(graph no.4.g1: various phases of growth of indian...
TRANSCRIPT
CHAPTER 4
DATA COLLECTION & ANALYSIS
The efforts are put to present the data which would highlight the current situation in the domestic
market of Indian Pharmaceutical Industry. To highlight current situation of Indian Pharma
Industry, various data has been collected from various sources.
(Graph No.4.G1: Various Phases of Growth Of Indian Pharma)
This graph indicates the various phases of growth of Indian Pharma Industry since 1970,
took place until today & expected growth by 2020.
(Table No. 4.T1 : Various phases of growth of Indian Pharma)
PHASE PERIOD DEVELOPMENTAL PARTS
I Prior to
1970
Dominated by MNCs. Indian Patent Act absent. Indian Pharma
companies absent.
II 1970 Government control started. Indian Patent Act came into
existence. Drugs prices capped. Indian companies started
improving.
0
0.05
0.1
0.15
0.2
0.25
0 1 2 3 4 5 6
Y-Values
Y-Values
III 1980 Process development started. Production Infrastructure started
initial phase. Exports of drugs started from India.
IV 1990 Rapid expansion of domestic market. Research orientation.
V 2000 Innovation & research. New Indian Patent Act. Discovery
research. Contract research & manufacturing services.(CRAMS)
VI 2010 &
onwards
Clinical Trials. Bio-technology. Drugs discovery. Quality &
Regulatory has received immense attention. India is a forerunner.
(Table No. 4.T2: Indian Pharma Industry Domestic market-2014,Source: AIOCD, MIR,
2014)
Rank
No.
Name of the
company
Sales Value
for 2014
Rs.Crs
Domestic
market
share %
Domestic
market
growth
%
Commercial or
Materials
deptt. Located
at
1 Abbott Group * 5136 6.19 6.9 Mumbai
2 Sun Pharma 4524 5.45 15.3 Mumbai
3 CIPLA 4142 4.99 11.4 Mumbai
4 Zydus (+ biochem) 3604 4.34 8.7 Ahmedabad
5 Ranbaxy 3059 3.69 10.7 Delhi
6 Mankind 2991 3.60 12.5 Delhi
7 Alkem 2912 3.51 11.1 Mumbai
8 Glaxo Smith Kline * 2780 3.35 -4.0 Mumbai
9 Lupin 2767 3.33 12.2 Mumbai
10 Pfizer * 2472 2.98 12.7 Mumbai
11 Macleods 2406 2.90 26.6 Mumbai
12 Emcure (+zuventis) 2218 2.67 7.4 Pune
13 Intas 2179 2.63 15.9 Ahmedabad
14 Aristo Lab 2068 2.49 18.3 Mumbai
15 Sanofi * 2065 2.49 5.8 Mumbai
16 Torrent 1863 2.24 10.5 Ahmedabad
17 Glenmark 1820 2.19 15.2 Mumbai
18 Dr. Reddys 1755 2.11 9.0 Hyderabad
19 Micro Lab 1637 1.97 8.8 Bangaluru
20 U S Vitamins 1610 1.94 16.9 Mumbai
21 Ipca Lab 1478 1.78 18.6 Mumbai
22 Novartis * 1159 1.40 1.6 Mumbai
23 Alembic 1127 1.36 11.5 Mumbai
24 Wockhardt 983 1.18 1.7 Mumbai
25 FDC 839 1.01 5.2 Mumbai
26 MSD
(+FULFORD)*
822 0.99 15.3 Mumbai
27 Unichem 803 0.97 6.3 Mumbai
SUB TOTAL 61219 73.75
Indian Pharma
Total Market
83009 100.00 10.2
• The asterisk * marked are Multinational Companies.
• There are 27 top companies, contributing to 73.75% of Domestic Pharma Market.
• Overall Indian Market, for the year 2014, has grown to the extent of 10.2%.
• Out of 27 top companies, MNCs are 6. (Abbott, Glaxo,Pfizer,Sanofi,Novartis and
MSD group).
• MNCs share is 17.40% out of 73.75% of Domestic market.
• Indian Pharma companies which are innovative, are doing well and indicating
double digit growth—Sun Pharma, Mankind, Lupin, Macleods, Intas, Aristo,
Glenmark, U S Vitamin, Ipca Lab.
The above data clearly indicates that Indian Pharma Companies are doing extremely well
as compare to Multinational companies. Even, Indian Companies are showing a better
growth than MNCs. Hence for sustainability and maintaining growth factor, “Cost
Reduction” cannot be ignored.
4.2 MARKET SHARE OF MNCs & INDIAN COMPANIES IN THE
PHARMACEUTICAL INDUSTRY IN INDIA.
(Table No.4.T3 –Source: ORG 1978 & AIOCD, MIR 2013 & 2014)
Year MNCs % INDIAN %
1970 68 32
1978 60 40
1980 50 50
1991 40 60
1998 32 68
2004 23 77
2012 28.7 71.3
2013 27 73
2014 26.08 73.92
The above data clearly indicates, that, Indian Companies market share has gone up,
since,1980 and has been growing slowly but surely. Since 2013, the market share has
remained more or less constant.
Indian Pharma prices are lower than MNCs. More “Generic Products” are introduced,
affordable to common man of India. Quality and infrastructure of Indian Pharma is also
improved.
4.3 SALES FOR DIFFERENT THERAPEUTIC DRUGS FOR THE
YEAR 2014.
(Table No. 4.T4- Source: AIOCD/AWACS, MIR 2014)
Rank
No.
Therapeutic super group. Value of sales in
crs. For the year
2014
% of
share to
total
IPM
% of
growth
for the
year
2014
1 Anti-infective 13,272 15.98 6.0
2 Cardiac 10,363 12.48 10.7
3 Gastro-intestinal 9,534 11.48 11.40
4 Vitamins/Nutrients 7,537 9.08 11.10
5 Respiratory 6,481 7.81 10.4
6 Anti-diabetic 6,278 7.56 21.3
7 Pain/ Analgesics 5,912 7.12 9.3
8 Neurological/Central
nervous system
5,064 6.10 8.2
9 Dermatological 4,772 5.75 16.1
10 Gynecological 4,209 5.07 5.1
SUB- TOTAL 73,422 88.43
11 OTHERS 9,588 11.55
12 TOTAL IPM 83,009 100.00 10.2
• There are in total 20 different Therapeutic drugs made for convenient purpose,
considering the broad view.
• Out of 20 different therapeutic groups, 10 top groups contribute to the extent of
88.43% of the Indian Pharma Market (IPM), worth Rs.73,422 crs.
• The balance 10 groups contribute to the extent of 11.55% of IPM, worth Rs.9588
crs.
• It is worth noting that Anti-Diabetic group is growing by 21.3% and Cardiac by
10.7%. Both the groups are categorized as CHRONIC.
