Supply Chain Blog

FMCG/Pharma S&OP; a healthy obsession?

Posted by Christian Cusworth on Tue, Aug 24, 2010

Reading through commentary and professional opinion on the subject of S&OP, best practice processes, its alignment to ERP etc, it’s pretty clear that raving about the importance of embedding S&OP will always grab popular support and light applause. It’s a little like election hopefuls pledging extra funds to the health service and to lower taxes. I am as guilty as everybody else on this one. The less prominent message seems to be the given that the businesses Order to Cash processes are robust and responsive enough, not only to execute the S&OP plan but to deliver it at low cost and to the maximum level of customer service. Following a week in Central Eastern Europe discussing Supply Chain issues with a number of multinational businesses, I have decided to put down my S&OP drum for a few weeks. (was that a distant hurrah !) – and pick up on some current issues around cash flow and customer service. The following series of blogs will look at some common faults in order to cash processes and how they can end up costing the business far more than first thought if not addressed. Over the coming weeks I will look at some practical solutions that could deliver great results. If any of the below targets touch a nerve – keep track of our updates over the next few days :

  • Providing accurate information to customers (eg delivery / availability)
  • PCO/CCFOT or equivalent order fulfilment/case fill KPI improvement
  • Invoicing accuracy & timeliness (working capital benefit)
  • Clear definition of internal roles and responsibilities across the OTC process
  • Transport cost reduction
  • Streamlined Order capture and more efficient working
  • Sales force automation
  • Organisation re alignment (automation / improved ERP utilisation / freeing up time for customer focussed activities particularly in sales)

After all business is primarily about customers and cash ?

Order to Cash

Tags: CEE, S&OP, Forecasting & Demand Planning, Order to Cash

OTC Distributor Payment terms in today’s Romanian pharma market

Posted by Lucian Cretu on Tue, Jun 01, 2010

As a representative of an OTC producer in Romania, I would bet that the challenge of 100+ days payment terms set by your Distributers is on your "Top 3 issues" list.

If you have been involved in the Romanian pharmaceutical market for some time surely you have exclaimed more than once "How on earth is this possible?" or "I will not accept this in a million years!". In time, I imagine you have come to accept this as a "house rule" in Romania.

Perhaps the only time fresh attention is paid to this subject is when a new boss arrives and raises the same incredulous questions about the payment terms. In your mid-term plans a targeted decrease in the payment terms would not occur in the first 4 years. (Actually, it is NOT going to change without a completely different approach by all parties.)

Coming back to reality, how did we get to this situation?

Well, there are several reasons:

  • The pharmaceutical market is Rx product driven (approximately 80% of the market), so the rest of the market (OTC) suffers from the rules set by Rx. Pharmacies get payment from the National Insurance House for  reimbursement receipts within 180+30 and Distributors collect the cash and pay you in another 30 days.
  • All the top 20 Pharma Distributors have mixed Rx & OTC portfolios and the majority of them do not use separate invoicing and cash collection for OTC and Rx. Why? Because it is easier to do it like that.
  • For the pharmacies it is also easy to claim that, with the cash they collect from the sales of OTCs and patients contribution to reimbursed prescriptions, they barely manage to stay alive.
Pharma OTC payment terms RomaniaSo, if you want to have your product in the portfolio of a Distributor (AND on the pharmacy shelf AND in the customer shopping basket) you must be able to accept 120-150 days payment terms.

Is this right or are there other options in the market? What is the real payment terms that an OTC producer should demand from Romanian pharmaceutical Distributors? Is this 21 days (like in the FMCG market) or is it 210 days like in Rx?

One thing is for sure, this problem will be with us for some time!

 

Enchange Pharma case studies

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Tags: Route to Market, Pharma, Order to Cash