Improvement of material supply systems : A case study in a Swedish pharmaceutical company executed on a research and development plant

Abstract: Material supply systems have for a long time been regarded as an important function with strong potential to increase the performance of companies in different industries. Consequently, substantial research has been conducted in the field. However, in the pharmaceutical industry within research and development plants, material supply systems have historically not been a prioritized function. Therefore, there is a research gap regarding material supply systems in that peculiar context. This study aims to fill that gap by investigating how a material supply system could be designed and which factors are critical to achieve a cost-efficient service level within a research and development plant in the pharmaceutical industry. To do so, a single case study has been conducted at a Swedish pharmaceutical company’s research and development plant. An abductive approach has been applied to both test if the general design principles developed in other industries and business functions can be applied to this context. Further, context specific factors affecting the material supply system design needed to be identified and investigated to adapt the general design principles to the specific context by generalizing data. The empirical data was collected by utilizing focus groups, interviews, observations and documents. The findings yielded that there is a substantial potential for improvement of material supply systems within the context of this study. The existing decentralized inventory structure at the case company was a particularly vital aspect that hindered the system from operating cost-efficiently in relation to the service level and a centralization is crucial to improve. Further, calibration and a general decrease of safety stocks, order points and order quantities is essential to uphold a consistent service level at a justifiable cost at the case company. The general design principles and formulas retrieved from the theoretical framework was partly applicable in the context of this study but needed some adjustments. Especially the low volume articles with high variety in consumption rate was not suitable to be managed by the existing methods and needed another approach. Further, the context establishes high requirements on system dynamics, it comes with boundaries due to laws regulating the industry, and companies in the context generally need to be better at aligning their design factors to the purpose. The result of this study adds valuable content to the research field and fills the gap for material supply systems in the context of research and development plants in the pharmaceutical industry. Further studies are needed in this field to investigate how articles with low and varying demands can be managed within material supply systems cost-efficiently and with high service levels.