4.4 TOP 20 BRANDS OF INDIAN PHARMA MARKET
(Table No. 4.T5- Source: AIOCD/AWACS MIR, 2014)
Sr.No. BRAND COMPANY Major contents in brand Sales
Rs.Crs.2014
1 Mixtard Novo Human premix 387
2 Augmentin GSK Amoxycillin+clavulanic 285
3 Glycomet
GP
USV Glimeperide+Metformin 279
4 Monocef ARISTO Ceftriaxone 248
5 Becosules PFIZER Vitamin B complex 238
6 Corex PFIZER Chlorpheniramine+codeine 222
7 Volini RANBAXT Diclofenac 221
8 Revital RANBAXY Ginseng 220
9 Clavam ALKEM Amoxycillin+clavuanic 213
10 Lantus SANOFI Glargine 208
11 Dexorange FRANCO Ferrous combination 198
12 Liv 52 HIMALAYA Hepatic 181
13 Manforce MANKIND Sildenafil 178
14 Betadine WIN-MEDI Povidone-iodide 177
15 Galvus met NOVARTIS Vildagliptin+metformin 177
16 Skinlite ZYDUSCADILA Hydroquinone combin 173
17 Aciloc CADILLA Ranitidine 167
18 Taxim ALKEM Cefotaxim 162
19 Taximo ALKEM Cefixim 162
20 Moxikind
CV
MANKIND Amoxycilin+Clavulanic 161
• Top 10 brands have crossed Rs. 200 Crs.
• Next top 10 brands have more than Rs.100 Crs sales.
• Out of top 20 brands, 6 brands are of MNCs.
• In top 10 brands, 2 brands each are of PFIZER & RANBAXY
4.5 Top 15 Global Pharma Companies by Revenues of 2014.
(Table No. 4.T6-Source: Fierce Pharma news letter dt. 19.5.2015)
2014
Rank
2013
Rank
COMPANY 2014
Revenue $
2013
Revenue $
% Growth
Billion Billion
1 7 Johnson & Johnson 74.331 71.312 4.23
2 2 Novartis 57.996 57.335 1.11
3 3 Roche 49.86 48.53 2.74
4 1 Pfizer 49.605 51.584 -3.84
5 5 Sanofi 43.07 42.08 2.35
6 4 Merck 42.237 44.033 -4.079
7 6 Glaxo Smith Kline 37.96 41.61 -8.77
8 8 AstraZeneca 26.095 25.711 1.493
9 17 Bayer 25.47 24.17 5.10
10 - Gilead Sciences 24.474 10.804 126.53
11 11 Teva 20.27 20.314 -0.216
12 12 Amgen 20.063 18.676 7.43
13 10 AbbVie 19.96 18.79 6.23
14 9 Eli Lilly 19.615 23.113 -15.13
15 14 Bristol-Myers
Squibb
15.879 16.385 -3.088
1. Johnson & Johnson, Novartis, Roche, Pfizer have headed up the rankings for last
couple of years, albeit in varying order.
2. For the first time, “Gilead Sciences”, a biotech company has been ranked 10th, with
skyrocketing sales of $ 24.474 billion. Growth of 126.53%, over the last year.
3. Teva a well-known company as “Generic Company” has struk $ 20.3 billion in
revenue.
4. De-growth is indicated by Pfizer, Merck, GSK, Teva , Eli-Lilly & Bristol Myers
Squibb.
5. Well -known companies are indicating de-growth in last 2-3 years, mainly due to
important products are off-patent. Over & above this the R &D products line is getting
dried up.
This is an opportunity for the Indian Pharma Industry to come up speedily in
Generics, especially for off-patented products and also discover new products.
4.6 EXPORTS OF PHARMACEUTICALS
1. The major players of Indian Pharma Market export API (Bulk Drugs) and
Formulations to both regulated and unregulated market. The larger exporters are
Ranbaxy, Glenmark, CIPLA, Sun Pharma, Lupin, IPCA, Wockhardt etc.
2. The exporters like Aurobindo Pharma, Shasun, Orchid,Hetetro Drugs, Neuland, Divis
& Ind-swift are specialized in bulk-drugs manufacturing and they do export to regulated
and unregulated markets.
3. India exports to 200 countries the pharmaceuticals products.Pharma exports is growing
at a compounded annual growth of 22%.
4. Out of total exports, US exports accounts for 28%, followed by 18% to EU and 17% to
South Africa. Almost 63% of Pharma exports is to these three countries.
In order to increase Exports, the organization has to remain competitive in terms of
QUALITY and PRICE. To sustain, it is obvious, that, organizations focus on
“cost reduction”. Reduction in cost without impairing the Quality is a difficult job.
This can be certainly be achieved, by using tools and techniques of cost reduction.
Many organizations practice them regularly.
Of course, while achieving the reduction not only Materials Department is valuable,
but other departments like R & D, Production, and Human Resources are equally
valuable and organization needs to focus their importance and efforts in that
direction. No doubt, Materials Department can contribute a lot, since they spend
organization’s money for procuring Materials of various needs, Equipment etc.
(Graph No.4.G2: Indian Pharma Market-Growth in future-Mckinsey report)
(Source- McKinsey Report: Sept.2014)
4.7 FUTURE GROWTH OF PHARMA INDUSTRY
• Indian Pharma Market is set for “above average” growth.
• Currently Indian Pharma Market is having its market share in the pattern of
72% Generic, 9% OTC products, and 19% Patented.
Organizations moving to leadership need to focus on 3 factors—
(1) Launch more innovative products and not “Me Too” products.
(2) Enhance channel management, enhance merchandising capabilities i.e. efficient
and effective distribution, retailing and logistics.
(3) Cost Reduction is one of the ways and need, in today’s context to improve
efficiency and effectiveness.
(4) Inventory control, Return management, Warehousing, Third party logistics
(3PL), Transportation, Reverse logistics are the crucial areas and Grey areas where
cost reduction can be captured with concerted efforts.
0
10
20
30
40
50
60
70
80
2009-USD 12.6 bln 2012-USD 35 bln 2020-USD 55 bln 2025-USD 70 bln
Series 1
Series 2
Series 3
4.8 HYPOTHESIS TESTING
[I] H0: Use of tools and achievement of Cost reduction are independent of
each other.
To test this hypothesis following questions from Questionnaire were taken into consideration.
Part B: Cost Reduction: Q. 4
Part E: Other departments: Q.2
From Part B , average cost reduction achieved during 2011-12 and 2012-13 in the slabs “Upto
Rs.5 Crs”, “Rs.5-10 Crs”, “Rs.10-15 Crs”, and “aboveRs. 15 Crs” by companies were
considered.
In part E the various options were classified into tools and techniques. The table of tools was
as follows
(Table No.4.T7 : Tools used for cost reduction)
Sr. No. Tools
1. Cause & Effect
2 Pareto Law
3 Control Charts
4 Brainstorming
5 Why? (5Times)
Responses to above tools were in ranks according to priority. Top priority (Ranks 1to 5) were
considered.
