colleagues,” Cafone said.
Other companies may have 50 to 200 people
performing similar work, he estimates.
Pfizer has an annual transportation spend
of about $400 million.
In 2011, the company had sales of $67.9
billion, and Cafone said the rule of thumb
in the pharmaceuti-
cal industry is that
t ra nspor t at ion ca n
represent from 0.5
percent to 5 percent
of a product’s manu-
facturing cost.
“That means that
transpor tation cost
is small compared to
total manufacturing costs. It’s very differ-
ent from retail apparel where the cost of
manufacturing is very low, but the cost of
transportation is high,” he said.
Still, Cafone also noted that logistics
spending by health care companies has
climbed as they increase sales globally
because more products need to be temper-
ature-controlled or move under very strict
regulatory requirements.
Globally, about 75 percent of Pfizer’s
products are shipped by air, and Cafone
said that high use of air freight is driven
largely because of the need to adhere to
high standards of care in transport.
Adapting To Change. Like other
pharmaceutical companies Pfizer must
contend with a number of major forces
shaping the industry.
One is shrinking margins as some highly
effective and popular drugs come to the end
of their patent life.
An example is Pfizer’s popular statin
drug Lipitor. Reportedly the best selling
drug in the history of pharmaceuticals,
Lipitor went off patent in December 2011.
With the market open to competition
from generics, worldwide sales of Lipitor
amounted to about $1.4 billion in the first
half of 2012, 42 percent less than the $2.4
billion in the first half of 2011.
At the same time, the company is seeing
new demand for drugs coming from around
the world, especially logistically challenged
emerging markets.
Consolidation in the pharmaceutical
industry has made companies larger and
more complex to manage. Pfizer, for ex-
ample, acquired several companies in recent
years, including Wyeth in 2009, Pharmacia
in 2003, and Warner-Lambert in 2000.
Pfizer also says there has been an expo-
nential increase in the number of products
in the past decade “as new therapies are
introduced thereby creating the need for
internal supply chain segmentation.” Pfizer
sells 3,000 formulations, which are avail-
able in 35,000 stock-keeping units or SKUs.
Cafone said Pfizer is “exceptionally
complex from a whole supply system per-
spective versus other companies in the
health care space.”
The company has 89 manufacturing sites,
175 logistics centers, utilizes 500 third par-
ties and sells products in just about every
country in the world, he said.
The trade lanes over which the com-
pany’s products travel — from Pfizer’s
own factories and those of its suppliers to
the company’s “first paying customers,”
whether they’re hospitals, drug wholesalers,
retailers or government agencies — create
a complex web.
With the GT Nexus/Unyson network
Pfizer has virtualized this tapestry by
creating what Cafone called a “device
independent structure.”
“We can plug in and out of our network
through various nodes of the supply chain
via a common information layer,” he said.
“What that means at the end of the day is
that we can take products from the sup-
plier and know when those products are
available to ship.”
The system is f lexible enough that the
company can add or change suppliers or
transportation companies, or business
strategies as needed.
The cloud-based system gives Pfizer “the
opportunity to do that much more quickly
than we could if we had to rely solely on
freight forwarder data,” Cafone said.
Thomas Berger, senior vice president and
global head of industry vertical health care
at Panalpina, said other drug companies are
beginning to adopt cloud technology but
“Pfizer is certainly a front runner. They
are certainly trying to do it differently
compared to others, in particular, when
you think about the size of the company.”
When Pfizer merged with Wyeth “they
looked at how they wanted to move forward
and that helped them drive it from a global
perspective. Their request was a global
request, and we had to respond and say, we
can do this on a global basis,” Berger said.
Cafone referred to the 3PLs that the
company uses as “our transportation con-
trol towers.” When suppliers or Pfizer sites
are ready to make a shipment, they upload
information about cargo and where it’s go-
ing based on the customer’s requirements.
“We have complete visibility from origin
to destination and every milestone along
the path,” he said.
Cafone compared the system to the social
networking site LinkedIn, where once a
member has allowed someone into his or
her network, updates he or she posts — say
a job change — become available to all the
members of their network.
Similarly, Pfizer’s system lets the autho-
rized participants in its supply chain know
when a shipment is ready for pickup, to trace
its progress and be notified if there is an
interruption in the supply chain.
“Everyone up and down the value chain
is able to see it or react to it,” Cafone said.
“Users put the information together in the
way that they need to see it, whether we
want to push an alert out or they want to
pull an alert down out of the system. That
is the f lexibility the platform allows.”
Jagiela said Pfizer tracks hundreds of
shipments on a daily basis in all parts of
the globe.
Don Maltby, an executive vice president
at Unyson, said the dashboards that his
company provides “display summary infor-
mation about Pfizer’s logistics in an easily
understandable graphic form,” for example,
pie charts that show market share of ocean
carriers or the density of shipments from
India to Europe or any other trade lane.
