In today’s extremely competition-oriented universal market, productive supply chain management (SCM) has a crucial role and is accepted as a key factor for organizational presentation and competitive advantage (
1,
2). The competitive environment needs that companies supply upward quality products and services, deliver quick service response, and improve dynamic capabilities that are in tune with the growing changing business environment (
3, 4). Today’s business situation is characterized by an upward level of unpredictability. In this unstable market, firms face aggressive competitive environment due to globalization, technological changes, shorter goods’ life cycles, diminished margins, economic downsized markets and more informed and well-informed customers with unique and quickly changing needs. The focus of supply chain has changed from production efficiency to customer-driven and collaboration synchronization approaches which need a high degree of cooperation among all supply chain partners (
5). These changing market situations forces organizations to alter the path their supply chains structured and handled in order to be more responsive to these changes. In order to respond to the challenges and demands of today’s business environment, firms have been undergoing a revolution in terms of implementing novel operations strategies and technologies (
6).
Recent literature in supply chain has addressed this flow and proposes that the key factor to survive in these changing situations is through agility by formation of responsive supply chain (
7). In a continuously changing global competitive environment, an organization’s supply chain agility directly affects its ability to produce and give inventive products to its customers in a timely and cost-efficient manner (
8). In such an unstable environment, companies require to improve more flexible and robust linkage with partners in order to reply to market situations in a timely manner. Therefore, being agile and capable of quick adjustment to unexpected changes undoubtedly become critical success elements for organizations (
9). Furthermore, due to strategic worth, supply chain agility must be operationalized in a way that companies can manage their agility level through their strategic decisions (
10).
The pharmaceutical section plays a significant role in the medical and health system. The pharmaceutical market is heavily regulated in many countries because of the unique nature of demand and supply (
11). According to the characteristics of the contest in drug market, governments must balance both clinical and economic interests (
12). One of the targets of this supply chain is to assure a continuous flow of drugs to patients at optimal price, with minimal delays, few shortages, and with little room for error (
13). A scientific and technological transformation is occurring in the pharmaceutical industry that will make it possible for drug producers to produce profitable new medicines for situations that cannot be treated very well today and for conditions which have formerly persisted against all treatments. Anyway, now several elements are pressing pharmaceutical firms to change their old manners of conducting business. One of these elements is the supply chain which is changing to a source of competitive advantage (
14). Finally, the purpose of this paper is to address this question:
“Which critical factors should be takeninto account by pharmaceutical companies todevelop an agile model in supplier section?”To answer the question, this article benefits from the fuzzy TOPSIS to quantify critical factors. The remainder of the paper is organized as follows: presenting the literature on SCM and a review of pharmaceutical industry, studying the design and basic factors, presenting the results and analysis, discussion, conclusion and implications.
Literature Review
Pharmaceutical industry environment
The pharmaceutical industry is explained as a system of procedures, operations and organizations involved in the discovery, development and production of medications. The pharmaceutical supply chain (PSC) represents the path through which essential pharmaceutical products are distributed to the end-users at the right quality, at the right place and at the right time (
15). The pharmaceutical supply chain is very complicated and greatly responsible to ensure that the appropriate drug, reaches the right people at the right time and in the right situation to fight against sicknesses and sufferings. This is a highly sensitive supply chain that everything less than 100% customer service level is unacceptable as it directly influences the health and safety. The solution that a lot of pharmaceutical industries adopt is to bear a vast inventory in the supply chain to ensure close to 100% fill rate. However, it is a great war to ensure 100% product availability at an optimum cost unless the supply chain processes are streamlined towards customer requirements and demands (
16).
The time to market, R and D productivity (Innovations), drugs’ life cycle reduction, government regulations, decreasing exclusive patent life, production flexibility, and increasing cost are the main problems that pharmaceutical industries are facing today. A manufacturer who can adjust the improvement time by 19% can save up to $100 million. At the time of a drug getting delayed to access the market, firm may get rid of around $1 million a day, therefore, the access time to market is so important for pharmaceutical companies in order to gain market share (
16). The pharmaceutical market is heavily regulated in many countries because of the unique nature of demand and supply for drugs (
17). In accordance with the feature of the competition in drug market, governments must balance both clinical and economic interests (
12). Finally, the pharmaceutical section plays a key function in the medical and health system. Characterized with its size of total and aging population, quickly increasing economy and increasing prevalence of chronic diseases (like cardiovascular disease, cancer, and chronic respiratory disease) pharmaceutical industry growth has been increased at a very fast rate (
18).