Two way tables were constructed showing frequencies as number of factories as follows.
Title: Distribution of organizations according to Cost reduction achieved and Tools used
to achieve cost reduction.
(Table No. 4.T8: Tools used & cost reduction achieved)
Cost
reduction
achieved
Tools used to achieve cost reduction
Cause &
Effect
Pareto Law
Control
Charts
Brainstorming
Why?
(5Times)
Upto 5 Crs 5 4 1 4 2
5-10 Crs 2 2 - 2 -
10-15 Crs 1 1 1 1 -
above 15crs. 5 3 - 1 1
Independence of attributes “Use of tools” and “Achievement of Cost reduction” was tested
using Chi-square test.
To apply Chi- square test the above table was reduced to 2X2 table by grouping adjusting rows
and columns. Thus the Observed Frequencies[O] were as given below.
(Table No. 4.T9: Frequencies used for cost reduction tools)
Cost reduction\Tools used
9 7
14 6
( Table No. 4.T10 :Table of Expected frequencies for the cost reduction tools.)
Cost reduction\Tools used
10.22222 5.7777789
12.77778 7.222222
The Chi-Square Statistic was calculated by the formula ∑[(O-E)^2/E]
The level of Significance used was 5% Degrees of Freedom: 1
Critical Value: 3.841459 Test statistic value: 0.72842809
Decision: Since Calculated Value < Critical Value
H0 is accepted.
Conclusion: Use of tools and achievement of Cost reduction are independent of each other.
[II] H0: Use of Techniques and achievement of Cost reduction are independent of each
other.
To test this hypothesis following questions from Questionnaire were taken into consideration.
Part B: Cost Reduction: Q. 4
Part E: Other departments: Q.2
From Part B , average cost reduction achieved during 2011-12 and 2012-13 in the slabs “Upto 5
Crs”, “5-10 Crs”, “10-15 Crs”, and “above 15 Crs” by companies were considered.
In part E the various options were classified into tools and techniques. The table of Techniques
was as follow:
(Table No.4.T11: Table of techniques used for cost reduction)
Sr. No. Techniques
1 P D S A
2 Six Sigma
3 T Q M
4 T P M
5 Analysis of Variance
(ANOVA)
6 Benchmarking
7 KAIZEN
Responses to above Techniques were in ranks according to priority. Top priority (Ranks 1to 5)
were considered. Two way tables were constructed showing frequencies as number of factories
as follows.
Title: Distribution of organizations according to Cost reduction achieved and Techniques
used to achieve cost reduction. (Table No. 4. T 12)
Cost
reduction
achieved
Techniques used to achieve cost reduction
P D S A Six
Sigma
T Q M T P M
Analysis
of
Variance
(ANOVA)
Benchmarking KAIZEN
Upto 5 Crs 1 1 2 3 2
5-10 Crs 1 1 1
10-15 Crs 1 1 2 2
above 15
Crs
3 3 1 4
Independence of attributes “Use of Techniques” and “Achievement of Cost reduction” was
tested using Chi-square test.
To apply Chi- square test the above table was reduced to 2X2 table by grouping adjusting rows
and columns. Thus the Observed Frequencies [O] were as given below.
Table of Observed frequencies for techniques used for cost reduction. (Table No.4.T13)
Cost reduction\Techniques
used
6 6
8 9
Table of Expected frequencies for techniques used for cost reduction.(Table No. 4.T14)
Cost reduction\Tools used
5.793103 6.206897
8.206897 8.793103
The Chi-Square Statistic was calculated by the formula ∑[(O-E)^2/E]
The level of Significance used was 5% Degrees of Freedom: 1
Critical Value: 3.841459 Test statistic value: 0.02436975
Decision: Since Calculated Value < Critical Value
H0 is accepted.
Conclusion: Use of Techniques and achievement of Cost reduction are independent of each
other.
[III] H0: Behavioral pattern of employees and efforts put by the management are
independent of each other.
To test this hypothesis following questions from Questionnaire were taken into consideration.
Part D: Motivation: Q. 8 Part D: Motivation: Q.9
Responses to above Techniques were in 0’S AND 1’S according to applicability.
Two way table was constructed showing frequencies as number of factories as follows.
Title: Distribution of organizations according to HIDDEN factors at “Organizational level
“affecting cost reduction and HIDDEN factors at “Employees level” affecting cost
reduction. (Table No.4.T15)
E\O O1 O2 O3 O4 O5 O6 O7 O8
E1 5 3 4 5 4 3 3 4
E2 4 2 3 4 3 2 3 4
E3 4 3 4 4 4 3 3 3
E4 3 2 2 4 2 1 2 3
E5 4 1 2 5 2 2 2 4
E6 1 1 1 1 1 1 1 1
E7 3 3 3 3 3 4 2 3
E8 2 1 1 2 1 1 1 2
E9 1 1 1 1 1 1 0 0
O: Factors at Organizational level, E: Factors at Employees level
(Table No.4.T16: Hidden factors at employees’ level)
E1 No appreciation
E2 No opportunity to learn
E3 No conducive atmosphere
E4 No enough compensation
E5 No specific training given
E6 Cognitive Dissonance
E7 Discouraged for experimentation
E8 Discrimination
E9 Unfair practices
AND
(Table No. 4. T17: Hidden factors at organizational level)
O1 Absence of proper culture
O2 High Tension Environment
O3 Vague Decisions
O4 Appropriate Policies not in place
O5 Appropriate Policies are in place but not implemented.
O6 Absence of OPENNESS
O7 CRITICISM prevails.
O8 No “role-models” in the organization
Independence of attributes of HIDDEN factors at “Organizational level “affecting cost reduction
and HIDDEN factors at “Employees level” affecting cost reduction were tested using Chi-
square test.
To apply Chi- square test the above table was reduced to 5X4table by grouping adjusting rows
and columns. Thus the Observed Frequencies[O] were as given below.
(Table No. 4.T18: Observed frequencies for hidden factors)
E\O O1 O2 O3 O4
E1 8 9 7 7
E2 6 7 5 7
E3 7 8 7 6
E4 10 13 7 11
E5 13 13 13 10
(Table No.4.T19: Table of Expected frequencies for hidden factors)
E\O O1 O2 O3 O4
E1 7.83908 8.908046 6.948276 7.304598
E2 6.321839 7.183908 5.603448 5.890805
E3 7.08046 8.045977 6.275862 6.597701
E4 10.36782 11.78161 9.189655 9.66092
E5 12.3908 14.08046 10.98276 11.54598
The Chi-Square Statistic was calculated by the formula ∑[(O-E)^2/E]
The level of Significance used was 5% Degrees of Freedom: 12
Critical Value: 21.02607
Test statistic value 1.98792
Decision: Since Calculated Value < Critical Value
H0 is accepted.
Conclusion: Behavioral pattern of employees and efforts are independent of each other.
.
