Strategic supply chain optimization for the pharmaceutical industries

Pharmaceutical companies are undergoing major changes to cope with the new challenges of the modern economy. The globalization of the business, the diversity and complexity of new drugs, the increasing tightness of capital, and the diminishing protection provided by patents are some of the factors driving these changes. All stages of the business value chain are affected: from the development of new drugs to the management of the manufacturing and marketing networks. This paper describes an optimization-based approach to selecting both a product development and introduction strategy and a capacity planning and investment strategy. The overall problem is formulated as a mixed-integer linear programming (MILP) model. This takes account of both the particular features of pharmaceutical active ingredient manufacturing and the global trading structures. An illustrative example is presented to demonstrate the applicability of the proposed model.