Pharmaceutical companies in Iran
On the eve of the 1979 revolution, numerous domestic, foreign, and domestic-foreign private companies were active in Iran›s pharmaceutical sector. By that time, the country›s pharmaceutical sector had been transformed into a market that boasted a $300 million annual cash flow. There were nearly 4,000 kinds of pharmaceutical products available in Iran, 70% of which was provided by imports and the remaining 30% was produced domestically (
19). More than half of the latter market served the sales of products under the concession of foreign companies (
20). At present, more than 95% of the drug consumption is produced by domestic pharmaceutical companies (
18,
21,
22).
Pharmaceutical supply chain components
The pharmaceutical supply chain (PSC) like the other industries begins with the sourcing of active and inactive ingredients for approved products. Dosages are planned and packed into different configurations. Products moved along to company’s warehouses, wholesale distributors, retail pharmacies, medicinal organizations (hospital pharmacy), and finally to end-users. The data flow and funds flow start from end customer to producer through different channels (
16).
A supply chain is the arrangement of organizations, their facilities, acts, and activities that are involved in manufacturing and giving a product or service. A typical pharmaceutical supply chain consists of the following members: initially manufacturing, secondary producing, market warehouse/distribution centers, wholesalers, retails/hospitals and patients (
23). Previously, under a centrally organized economy, the whole pharmaceutical products were distributed byan owned monopoly firm (first-tier wholesaler) to some regional wholesalers (second-tier wholesalers) who would then deliver the products to local wholesalers (third-tier wholesalers) (
24). Among pharmaceutical supply chain components, it has been argued that delivery of medicines has substantial effect on customers’ satisfaction (
25). Because of the changing economic system; pharmaceutical supply chain has been reformed.
Figure 1 exhibits the new pharmaceutical supply chain
. In this continuum, wholesalers play as a customer role and patients are considered as consumers.
Pharmaceutical supply chain (15
The agile supply chain Supply chain agility has received very consideration recently as a way for organizations to reply in a quick manner to change the business environment and improve their customer service levels. In order to comprehend this concept, it is important to first establish the definition of the agile companies. Agility has been proposed as a reply to the high levels of intricacy and uncertainty in advanced markets (
26). According to Naylor
et al. (1999), “agility means applying market knowledge and a vital corporation to exploit profitable opportunities in a rapidly changing market place”. The relation between agility and flexibility is extensively discussed in the literature (
7,
8). It has been proposed that the origins of agility lie in flexible manufacturing systems (
27,
28).
The target of an agile enterprise is to enrich/ satisfy customers and employees. A firm basically possesses a set of capabilities for making appropriate replies to changes occurring in its business environment. Anyway, the business statuses in which a lot of companies understand themselves are characterized by volatile and unpredictable demand. Agility might hence, be defined as the ability of a firm to reply rapidly to changes in the market and customer demands. To be really agile, a firm should control a number of differentiating agility-providers. Tseng
etal. (2011) have developed an agile enterprise conceptual model, as shown in
Figure 2 (
29).
Components of an agile supply chain (29).
Hence, these firms need a number of distinguishing attributes to promptly deal with the changes inside their environment. Such attributes include four main elements (
30): responsiveness, competency, flexibility/ adaptability and speed. The base for agility is the joining of information technologies, staff, business process organization, innovation and facilities into main competitive attributes. The embracing of agile strategies has some benefits for firms, including quick and efficient reaction to changing market requests; the ability to customize products and services delivered to customers, the capability to manufacture and deliver new products in a cost-efficient mode (
8), decreased producing costs, enhanced customer satisfaction, removal of non-valueadded activities and increased competitiveness. Therefore, agility has been advocated as the commerce paradigm of the 21
st century and in addition, agility is considered as the winning strategy for becoming a universal leader in an increasingly competitive market of quickly changing customers’ requirements (
31,
32).
Supply chain operations reference (SCOR) model
In the current study, we will employ some parts of the Supply Chain Operations Reference (SCOR) model according to Supply Chain Council in 2001 (
33). The SCOR makes a cross industry structure for the estimation and improvement of supply chain management and execution (
34). Five main supply chain processes are captured by the structure of the SCOR model. The processes are planning, sourcing, making, delivering and returning. In part of conceptualization of supply chain agility, it is better to apprise each of them disparately in order to frame the theoretical parts of supply chain agility into a generally accepted business structure (
33).