4.9 PART A
1. Number of employees in the organization.
(Graph No.4.G3: Employment in Pharma Organizations under research study)
1. 71% organizations are employing less than 10000 employees, whereas, 29% are employing
more than 10000.
2. General trend in Pharma organization is that
manufacturing 12 to15%, & in R&D 8 to 15%.
3. Talented & well educated employees are available in immense in India for Pharma sector.
Good facilities of Pharma education is the main reason for such availability and employment.
4. However attrition rate is also very high. For some organizations it is to an extent of 33%. HR
policies, culture of the organization, compensation, respect to employees, vision and growth o
the organization matters in controlling an attrition rate.
02 Sales Revenue and Materials consumed:
1. 71% organizations are employing less than 10000 employees, whereas, 29% are employing
2. General trend in Pharma organization is that 60% employees are in the field, followed by
manufacturing 12 to15%, & in R&D 8 to 15%.
3. Talented & well educated employees are available in immense in India for Pharma sector.
cation is the main reason for such availability and employment.
4. However attrition rate is also very high. For some organizations it is to an extent of 33%. HR
policies, culture of the organization, compensation, respect to employees, vision and growth o
the organization matters in controlling an attrition rate.
02 Sales Revenue and Materials consumed: (Graph No.4.G4)
1. 71% organizations are employing less than 10000 employees, whereas, 29% are employing
60% employees are in the field, followed by
3. Talented & well educated employees are available in immense in India for Pharma sector.
cation is the main reason for such availability and employment.
4. However attrition rate is also very high. For some organizations it is to an extent of 33%. HR
policies, culture of the organization, compensation, respect to employees, vision and growth of
• Abbott, GSK (Glaxo Smith Kline) & Sanofi are MNCs in Indian Pharma Industry and
when their ratio of material consumption to Sales Revenue is observed, it would be as
follow:
• Abbott for 2012 is 57.64%, for the year 2013 it is 58.33%. This % is unusually higher
than other organizations mainly due to traded stocks purchased by them is immense, as
compare to other organizations. One reason is their MNC policy to go for outsourcing
and second reason is, they do not have enough manufacturing capacity of their own in
India. Third reason is, manufacturing cost of traded items is incurred too!
• In case of GSK, it is 39.99% & 47.46% for the years 2012 & 2013 respectively.
• In case of Sanofi it is 46.03% and 43.73% for the year 2012 & 2013 respectively.
In general, in Pharma Industry, the materials cost ranges between 35 to 45%.
It also depends upon business models of an organization & therapeutic segments of an
organization. If product-mix is more falling under DPCO, then materials cost would be
higher since profit margin is extremely low. If products are of CARDIAC or
ANTIDIABETIC, then cost of materials is negligible. Hence total product mix, vis-à-vis
0
500
1000
1500
2000
2500
3000
Abbott 2012 Abbott2013 GSK 2012 GSK 2013 Sanofi 2012 Sanofi2013
Series 1
Series 2
Series 3
business of formulations, bulk drugs, intermediates & specialty chemicals matter the
most.
(Graph No.4.G5: Sales revenue & materials consumption)
• Some of the other organizations where ratio of materials consumed against sales revenue
for the year 2013-14 is shown in the above graph.
0
2000
4000
6000
8000
10000
12000
Alembic
13-14
CIPLA 13-
14
Ipca 13-14 Lupin 13-
14
Novartis
13-14
Pfizer 13-
14
Unichem
13-14
Series 1
Series 2
Series 3
• Alembic- 41.56% CIPLA
Lupin Lab- 34.18% Novartis
The materials consumption for the aforesaid organizations is in the range of 33% to 42%.
This is the general trend in the Indian Pharma Industry
This implies the scope of Materials Man
design, early involvement of vendors, negotiations, warehousing, inventory control,
manufacturing, transportation, reverse logistics to distribution
encompassing the entire to & fro flow of m
03. (Graph No.4.G6: Number of
(Table No. 4.T20: Manufacturing units and organizations under study)
Sr.
No.
Organization Number of
manufacturing
units in India
1 Abbott * 2
2 Alkem 9
41.56% CIPLA- 38.71% Ipca Lab- 37.13%
34.18% Novartis- 40.66% Pfizer- 33.45% Unichem
The materials consumption for the aforesaid organizations is in the range of 33% to 42%.
This is the general trend in the Indian Pharma Industry.
This implies the scope of Materials Management for cost reduction right from product
design, early involvement of vendors, negotiations, warehousing, inventory control,
manufacturing, transportation, reverse logistics to distribution among
encompassing the entire to & fro flow of materials.
Number of manufacturing units in India)
(Table No. 4.T20: Manufacturing units and organizations under study)
Number of
manufacturing
units in India
Sr.
No.
Organization Number of
manufacturing
units
8 Lupin Lab 9
9 Novartis * 1
33.45% Unichem-35.04%
The materials consumption for the aforesaid organizations is in the range of 33% to 42%.
agement for cost reduction right from product
design, early involvement of vendors, negotiations, warehousing, inventory control,
among all segments
Number of
manufacturing
units in India
3 Alembic 2 10 Pfizer * 2
4 CIPLA 34 11 Sun Pharma 9
5 Glaxo * 1 12 Sanofi * 1
6 Glenmark 12 13 Unichem 6
7 Ipca Lab 16 14 Wockhardt 8
• It can be observed that organizations that are top in Pharma business in totality including
domestic & exports are having more numbers of units. e.g. CIPLA, Ipca & Glenmark.
This is followed by Sun Pharma ,Alkem etc.
• Organizations having more number of units are having diversified business within the
Pharmaceuticals. Like- Formulations, Bulk drugs, Intermediates, Specialty chemicals,
exclusive units for exports due to technical demands or regulatory needs.
• Indian companies are doing very well in domestic and exports; hence their involvement
in the business is more. They are expanding, entering into new markets & hence
obviously building the capacity.
• MNCs like Glaxo,Pfizer,Novartis, Sanofi and Abbott are having very less units , this is
very much appropriate to the existing business model. MNCs with long term strategy in
mind would not like to create more liabilities. In case they want to wind-up, it becomes
easy to dismantle an operation. Over and above this, one more observation is that, MNCs
have not expanded their business in terms of expansion in manufacturing units. Their
sales revenue has gone up. They manufacture at Indian Pharma Small Scale Units or
sometimes at the top Pharma organizations’ facilities, usually called as THIRD PARTY
LOGISTICS (3PL). This is to avoid operation expenses and no creation of liabilities.
• In India many of the facilities of manufacturing are approved by US-FDA. Current
report say almost 100 units are approved for formulations, bulk drugs and intermediates.
• Along with US-FDA, there are other regulatory like MHRA,UK ; Australia, South Africa
etc. These regulatory have also passed the manufacturing units.
Once regulatory passes manufacturing units, marketing can do it’s export very well.
(Graph No. 4.G7 : Business operations of organizations under study)
4. BUSINESS OPERATIONS:
• Out of sample of 14 organizations, all the organizations are in Domestic formulations.