Pfizer logistics experts can use those
charts to find opportunities for increased
consolidation of shipments, if products
can be combined from several locations,
or reduce the frequency of certain ship-
ments altogether.
Because that data is available electroni-
cally, they can share it with other Pfizer
suppliers, say the manager of a factory, and
drill down into the data to look at informa-
tion relating to a single shipment.
Cafone said it also allows the company
to investigate various “what if ” scenarios
— for example, how a rise in oil prices will
affect European surcharges and whether the
company should reroute cargo.
Outsourcing And Control. Having
the ability to track and trace shipments has
become increasingly important as pharma-
ceutical companies like Pfizer outsource
production, often to overseas firms.
Cafone
AMERICAN SHIPPER: JANUARY 2013 9
LOGISTICS
“There is always a decision a company
makes as to what expertise do you want to
keep inside the company and what expertise
do you want to source from outside the
company,” Cafone said. “The Pfizer posi-
tion is that if someone can do it better on
the outside then they ought to be doing it.
“Very little of our product is made in a
single facility anymore,” he added. “Twenty
years ago everything was made within the
four walls of the company and typically
made within the four walls of a single asset.”
He also said “20 years ago you could have
a manufacturing plant in every country
where you did business. In today’s world
we don’t have that because you can’t afford
the capital any longer. And the technical
expertise required in the manufacturing
processes is such that you cannot replicate
them all around the world.”
Today few products are made within the
walls of a single plant and “as a result our
supply chains are quite extended,” with
products often shipped in bulk form for
further processing at other facilities on a
global basis.
At the same time, Cafone said Pfizer has
redundancy built into some of its manufac-
turing processes.
“The problem is that as you outsource,
you can lose control if you do not manage
it effectively,” he noted. “With the supply
chain, the weakest link can be inside or
outside of Pfizer.”
In manufacturing, Pfizer may use outside
firms to produce the active pharmaceutical
ingredients (APIs), turn those compounds
into a tablet or other drug, or package the
finished drug. Some products are made
entirely inside Pfizer, some by outside sup-
pliers, and some are a mixture, Cafone said.
The amount of outside manufacturing
can be measured in a variety of ways — by
revenue or SKU count, for example — but
Cafone said it amounts to about 50 percent.
Ed Silverman, who writes about health-
care on the blog Pharmalot, said Pfizer
ref lects a broad trend in the pharmaceuti-
cal industry toward more outsourcing, one
that is expected to continue to grow unless
safety issues arise or economics change.
Most outsourcing is done in China and
India, though Silverman explained there is
some increased activity in Latin America
and Eastern Europe. India and China are
particularly attractive markets for manu-
facturing because the countries have their
own, large domestic markets.
Incidents such as the contamination
of heparin in 2008 at a Chinese factory
that was incorporated into a Baxter In-
ternational drug have made supply chain
integrity a hot topic. “Logistics or supply
chain as the industry calls it is increasing
important,” Silverman said.
Pfizer said in its 2011 annual report it
applies “rigorous systems of quality as-
surance, including inspections and audits
of both Pfizer-owned facilities and other
facilities in our supply network, and insist
that quality systems include direct oversight
of the ‘chain of custody’ of suppliers.” In
2011, the company conducted 213 supplier
assessments and 139 onsite evaluations of
suppliers.
When it comes to transportation man-
agement, Cafone said Pfizer is “not in
the business of buying trains, planes, and
automobiles. We don’t actually need to
own the external supplier, the transporta-
tion provider, the customs broker, but we
have a means of communicating with them
through this information layer.”
The cloud system gives Pfizer complete
traceability of products as they move
through the company’s supply chain.
In addition, Pfizer takes product security
extremely seriously.
“We have overt and covert security tech-
niques on a product basis — anti-tampering,
those sorts of things,” Cafone said. “We
have robust security practices all of our
providers must adhere to.”
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10 AMERICAN SHIPPER: JANUARY 2013
LOGISTICS
Pfizer’s Standards of Care define the
policies and procedures providers must
follow for Pfizer products. The company’s
ability to track shipments with its cloud-
computing system aids in that effort.
“If a move is supposed to take three days
and it has gone beyond that, we want to know
what’s happening,” Cafone said. “When you
have visibility of data you can use it for a
whole series of things.” That includes the
ability to track ingredients that might be
classified as dangerous goods or temperature
sensitive, for example. The standards of care
for pharmaceutical products are becoming
ever more rigorous. About 25 to 30 percent
of the material Pfizer ships are temperature-
sensitive “cold chain” products.
A growing number of new drugs contain
biological ingredients such as proteins or
nucleic acids that must be stored and trans-
ported within narrow temperature ranges
if they are to retain their efficacy.
Angelos Orfanos, DHL’s president of life
sciences and healthcare customer solutions
and innovation, said there has been a change
in the cold-chain business in recent years.