Agile supplier selection
In today’s highly competitive environment, enterprises require to take promotion of any opportunity to develop their performance. There has been increasing recognition of the need for a firm to work closely with its supply chain partners in order to optimize its business activities. A key function in the structure formation of any supply chain is that of supply partner selection (
35), which is reflected in the increasing research interest in this subject in recent years (
36). The agile supply chain (ASC) is a dynamic alliance of member companies, the formation of which is likely to require changing frequently in response of fast-changing markets (
37,
38). More recently, in an era of intensified outsourcing, Huang
et al. (2004) have insisted on the idea of the virtual firm as an effective and viable solution to the problem of fulfilling requirements in a universal market. In ASCs, companies must align with their supply partners to streamline their operations, as well as working with each other to reach the necessary levels of agility throughout the entire supply chain and not just among an individual company. The growing importance of ASCs has concentrated more attention on supply partner selection. In ASC, decision-making about partner selection is particularly challenging, due to the complexity of putting together a network under dynamic conditions. Researchers have generally proposed that the problem of supplier selection under aforementioned conditions cannot be solved effectively and efficiently unless it is separated into several sub-problems, each of which can then be discussed and solved individually (
39,
36). For instance, Lorange
et al. (1992) developed a two-stage supply partner selection approach: first, evaluating the level of compatibility with a candidate partner and then examine the market potential, key competitors and simulating worst-case scenarios after the formation of the partnership. De Boer
et al. (2001) described the supply chain partner selection process as three important stages, comprising the ‘‘criteria formulation’’ and ‘‘qualification’’ stages in which appropriate partners are identified, followed by the ‘‘choice’’ stage in which a final selection is made from appropriately qualified partners. Che (2010) also developed a two-phase model. In phase 1, suppliers are clustered in accordance to their characteristics for meeting customer needs on multiple agents of cost, quality and time. In phase 2, a multi-criteria optimization mathematical model was constructed on the basis of these clusters (
40-
42).
The authors could find no studies on the agility of pharmaceutical supply chain in any of the developing countries. This research will contribute to reduce the current lack of aforementioned studies and also it extends agility scale as a key component of PSC into developing countries and into a new sector.
Fuzzy TOPSIS
TOPSIS (technique for ordering preference by similarity to ideal solution) technique of solving the multi-criteria decision choosing tasks that implies full and complete information on criteria, was expressed in a numerical form. The method is very useful for solving the real problems; it provides us with the optimal solution or the alternative›s ranking. In addition to this, it is not so complicated for the managers as some other methods which demand additional knowledge. TOPSIS technique would search among the given alternatives and find the one that would be closest to the ideal solution but farthest from the anti-ideal solution at the same time. Modification of the method aims to set a different manner of determining the ideal and anti-ideal point through standardization of linguistic attributes› quantification and introduction of fuzzy numbers in description of the attributes for the criteria expresses by linguistic variables (
43).
Study design
In this section, we provided a methodology for operationalizing the variables and factors, acquiring the data and determining the reliability of factor grouping. The data used in this study was gathered from questionnaires distributed to the managers of Iranian pharmaceutical companies. The pharmaceutical industry is chosen as it has a heavy and complete supply chain. These types of firms have tried to improve their supply chain performance due to the increasing concerns and importance of supply issues and also manufacturers are seeking methods to improve their performance.
This research is based on supply chain operations reference model (SCOR), and our scope in this paper emphasizes on the supply of API. The questionnaire was designed based on ten critical factors listed in
Table 1, which was created in previous studies (
44,
45,
29), with 25 questions measuring attitudes including: the chosen response can be strongly disagree, disagree, no opinion, agree, or strongly agree.