• All the organizations indicate that, they are also in EXPO
mainly due to their MNC status and global
Quarters in Global.
• Out of 14 only 7 are in bulk drugs domestic business and 6 are in export business as well.
This indicates that all the organizations are not in bulk drugs business, mainly due to R &
D and second reason is viability. MNCs like GSK (Ank
PFIZER (Chandigarh Plant) have stopped business of bulk drugs long time back, due to
Business operations of organizations under study)
BUSINESS OPERATIONS:
Out of sample of 14 organizations, all the organizations are in Domestic formulations.
organizations indicate that, they are also in EXPORT of formulations
mainly due to their MNC status and global policy on exports laid down by their Head
Out of 14 only 7 are in bulk drugs domestic business and 6 are in export business as well.
This indicates that all the organizations are not in bulk drugs business, mainly due to R &
s viability. MNCs like GSK (Ankleshwar plant, Gujarat) and
PFIZER (Chandigarh Plant) have stopped business of bulk drugs long time back, due to
Out of sample of 14 organizations, all the organizations are in Domestic formulations.
RT of formulations, except 2
laid down by their Head-
Out of 14 only 7 are in bulk drugs domestic business and 6 are in export business as well.
This indicates that all the organizations are not in bulk drugs business, mainly due to R &
leshwar plant, Gujarat) and
PFIZER (Chandigarh Plant) have stopped business of bulk drugs long time back, due to
competition with Indian companies & unviability. GSK sold their plant to Gle
back in 2001 and PFIZER
• Intermediates Business--
special technology, prices wise very competitive, have earned reputation in the market for
respective intermediate segment & are LEADERS in the segment
5. NUMBER OF APPROVALS RECEIVED BY ORGANIZATIONS:
(Graph No.4.G8 : Various approvals received by the organizations)
• All the organizations have received
practice of “Good Manufacturing” is
banned to export to US
plant being banned year after year. This is a major blow for
of foreign exchange. Not only that,
for sub-standard supply of drugs.
competition with Indian companies & unviability. GSK sold their plant to Gle
and PFIZER had to dismantle the plant in totality.
very few organizations are active. Organizations who are having
special technology, prices wise very competitive, have earned reputation in the market for
respective intermediate segment & are LEADERS in the segment, sustain for long time.
OF APPROVALS RECEIVED BY ORGANIZATIONS:
(Graph No.4.G8 : Various approvals received by the organizations)
All the organizations have received GMP certification that indicates
practice of “Good Manufacturing” is followed. However many plants from India are
by US-FDA. The statistics indicate an increase
plant being banned year after year. This is a major blow for exports business
hange. Not only that, huge penalty is also paid by some of the organizations
standard supply of drugs. In this, the reputation is also at stake.
competition with Indian companies & unviability. GSK sold their plant to Glenmark way
very few organizations are active. Organizations who are having
special technology, prices wise very competitive, have earned reputation in the market for
sustain for long time.
certification that indicates the minimum
followed. However many plants from India are
indicate an increase in numbers of
business and earning
huge penalty is also paid by some of the organizations
• Some of the Indian Pharma organizations are practicing TQM. None is successful in
receiving “QUALITY” certification as DEMING PRIZE. Main reason is, cultural
change does not take place at top management level and obviously change does not take
place in the whole organization. The efforts put are futile in terms of RETURNS at all
fronts.
• Out of 14 organizations, only 6 organizations are approved for ISO 9000. ISO 9000 series
of standards is generic in scope. This can be applied to SERVICE sector or
MANUFACTURING sector. In simple terms, the standards require an organization to
say what it is doing to ensure quality, then do what it says & finally document or prove
that it has done what it said.
• Many organizations are lacking in the system. We have seen consequences of it –US-
FDA and other regulators have banned some of our Indian Plants. This largely affects
EXPORT business, earning of foreign exchange and moreover reputation. Ultimately, in
Pharma Manufacturing, system matters.
• Out of 14 organizations, only 5 organizations are approved for ISO 14000.International
Organization for Standards (ISO) developed standards for an environmental management
system, which is known as ISO 14000.The standards addressed the process rather than
the end goal. The different standards like- environmental auditing, environmental
performance evaluation, life cycle assessment , environmental labeling, environmental
management systems etc. are covered in ISO 14000.
• ISO 14000 assumes that cultural transformation through employee involvement and
responsibility would occur, from the bottom up rather than dictates from the top. It would
improve environmental performance of planet earth. It would a build a consensus that
there is a need for environmental management system.(EMS).
• Very few organizations have taken up seriously on Environmental Management. There is
a lack in seriousness at corporate level as well as at Government level. Environmental
laws are NOT AT ALL taken seriously, in India.
06.(Table No 4.T21: Therapeutic Segments of Organizations under study.)
Therapeutic Segments of
Organization
Out of 14
companies,
presence of
companies
% of Companies
present in
therapeutic. (Out of
14 companies)
Anti-allergic * 9 64.28571
Anti-Biotics * 14 100
Anti-Malaria 6 42.85714
Anti TB 4 28.57143
Anti-Aids 4 28.57143
Anti-Retroviral 5 35.71429
Auto Immune 2 14.28571
Cardiac * 13 92.85714
CNS * 12 85.71429
Diabetic * 12 85.71429
Dermatology 9 64.28571
Gastrointestinal * 10 71.42857
Gynecological * 11 78.57143
Genetics 1 7.142857
Hormone 7 50
Neutraceuticals 8 57.14286
Ophthalmology 5 35.71429
Oncology 8 57.14286
Pain/Analgesics * 14 100
Respiratory * 11 78.57143
Vitamins/Minerals 10 71.42857
Pediatric 4 28.57143
Veterinary 2 14.28571
Vaccines 1 7.142857
• As per AIOCD-AWACS’s report, the therapeutic segments Of CARDIAC, ANTI-
INFECTIVES, ANTI-DIABETIC, and GYNECOLOGICAL, PAIN/ANALGESICS,
CNS, all the aforesaid therapeutics together share 88% of Indian Market.
• This tallies with above observation. Almost all the organizations are very much in these
therapeutic segments. Their presence in these therapeutic segments indicates that
customers’ needs are met by them. Also, they have share in the majority of the
therapeutic segments.
• Current Indian Market scenario indicates that CARDIAC & ANTI-DIABETIC along-
with CNS (Central Nervous System) are showing growth year after year.
• Organizations concentrating in these sectors are doing very well in terms of revenue and
profits in the domestic market as well as in the exports market.
• Almost all the top Pharma Organizations are in these therapeutic segments and are
concentrating their efforts in R & D for new drugs discovery and new drugs delivery.
07: TECHNOLOGY
A) In your organization procurement is viewed as:
P1: Cost Centre P2: Part of Strategic team
P3: A resource to save money P4: An innovator that impacts all areas of
Business.
(Table No.4.T22: Organizations view procurement from different perspectives)
Sr.
No.
