SUPPLY CHAIN MANAGEMENT

CASE STUDY
ON

BioPharma Inc.
SUBMITTED BY TAJUL AL TONOY(17221052,SEC:B)
FINANCE AND BANKING 2
 OVERVIEW OF THE COMPANY

Biopharma Inc is a global manufacturer of the bulk chemicals used in parmaceutical industry .

Two patents : Highcal and Relax.

Chemical used by companies internal pharmaceutical divisions and also sold to other drug
manufacturers.
MAIN POINTS OF THIS CASESTUDY

Problems faced in financial performance of Biopharma Inc.

Steep decline in profits.
German plant has got the best production ability and has routinely had the highestyields.
Japanese plant is best in terms of its abilityto handle regulatory and environmental issues..
Very high costs at Germany and Japan plants.
Stable demand across the globe.
Company could no longer afford to have surplus capacity.
Aims at having an efficient network.
Cutting the costs is the top priority.
 QUESTIONS AND ANSWERS
1)How should Biopharma have used its production
network in 2013? Should any other plants be idled?

BioPharma Inc. need to consider fixed and variable costs for effective network of production. It will efficiently
deliver products globally and will meet demand. To meet demand production costs should be taken into account over
technology and plant capacity.
Plant in Japan should be idled because fixed and variable costs in India is quite lower and can meet to meet the
demand which would be cost effective.
 QUESTIONS AND ANSWERS
2)Why should Landgraf structure his global production
network? Assume that the past is the reasonable
indicator of the future in terms of exchange rates.

Landgraf should keep idle the plant in Japan and let plant in India meet the demand in order to save costs. He can also
stop producing only one chemical in Germany plant. As per forecast demand is stable which can be meet by efficient
supply chain. It is said that Asian market can rise in future for which Landgraf can start plant in Japan to meet rise in
demand. If there is major change in exchange rate it will be matter of concern and effective steps will be required to take
to minimize costs. For example, if exchange rate reduces in country where plant is situated, costs increases.
Another way, it would be wise to retain capacity and capabilities throughout the entire supply chain
so that production can be diverted as currencies move against each other.
 QUESTIONS AND ANSWERS
3)Is there any plant for which it may be worth adding a
million kgs of additional capacities at a fixed cost of $3
million oƒ year?

India looks most cost effective plant for Biopharma Inc. This plant has lowest variable and
associated fixed cost as well as chemical costs. As it is said plant has not latest technology
and advanced equipment but if some money is invested it can provide better output to feed
Asian market. When Japan plant is idle it can use single product produce by Germany. If
capacity in Asia is increased there won’t be requirement of shipping chemical product from
Europe. Thus, additional plant capacity in Asia would surely lead to profits which will be cost
effective.
 QUESTIONS AND ANSWERS
4) How are your recommendations are affected by the reduction
of the duties .

Import duties are higher in Latin America, Mexico and Asia w/o Japan where there is lower
production and supply rate. On the other side, duties are lower in US, Japan & Europe are
lower where production and supply rate are higher. It can be concluded that there won’t be
any effect of reducing duties where production network is lower and that won’t be affected
either change of duties.
 QUESTIONS AND ANSWERS

5)The analysis has assumed that each plant has 100% yield.
How would you modify your analysis if the yield varies?

If percent output of acceptable quality decreases, it will lead to loss of production
and in term increased cost. Similarly, if the percent output of acceptable quality
increases, it will lead to increase profit due to lesser non qualities and lesser
material requirements. The increase in non-quality will require more material and
which will increase cost. Thus, yield of acceptable quality is inversely proportional to
production cost.
Another approach would be to leave capacity as stated but adjust the amount shipped
down by the scrap percentage.
 QUESTIONS AND ANSWERS

6)What other factors should be accounted for while making

your recommendations?

Individual country’s economic growth and government schemes.

Mutual trade and business environment within countries and continents.
Industrial growth in individual country and plant location.
Labor law and wages all around plant locations.
Crude and non-conventional raw material prices.
Sales and marketing team and their analysis for future scope.