| Factors | Factor dimension | Researches |
|---|
| Planning and reordersegmentation | - Market research and monitoring- Forecast of alternatives Suppliers | Baramichai et al., 2007 (44); Agarwal et al., 2007 (45); Tseng etal., 2011 (29); Lin et al., 2006 (46); Swafford et al., 2008 (47) |
| Assessment and prioritizing ofsuppliers for purchasing | - Quality/cost standards for supplierselection- Maintaining list of prequalifiedsuppliers | Baramichai et al., 2007 (44) |
| Utilizing of IT tools (UIT) | - E-commerce- Electronic biding- RFID (Radio frequencyidentification) | Baramichai et al., 2007 (44); Gunasekaran et al., 2008 (6);Agarwal et al., 2007 (45); Swafford, 2003 (10) |
| Suppliers empowerment | - Operational information sharing- Flexible contract- Partnership with suppliers | Baramichai et al. ,2007 (44); Tseng et al., 2011 (29); Lin et al.,2006 (46) |
| Material quantity adjustment (fordifferent orders) | - Order consolidation- Variety of suppliers | Baramichai et al., 2007 (44) |
| Process integration &performance management | - Co-managed inventory- Collaborative product design&development- Synchronous supply | Agarwal et al., 2007 (45); Christopher, 2000 (7) |
| Cost reduction(CR) | - Sourcing cost- Inventory cost | Qureshi et al., 2008 (48); Agarwal et al., 2007 (45); Lin et al.,2006 (46); Swafford, 2003 (10) |
| Delivery speed (DS)Trust development (TD)Environmental pressure | - Responsiveness rate - Reliabilitydelivery- Trust-based relations withsuppliers- Minimizing uncertainty (MU)- Political factor- Economic factors- Social factors | Agarwal et al., 2007 (45); Tseng et al., 2011 (29); Sharifi et al.,1999 (60)Agarwal et al., 2007 (45); Tseng et al., 2011 (29); Sharifi et al.,1999 (60)Agarwal et al., 2007 (45); Tseng et al., 2011 (29); Handfield etal., 2002 (49)Sharifi et al., 1999 (60); Tseng et al., 2011 (29) |
In addition to the above questions, the information related to the basic profile of the interviewees was requested at the end of the questionnaire. The main sampling targets were senior managers, different department’s managers and personnel who were involved in decision making.
Our research model is presented in
Figure 3. The key dependent variable of interest is agility in supply of API that is expected to be influenced by some independent variables.
These variables have some subfactors which are shown in
Table 1, and as a result, agility can improve responsiveness, quickness, flexibility and competency of suppliers.
Capabilities of agility
Agile enterprises require a number of distinguishing capabilities or ‘‘fitness’’ to deal with the change, uncertainty and unpredictability within their business environment. These capabilities consist of four principle elements (
50,
51): (
1) responsiveness which is the ability to identify changes and respond quickly to them, reactively or proactively, and recover from them; (
2) competency which is the ability to efficiently and effectively reach enterprises’ aims and goals; (
3) flexibility/adaptability which is the ability to process different processes and achieve different goals with the same facilities; and (
4) quickness/speed which is the ability to carry out activity in the shortest possible time. Furthermore, underpinning these four principles is a methodology to integrate them into a coordinated, interdependent system, and to translate them into strategic competitive capabilities (
30). These must be taken into account if an organization is to carry out agile enterprise (
29).
Reliability and validity of the questionnaire
The internal consistency of a set of measurement items refers to the degree to which items in the set are homogeneous. Internal consistency can be estimated using reliability coefficient such as cronbach’s alpha (
52). In this research, cronbach’s alpha was calculated 0.9. Content validity is not evaluated numerically; it is subjectively judged by the researchers (
53). It is important since the measurement items were based on an extensive review of the literature on various SCM approaches. To gauge the acceptance of the questionnaire, 10 people who were qualified in the field of SCM, participated in a pilot test. The participants suggested adding and omitting some parts of questionnaire. Finally, all the pretest participants expressed strong agreement with the suitability of the questionnaire. The questionnaire was considered finalized after modifying some questions and then, became ready to be delivered.
Data collection
Data for this study has been gathered using questionnaire that was distributed to 21 pharmaceutical firms which affiliated to three large holding companies. In order to understand the viewpoints on agile supply from key sectors of the pharmaceutical industry, questionnaires were sent to the marketing, sales, information technology (IT), finance, research and development (R & D) and quality assurance and control departments. Accordingly, we chose respondents from managers who had comprehensive knowledge about company’s process, products and general pharmaceutical related issues. The number of questionnaires sent out was 145 and the number of returned ones was 93; a return rate of 64.14 percent. All of the returned questionnaires were complete. Finally, 20% of respondents were top managers and 80% were middle managers according to
Table 2.
| Position | Frequency | Percent |
|---|
| Deputy managing directory | 8 | 8.6 |
| Responsible of production | 9 | 9.7 |
| Financial manager | 23 | 24.7 |
| Manufacturing manager | 10 | 10.7 |
| Quality assurance and control manager | 14 | 15.1 |
| Marketing and sales manager | 11 | 11.8 |
| Strategic planning manager | 18 | 19.4 |
| Total | 93 | 100.0 |