Particulars Number of
respondents
% of respondents
1 Cost Center 4 29%
2 Part of strategic team 2 14.28%
3 Resource to save money 0 0 %
4 An innovator that impacts all areas
of business
1 7.14%
PROCUREMENT IS VIEWED AS:
(Graph No. 4.G9: Organizations look at ‘Procurement’ from different perspectives.)
1. 29% of the respondents view ‘Procurement’ as ‘Cost Center’.
2. 22% of the respondents view ‘Procurement’ as ‘Part of strategic team & a resource to save
money.
3. 14.28% of the respondents view ‘Procurement’ as ‘cost center as well as part of strategic
team’.
4. However, no respondent view plainly ‘Procurement’ as only a source of cost saving.
This implies that an outlook of an industry is changing. Materials management is no more seen
only as cost center but a strategic one, saving resource and an innovator that would impact the
entire organizational aspects.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Series 1
Series 2
Series 3
B) In your organization (INFORMATION)
T1 Very little, processes are still very
T2 Within the department as part of procurement tool kit
T3 Across the organization to all end users
T4 Integrated into all of organizational activities to pr
Value.
(Graph No.4.G10: Technologies “IT” used in procurement is viewed as
36%
7%
7%
Technologies used in Procurements viewed as
T1
(INFORMATION) technology used in procurement:
Very little, processes are still very labor intensive.
Within the department as part of procurement tool kit.
Across the organization to all end users.
ll of organizational activities to provide transparency & drive
(Graph No.4.G10: Technologies “IT” used in procurement is viewed as)
7%7%
7%
0% 0%0%
Technologies used in Procurements viewed as
T2 T3 T4 T1,T2 T2,T4 T3,T4
procurement:
ovide transparency & drive
29%
Technologies used in Procurements viewed as
1. Processes still being very labor intensive- 7%
2. within the department as part of procurement tool kit-7%
3. Across the organization to all end users-29%
4. Integrated into all of the organizational activities to provide transparency & drive value- 36%
5. Partly labor intensive & partly within the department as procurement tool kit-7%
6. Partly departmental & partly integrated into organizational activities-7%
7. Partly across the end users and partly integrated into organizational activities-7%
Indication is 84% organizations are using SAP or any other software, integrating all the activities
of organization and that of Materials Management. This reduces time, efforts, makes work
speedier with accuracy. Also, helps to take correct decision.
In other words, top organizations in Pharma Industry are using latest & sophisticated IT-software
to sustain the competition in the Global Market.
C) Technologies used are :
CT1- ERP CT2- Procurement
CT3- Request for Quotation CT4- Integrated Payment to suppliers
The above observation is being supported by the data collected in this addressed question. The
answers received speak for themselves supporting the above conclusion.
1. 21% are using exclusively ERP. That means all the activities of organization are integrated.
2. 43% are integrated in totality until the payments to the suppliers are made. That means
right from quotation floating, procurement, production, storing, till payments to suppliers are
made being done thru’ IT help. Usually SAP or some other software being used.
3. 36% balance are not in very sophistication but are using customer-friendly software which
may be suitable for their current needs.
This indicates, top Pharma organizations are using latest IT technology to remain & sustain the
competition. This is very positive from business point of view.
(Graph No. 4.G11: Technology used & coverage in process of procurement)
D) Any Comments on technologies?
1.72% respondents are very happy, indicating Excellence and fineness in the software selected
and being used and practiced throughout the organization.
2. 28% respondents are suggesting “need for the improvement”, whereas 7% respondents are
indicating suitability of the software being used.
3. The organizations lacking in the system need to upgrade the IT system to match with the
current scenario and competition in the domestic as well as international market.
technologies?
1.72% respondents are very happy, indicating Excellence and fineness in the software selected
and being used and practiced throughout the organization.
% respondents are suggesting “need for the improvement”, whereas 7% respondents are
indicating suitability of the software being used.
3. The organizations lacking in the system need to upgrade the IT system to match with the
on in the domestic as well as international market.
1.72% respondents are very happy, indicating Excellence and fineness in the software selected
% respondents are suggesting “need for the improvement”, whereas 7% respondents are
3. The organizations lacking in the system need to upgrade the IT system to match with the
on in the domestic as well as international market.
(Graph No.4.G12: Respondents view on IT technology being used in the organization)
Part B : COST REDUCTION
Q.1. Do you take specific goals for Cost reduction at corporate level every
All the companies i.e. 100% take specific goals for Cost reduction at corporate
Level every year.
Q.2. Do you assign specific goals to Materials Department
All the companies i.e. 100% assign
Year .
Q.3. What is the approach of top management towards cost
(Graph No. 4.G 13: Approach of top management based on
(Graph No.4.G12: Respondents view on IT technology being used in the organization)
Part B : COST REDUCTION
Do you take specific goals for Cost reduction at corporate level every year?
the companies i.e. 100% take specific goals for Cost reduction at corporate
pecific goals to Materials Department every year?
All the companies i.e. 100% assign specific goals to Materials Department every
What is the approach of top management towards cost reduction?
h of top management based on strategy for cost reduction)
(Graph No.4.G12: Respondents view on IT technology being used in the organization)
the companies i.e. 100% take specific goals for Cost reduction at corporate
Materials Department every
for cost reduction)
(Graph No. 4.G 14: Approach of t
The above responses recorded indicate the following:
14%
29%
long term
Unstructured
Approach of top management according to
Approach of top management according to process)
The above responses recorded indicate the following:
57%
short term both
Structured
86%
Unstructured
14%
Approach of top management according to
process
(a) Every year all the organizations in Pharma Industry take the goal for cost reduction. This
indicates an importance of the subject matter for each and every organization. No respondent has
denied that goal is not taken.
(b) Every year “specific goals” are given to Materials Department. All respondents have
assertive answer for this. This indicates two important matters, one is goal for cost reduction &
second it is assigned to “Materials Department” for its accomplishment. Materials Department is
no more COST CENTER but is seen as PROFIT CENTER. Many wonders can be achieved by
Materials Department since they spend organization’s purse. 35 to 45% approx. is spent in
procurement of Materials for consumption. This includes money spent for traded items.
There is huge scope for cost reduction and all the respondents are very positive on this
front.
(c) Generally, the approach of management towards cost reduction is long term (57%) & in few
cases it could be long as well as short term also(29%). Very few cases could have only short
term approach (14%).
(d) Most of the respondents have indicated that process of cost reduction is well structured. That
means system, process, accountability, repercussions, reviews, long term effects are well
considered. 86% are in favor of this. In some cases may be, (as per respondents’ view 14%),
unstructured process takes place. In my opinion & with personal experience it is true. This may
be to overcome business exigencies &/or certain steps required to be taken for organization’s
benefits to respond to circumstantial issues.
