LEAN SUPPLY CHAIN TRANSFORMATION: A STRATEGIC APPROACH TOWARDS SUPPLY CHAIN EXCELLENCE IN INDONESIAN PHARMACEUTICAL INDUSTRY

• Main Author: Argiyantari, Berty
• Format: Dissertations
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/53690
• Institution: Institut Teknologi Bandung

Nowadays, in the current global market environment, the pharmaceutical industry is coming under pressure because of increasing competition, reduced product life cycles, and more restrictive regulatory compliance. At the same time, customers have higher expectations of lower prices, shorter lead-times, higher quality, and safety standards. Thus, to win the market, the pharmaceutical supply chain (PSC) must change its conventional practices to ensure product availability allied with excellent service levels, reduce unnecessary costs, improve productivity, and deliver higher quality products at the right time. Accordingly, the lean principle is acknowledged as one of the best systems for achieving operational excellence by eliminating waste. The concept of operational excellence is outperforming operational performance which is represented by the increased customer satisfaction, improvement in productivity and quality, and reduction in cost and lead time. The literature revealed that the pharmaceutical industry has been slow to adopt lean initiatives compared to other industries. The condition due to the industry has focused more on strict quality regulations compliance, which creates a challenging environment for lean implementation. As a result, this study established that the previous academic literature remains limited and largely fails to address the implementation of lean initiatives in the PSC. This study presented a change in a practical context to close the gap through a lean supply chain application in an Indonesian pharmaceutical distribution company. This study aims to identify the impact of lean principles in supply chain performance, determine the key success factors, and identify the implementation strategy to ensure long-term lean practice. The transportation 4 process is the focus of this project, as it is the core of the company's distribution process and incurs the highest costs in its supply chain. An action research approach was used where the researcher was actively involved in the lean project for one year as a process improvement facilitator. Empirical data were collected and analyzed through direct observations, interviews, and the study of company data and documentation. Besides, this study involved experts and practitioners in contributing to developing a new practicable framework. Accordingly, the adoption of lean principles tends to change the organization's norms and values. Thus, Lewin's change management model described three stages; unfreeze, change, and refreeze has been selected incompatibility with the lean philosophy as a basis for the implementation strategy. The transformation towards a lean supply chain enabled the transportation value stream to remove waste, which has led to significant changes. The project delivered a 40% reduction in overall transportation costs, a 75% reduction in total lead time, a 200% improvement in truck productivity, and a 100% improvement in truckload capacity utilization. The research investigation found ten critical elements as the fundamental success factor for implementing the lean principle, including top management commitment, quality compliance, employee competency, supplier relationship management, collaboration, customer relationship management, technology-based information sharing and visibility, the lean tools application, lean culture, and performance measurement. All ten critical elements were interconnected to each other in the form of the house of a lean framework. Meanwhile, the implementation framework based on the Lewin model is acknowledged as the company's lean journey that presents a well-structured guideline for executing a lean supply chain. It is proven that lean supply chain implementation has successfully provided a tangible strategy and advantages for improving PSC performance. Such efforts have delivered the product at the right time, right quality, and right cost. It enables the pharmaceutical supply chain to provide better product availability while improving access to high-quality drugs at affordable prices. Therefore, it is concluded that this achievement has contributed to the development of a healthier Indonesian community. This study is one of few that provide evidence of a first-hand account of the change in the PSC's journey, which produced a knowledge-based practice. Therefore, this study can guide the practitioners to transform the PSC toward operational excellence. Additionally, the approach allows this study to broaden the existing limited body of the literature by generating actionable knowledge based on real-life experience relating to pharmaceutical lean supply chains.