The Veroxide Group (VG) manufactures a range of pharmaceutical products, namely, prescription drugs and human vaccines. VG have their headquarters in Berne, Switzerland, a research and development unit in Stockholm (Sweden) and manufacturing sites in Leeds (England), Pretoria (South Africa) and Berne. In the past year, R&D spending rose 3.9%, equivalent to 17.3% of core business sales. There are a number of potential new products in the pipeline but ‘Zentonex’ is widely anticipated to receive regulatory approval in six months time.

 

VG have located their production buying operation in Leeds, but it may be noted that the R&D unit have their own buying function. There is a little contact between the two buying functions, mainly because the R&D Director insists that he is the custodian of his budget. When a drug goes into mass production, much larger quantities of feedback are required.

 

When ‘Zentonex’ enters production, one of the feedstock items is ‘Onolun’, a special chemical. To meet the forecasted production scheme, 2 tonnes will be required every three months. This chemical has been supplied to VG by Gardners Ltd. who produces it in their Birmingham (England) manufacturing plant. Gardeners have been a regular supplier to R&D unit for five years and have impeccable delivery and quality performance. Gardeners have three competitors located in Brazil, Canada and France. VG plan to make

‘Zentonex’ in their Pretoria location.

 

Anne Fortescue, the VG Buying Director, commissioned a report on Gardner’s ability to manufacture and supply ‘Onolun’. The salient extracts from the report are:

 

‘Buying is done by an untrained buyer who takes instructions from the plant director. Buying is an unsophisticated operation and would require three key suppliers for feedstock to ‘Onolun’. These suppliers can manufacture the quantities required and to the quality standards. The quality management is excellent, and we have complete confidence in this aspect.

 

It became evident that Gardner will need to invest $500,000 in new plant and equipment.

 

They have not planned this expenditure and would need to extend their bank overdraft to fund the purchase. The lead time to purchase, install and commission the new facility would be 18 weeks. The Chief Engineer would take accountability for the project, including procurement.

 

The feedback is shelf life restricted (seven weeks), and so the supply chain and inventory management will be critical. The accountability for this is with the stores manager. This causes us serious concern and is identified as a major risk.

 

If VG sign a contract with Gardners, there will have to be a commitment to supplier development. This is our key recommendation.

 

 

Task

 

If you were Anne Fortescue, what would you identify as the key features of a supplier development programme in the above circumstances?