(e) The approach of top management is never exclusively at business level. This indicates that
only PROFIT-LOSS is not a prime area for cost reduction. This is a very positive and matured
sign of an industry. The corporate level goals are maximum-36%, at exclusively operational
level are 22%, at combined level of corporate plus operational plus business level and other
combination –of corporate& operational level are 21% each.
Q.4. Cost Reduction achieved
(Table No.4.T23: Distribution of Companies according to cost reduction achieved
wise.)
2011-12
Upto 5 Crs. 4
5 -10 Crs 3
10-20 Crs 2
above 20 Crs 4
*(Projected)
(Graph No. 4.G15: Graphical presentation of cost reduction achieved)
A. All the organizations are indicating that, cost reduction is achieved. However, no respondent
was pretty sure on the figures. Many have responded just to answer the question and/or to satisfy
an interviewer, and also to satisfy ego of the respondent.
B. Nevertheless, figures are indication of achievement of cost reduction.
C. One of the respondents was pretty sure on the figure of Rs.20 crs, the reason being they have
appointed a consultant (MNC) in their organization & was requested to restructure the Materials
Department and implement cost reduction program
0
1
2
3
4
5
6
Upto 5 Crs. 5 -10 Crs
Cost reduction achieved by no. of
companies in last 3 years
Distribution of Companies according to cost reduction achieved
12 2012-13 2013-14*
3 3
2 2
4 3
4 6
(Graph No. 4.G15: Graphical presentation of cost reduction achieved)
A. All the organizations are indicating that, cost reduction is achieved. However, no respondent
figures. Many have responded just to answer the question and/or to satisfy
an interviewer, and also to satisfy ego of the respondent.
B. Nevertheless, figures are indication of achievement of cost reduction.
pretty sure on the figure of Rs.20 crs, the reason being they have
appointed a consultant (MNC) in their organization & was requested to restructure the Materials
Department and implement cost reduction program.
10-20 Crs above 20 Crs
Cost reduction achieved by no. of
companies in last 3 years
2011-12
2012-13
2013-14
Distribution of Companies according to cost reduction achieved year
A. All the organizations are indicating that, cost reduction is achieved. However, no respondent
figures. Many have responded just to answer the question and/or to satisfy
pretty sure on the figure of Rs.20 crs, the reason being they have
appointed a consultant (MNC) in their organization & was requested to restructure the Materials
D. Many organizations were keeping CONFIDENTIALITY on the actual figures, however all
were agreeing to accomplishments to the extent of 80 to 90 %.
E. Other than respondents many of the working professionals were not aware of the actual
figures of cost reduction achieved in their own organization itself.
Q.5. How do you ensure that : � Ongoing process � Monthly Review
“Cost Reduction” is achieved � Quarterly Review � Half Yearly
As per determined goals? � Annual Review
On horizontal axis methods were taken. The methods were numbered as follows
1: Ongoing process, 2: Monthly Review 3: Quarterly Review.
4: Half Yearly Review 5: Annual Review
(Graph No. 4.G16 : Review methods adopted to achieve cost reduction)
0
0.5
1
1.5
2
2.5
3
3.5
lNo
. o
f co
mp
an
iese
Observation indicates the methodology adopted by
reduction achievement, in order to ensure that targets are met and
remedies are sought for.
1. 64.28% are in practice of MONTHLY & ANNUAL REVIEW.
2. 35.71% are in practice of QUARTERLY &
3. 50.0% are indicating cost reduction in their organization is
The review process adopted indicates seriousness of top management in taking cost reduction as
“GOAL” and it’s accomplishment.
Q.6: How the “process” of cost reduction
(Graph No.4.G 17: Process of cost reduction)
Approach 1- 57% deploy “Top
various departments/sections/divisions.
Approach 2 -29% deploy “Down
later taken as a consolidated figure for cost reduction.
Observation indicates the methodology adopted by various organizations to review cost
reduction achievement, in order to ensure that targets are met and if required appropriate
64.28% are in practice of MONTHLY & ANNUAL REVIEW.
35.71% are in practice of QUARTERLY & ANNUAL REVIEW.
3. 50.0% are indicating cost reduction in their organization is an “ongoing process”.
The review process adopted indicates seriousness of top management in taking cost reduction as
“GOAL” and it’s accomplishment.
f cost reduction handled for the entire organization?
(Graph No.4.G 17: Process of cost reduction)
57% deploy “Top-Down”. Target taken at corporate level and then delegated to
various departments/sections/divisions.
deploy “Down-Top”. Target is well debated at all the levels/departments and
later taken as a consolidated figure for cost reduction.
various organizations to review cost
if required appropriate
“ongoing process”.
The review process adopted indicates seriousness of top management in taking cost reduction as
organization?
Down”. Target taken at corporate level and then delegated to
Top”. Target is well debated at all the levels/departments and
Approach 3- 7% have responded that the cost reduction is discussed as and when felt & then
tried to implement and achieve.
Approach 4- 7% have the combination of approach 1&2 i.e. Top
This focuses on one important thing that, cost reduction is taken as a ritual and not in casual
form. Approaches could be different but ultimate goals are same.
Q.7- How cost reduction achieved is validated in y
(Graph No.4.G 18 : Methods adopted to validate cost reduction)
Benchmarking
Compare with Target
Compared with previous figure
1. 15% compare cost reduction achieved with target.
2. 7% compare cost reduction achieved with previous figures.
3. 50% compare with target as well as with previous figures.
4. 14% benchmark &/or compare with target.
5. 7% benchmark &/or compare with previous
7% have responded that the cost reduction is discussed as and when felt & then
7% have the combination of approach 1&2 i.e. Top-Down & Bottom
This focuses on one important thing that, cost reduction is taken as a ritual and not in casual
Approaches could be different but ultimate goals are same.
ction achieved is validated in your organization ?
(Graph No.4.G 18 : Methods adopted to validate cost reduction)
Benchmarking – M1
Compare with Target- M2
Compared with previous figure-M3
compare cost reduction achieved with target.
2. 7% compare cost reduction achieved with previous figures.
3. 50% compare with target as well as with previous figures.
4. 14% benchmark &/or compare with target.
5. 7% benchmark &/or compare with previous figures.
7% have responded that the cost reduction is discussed as and when felt & then
Down & Bottom-Up.
This focuses on one important thing that, cost reduction is taken as a ritual and not in casual
6. 7% use any of the combinations.
7. No-one is using EXCLUSIVE method of benchmarking.
The most important matter is “cost reduction” is not done for the sake of doing. It has been
validated. The process of validation would differ from organization to organization & perhaps
case to case. This speaks about seriousness of top management’s approach towards the entire
process of cost reduction done in the organization.
Q.8. What are the major causes your organization is facing to practice cost reduction?
