PeriGrow’s Assurance Team Addresses Inventory Consolidation for a Global Biopharmaceutical Company
Largest biopharmaceutical group in India (100,000 + Manpower; B2B – Organized Sector) witnessed increased distributor price difference claims due to a change in the product prices enabling Distributors to be eligible for credit notes on the inventory in hand.
Why PeriGrow: Due to PeriGrow’s national presence, a physical verification of inventory at 37 large distributors across India was conducted on the same day and a consolidated report was presented to the management. The consolidated report became the basis of issuing the credit notes.
Service Offered: Inventory Consolidation; Audit; Reporting excellence
Actionable Strategy: A dedicated team designed the inventory verification process and consolidated reports to assist the management track the inventory on which the credit notes were eligible.
Sustainable Results: PeriGrow team discovered certain practices by distributors that could have led to a higher amount of credit notes being claimed. PeriGrow helped the company reduce the expected amount of credit notes by 30%.
India is a geographically diverse country with extreme climates that make distribution a critical function. The main hurdles include the highly fragmented nature of the distribution network, limited advancement in regulatory reforms, and presence of strong resistance from lobbies of traders involved in the supply chain of pharmaceutical products. In older times, pharmaceutical companies used a different distribution system, in which they established their own depots and warehouses that now have been replaced by clearing and forwarding agents (CFAs) and distributors.
Because pharmaceutical companies do not have direct access to retailers’ data on sales (tertiary sales), most pharmaceutical companies depend on distributor’s sales data. The primary sale involves transferring stock from the central warehouse to its CFA / distributor. The medical representatives are given predefined sales targets and to meet these targets they push inventory on the distributor to levels that exceed the actual demand. When the next level of sale does not take place, the distributor will either return goods to the company or the stock expires. The distributor, in turn, after 30–45 days (a typical credit or time limit) pays for the products directly in the name of the pharmaceutical company. This creates a gap in accountability thereby burdening the pharmaceutical manufacturer with added financial liability.
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