Different countries and varying regula-
tors are imposing new rules to ensure the
quality of drugs, leading to more tracking
and tracing. At the same time, he said
tracking cargo has become more important
as the value of drugs have increased. He
noted many biological-based drugs have
higher values.
Supply Chain Consolidation. As
Pfizer restructured its supply chain in recent
years, DHL acquired two of the company’s
warehouses in Vonore, Tenn., and Reno,
Nevada. DHL converted those facilities into
multi-user warehouses, so that Orfanos said
Pfizer has converted warehousing from a
fixed to a variable expense.
By reducing the number of 3PLs it em-
ploys, Pfizer has been able to reduce its
transportation spend by about 10 percent
and utilize the support of about 40 people
externally from the three preferred freight
forwarding providers.
It has also reduced the number of acces-
sorial charges it’s subject to from about 400
globally to a consolidated set of 30.
Cafone said DHL, UTi, and Panalpina
“embrace this concept along with us and
brought resources to bear on our behalf…
to ensure that our standards of care are
adhered to from a product perspective and
that the information is made available to
the cloud so that we can analyze it using
the analytics platform.
“Every company in the world would like
to track and trace products the way we are
able to when we buy something from Ama-
zon.com,” he said. “The problem is if we do
that within a service provider like FedEx
or UPS or the Postal Service, you can track
and trace within their own engines, but you
can’t go to the UPS Website and say ‘give
me the FedEx information.’”
Cafone said when Pfizer sought to select
global 3PLs “the typical provider would say
‘we can do exactly what you described here,
but we want you to do it in our proprietary
system.’”
For now, most of the company’s trans-
portation in Asia is handled by DHL, which
also does some work in the United States
and handles all of Pfizer’s external sup-
pliers worldwide. Panalpina handles the
transportation work in the Americas and
all three companies do some work in the
Europe, Middle East and Africa region.
Branded Vs. Generic. As a phar-
maceutical manufacturer, Pfizer makes a
variety of both branded, patented products
and generic drugs.
In the branded world, Pfizer may be
the only manufacturer of certain drugs
for diseases such as hemophilia and
cancer, and Cafone noted “the patient
absolutely needs them because they are
lifesaving.”
For those products, the company strives
for “100 percent service levels, no questions
asked. With oncology drugs you can al-
most assume air transportation, shipments
tracked and traced completely.”
With generic drugs, where Pfizer may
compete with many suppliers, logistics
managers “are more likely to employ ocean
transportation and consolidation.”
But Cafone said “at the end of the day
we’re all about servicing the patient and
their critical healthcare needs — that
trumps everything.”
If there is a critical drug shortage, for
example, where a competitor’s drug is not
available and demand climbs, and Pfizer
would normally ship a similar product from
Germany to Singapore with a transit time
of 30 to 40 days, it might drop that rule and
instead move product by air in 12 hours,
regardless of the cost.
Cafone indicated there is increased inter-
est in logistics among upper management at
pharmaceutical companies in part because
of geopolitical events and natural disasters,
such as the 2010 eruptions of the Iceland
volcano Eyjafjallajökull, the 2011 Tohoku
earthquake and tsunami in Japan, and this
year’s Hurricane Sandy.
But he said there is also an increasing
recognition that “not only is Pfizer sell-
ing a product, but a trusted supply chain.
And a trusted supply chain means we have
visibility end-to-end, limited number of
trusted partners in DHL, Panalpina, and
UTI, and robust standards of care.”
Cafone foresees the day when Pfizer will
be able to use its supply chain as a sales
tool. It will be able to go to, for example,
an emerging market or a non-governmental
organization and say “not only do we have
the right product innovation, but we also
have a great supply system innovation.
“That’s where we believe this is going,”
he said. ■
But he added “the more proprietary the
system, the more you are locked into that
provider and that means you’re not flexible,
you’re not agile. You cannot plug and play.
“What we sought to do in this whole
virtualization was to be ‘device agnostic,’
meaning while the network may change
over time, no new integrations are required
by Pfizer and allows network participants to
be added or removed rapidly,” Cafone said.
The company decided to use the GT
Nexus system as an engine “we can plug
anyone into. Our network is incredibly
complex,” he said.
Pfizer demanded the 3PLs it selected
agree to send the information that it required
to its cloud system every time they handle
a Pfizer product.
“Our network is so dynamic,” Cafone
said. “We may have an emergency health
need in some emerging market, and we
don’t have time to talk to somebody about
plugging into their propriety system. We
want a tool that is device agnostic.”
While DHL, Panalpina and UTi were
willing to work with Pfizer, he said other
companies insisted Pfizer would have to use
their tools, so the company declined to do
business with them, even though in some
cases they were very large 3PLs.
Cafone said several others could not
operate in that fashion, but said once they
developed the capability that they hoped to
be able to do business with Pfizer in the
future. Cafone said that might be something
the company would entertain in the future,
adding there could be particular trade lanes
where Pfizer might like to use a different
company.
- Nurturing a healthy supply chain
- C.R. England