Evaluating the Supply Chain in Emerging Markets - Pharmaceutical Technology

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Evaluating the Supply Chain in Emerging Markets
The article examines pharmaceutical market growth, company positioning, and the innovation potential in emerging markets. Read this and other preferred organization articles in this special issue.

Pharmaceutical Technology
Volume 35, pp. s47-s51

Benchmarking the supply chain

The increased interest in emerging markets also is reflected in companies' need to expand their supply organizations in those markets. CAPS Research, a joint research initiative between the Institute for Supply Management and the W.P. Carey School of Business at Arizona State University, recently conducted a benchmarking study to evaluate supply management and supply-management organizations in emerging markets among pharmaceutical companies. For purposes of the survey, supply management includes sourcing, procurement, purchasing, and other functions assigned to the organization's supply-management group. The study is part of the 2010 CAPS Research Pharmaceutical Industry Supply Management Performance Benchmarking survey, which examined topics selected by a group of pharmaceutical industry supply-management executives. The survey on emerging markets was conducted in July 2010, and the results were released in August 2010.

Presence in emerging markets The survey found that almost half (45%) of the respondents have supply-management organizations physically located in emerging markets. Of those companies with supply-management organizations in emerging markets, all of them (100%) had organizations physically located in Asia (less China), Brazil, China, Eastern Europe, and India. Eighty percent of the respondents had supply-management organizations each in Mexico, the Middle East/Turkey, and Russia. Twenty percent had supply-management organizations in other regions, which include Africa or Southeast Asia.

The survey examined the degree to which companies had supply-management full-time equivalents (FTEs) physically located in emerging markets. For those companies with supply-management organizations physically located in emerging markets, 80% each had supply-management FTEs physically located in Asia (less China), Mexico, the Middle East, and Russia and 100% had supply-management FTEs locate each in Brazil, China, Eastern Europe, and India. Twenty percent had FTEs in Africa.

Change in leadership. The survey also examined the level of change given to supply-management leadership in select emerging markets to source and procure goods and services locally or regionally during the past year. The survey ranked the level of change on a scale of 1 to 7, where 1 represented no change, and 7 represented significant change. The level of change was moderate, ranging from a value of 3.20 in India to a value of 4.80 in China. The results were as follows: Asia (less China), 3.80; Brazil, 3.80; China, 4.80; Eastern Europe, 3.6; India, 3.20; Mexico, 3.25; Middle East/Turkey, 3.20; and Russia, 4.00.

Growth in emerging markets. The survey also examined to what degree pharmaceutical companies except supply-management growth in emerging markets during the next three years. The survey found that 80% of respondents plan to increase their supply-management organizations in emerging markets during the next three years. A majority of respondents (60%) anticipate this growth being 10% or less. Twenty percent anticipate growth of 11 to 20%, and 20% anticipate higher growth of 21–30%.

Innovation potential

Emerging markets, particularly China and India, are expected to raise their position in overall economic innovation. According to the results of a survey of 6000 respondents in six countries conducted by AstraZeneca and released in December 2010, China is expected to become the world's powerhouse of innovation over the next decade, eclipsing the United States and Japan. The survey showed that China will be the most inventive country by 2020, followed by India. The US and Japan will be relegated from first and second place to third and fourth, respectively. Thirty percent of survey respondents currently ranked the US most innovative, followed by Japan (25%) and China (14%). However, when asked which country will be the most innovative by 2020, China which was projected by 27% of survey respondents to overtake the US as the most innovative economy. India was ranked second, (17%), followed by the US (14%), and Japan (12%). More than half of those surveyed in China and India thought their home countries would be the most innovative in the world by 2020 (57% and 56%, respectively). Americans were also optimistic with 28%, believing their country would hold this position.


Given the market potential of emerging markets, combined with slowing pharmaceutical industry growth in established markets in the US and Western Europe, emerging markets will continue to be an important cog in the growth strategies of the pharmaceutical majors. These strategies entail investing in internal development and manufacturing, partnering with domestic companies, and building supply-management organizations in emerging markets.


1. P. Van Arnum, Pharm. Technol. 34 (8), 32–38 (2010).


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