(Please rank 1 to 10 from following priorities. Number 1 is Higher Priority and
Number 10 is lowest Priority) (Please Rank Them according to Priority)
(Table No.4.T24: Rating for major causes forcing organizations to go for cost reduction)
Cause/Rank 1 2 3 4 5 6 7 8 9 10
1 Recent changes in Market Dynamics 8 1 1 2 1 0 1 0 0 0
2 Competition from Generic Drugs
2 3 5 1 3 0 0 0 0 0
3 Increased bargaining power of large customers
0 3 1 1 2 2 1 2 1 0
4 Drugs price control order ( DPCO)
2 3 4 1 0 0 1 0 0 3
5 Reduction of the effective patent Protection
Period of new drugs.
0 0 0 0 3 4 2 2 1 1
6 Patent Expiry of good old drugs.
1 2 0 1 2 1 3 2 0 1
7 Introduction of new & cheaper drugs in market
0 0 2 4 1 2 1 4 0 0
8 Easily Accessible outsourcing
0 1 0 7 2 1 0 2 1 0
9 New Drugs Delivery system
0 0 1 0 1 0 3 1 7 0
10 Introduction of new & more effective Drugs 0 0 1 1 1 2 1 1 0 6
Out of 10 major reasons mentioned above, 5 reasons are conspicuous for practicing cost
reduction.
01- Recent changes in Market dynamics is major reason and 60% respondents have rated it as
number 1.
02- Competition from Generic drugs is other reason & 30% respondents have rated at number
3.
03- Drugs price control order is other reason.
04- Introduction of new and cheaper drugs in market
&
05- Easily accessible cheaper outsourcing is other major reason.
Q.9. What are the tools / techniques used specifically by Materials Department?
(Graph No. 4.G 19A: Tools & Techniques used & preferences)
Data indicates from Graph No 4 G
1. 100% respondents use ALTERNATIVE MATERIALS.
2. 79% respondents use other methods of BRAINSTORMING, CHANGE IN
SPECIFICATIONS WITHOUT AFFECTING QUALITY & CREATIVITY.
3. 86% respondents use CREDIT IMPROVISATION.
(Graph No.4.G19B: Tools & Techniques used & preferences)
4 G.19-A of “Tools and Techniques” that,
ALTERNATIVE MATERIALS.
2. 79% respondents use other methods of BRAINSTORMING, CHANGE IN
SPECIFICATIONS WITHOUT AFFECTING QUALITY & CREATIVITY.
respondents use CREDIT IMPROVISATION.
(Graph No.4.G19B: Tools & Techniques used & preferences)
2. 79% respondents use other methods of BRAINSTORMING, CHANGE IN
Data from Graph 4 G 19-B of “Tools & Techniques” indicate that,
1. 93% respondents use COST PRICE ANALYSIS.
2. 79% respondents use CUTTING DOWN
3. 64% respondents use CUTTING DOWN COST ON STORAGE SPACE.
4. 50% respondents only use ERP system for cost reduction.
5. 79% respondents use IMPORT SUBSTITUTION.
(Graph No. 4.G19C: Tools & Techniques used & preferences.)
of “Tools & Techniques” indicate that,
1. 93% respondents use COST PRICE ANALYSIS.
2. 79% respondents use CUTTING DOWN COSTS ON TRANSPORTATION MODES.
CUTTING DOWN COST ON STORAGE SPACE.
4. 50% respondents only use ERP system for cost reduction.
5. 79% respondents use IMPORT SUBSTITUTION.
(Graph No. 4.G19C: Tools & Techniques used & preferences.)
COSTS ON TRANSPORTATION MODES.
The data from Graph 4.G19-C provides following information:
1. 86% respondents use INNOVATIVENESS.
2. 100% respondents use INVENTORY CONTROL.
3. 71% respondents use INVENTORIES REDUCTION.
4. 29% respondents use hike in SCRAP RECOVERY.
5. 36% respondents use JUST IN TIME.
(Graph No.4.G 19D: Tools & Techniques used & preferences)
provides following information:
1. 86% respondents use INNOVATIVENESS.
2. 100% respondents use INVENTORY CONTROL.
3. 71% respondents use INVENTORIES REDUCTION.
4. 29% respondents use hike in SCRAP RECOVERY.
respondents use JUST IN TIME.
(Graph No.4.G 19D: Tools & Techniques used & preferences)
The received data from Graph No.4
1. 100% respondents use NEGOTIATIONS & NEW VENDORS DEVELOPMENT.
2. 71% respondents use LEAD TIME ANALYSIS & MATERIALS HANDLING.
3. 93% respondents use PACKAGING ECONOMICS.
(Graph No.4.G 19 E: Tools & Techniques used & preferences)
received data from Graph No.4. G19 D illustrates following:
1. 100% respondents use NEGOTIATIONS & NEW VENDORS DEVELOPMENT.
respondents use LEAD TIME ANALYSIS & MATERIALS HANDLING.
3. 93% respondents use PACKAGING ECONOMICS.
(Graph No.4.G 19 E: Tools & Techniques used & preferences)
1. 100% respondents use NEGOTIATIONS & NEW VENDORS DEVELOPMENT.
respondents use LEAD TIME ANALYSIS & MATERIALS HANDLING.
Table 4. G 19-E shows that following ‘T
1. 100% use OUTSOURCING.
2. 86% use WASTAGE CONTROL
3. 79% use STANDARDISATION & VARIETY REDUCTION.
4. 71% use SUPPLIERS’ EARLY INVOLVEMENT.
5. 43% only use TENDERING & VALUE ENGINEERING.
6. 29% only use REVERSE AUCTION.
Q. 10. How would you rate the importance given to creativity in your organization?
E shows that following ‘Tools & Techniques’ are used in a manner:
2. 86% use WASTAGE CONTROL & YIELD IMPROVEMENT.
STANDARDISATION & VARIETY REDUCTION.
4. 71% use SUPPLIERS’ EARLY INVOLVEMENT.
5. 43% only use TENDERING & VALUE ENGINEERING.
ly use REVERSE AUCTION.
How would you rate the importance given to creativity in your organization?
are used in a manner:
How would you rate the importance given to creativity in your organization?
(Graph No. 4.G 20 : Rating ‘Importance of Creativity’ in the organization)
Observation clearly indicates that,
1. 50% Respondents feel that their organization is STRONGLY CREATIVE.
2. 36% Respondents feel that their organization is MODEST CREATIVE.
3. 15% Respondents feel that their organization is MEDIUM CREATIVE.
4. However, no Respondent felt that one’s organization is NOT
Q. 11.How would you rate the importance given to
Your organization. (Graph No. 4. G 21: Rating importance of innovativeness)
(Graph No. 4.G 20 : Rating ‘Importance of Creativity’ in the organization)
Observation clearly indicates that,
that their organization is STRONGLY CREATIVE.
2. 36% Respondents feel that their organization is MODEST CREATIVE.
3. 15% Respondents feel that their organization is MEDIUM CREATIVE.
4. However, no Respondent felt that one’s organization is NOT CREATIVE.
Q. 11.How would you rate the importance given to “INNOVATIVENESS” in
(Graph No. 4. G 21: Rating importance of innovativeness)
VATIVENESS” in
(Graph No. 4. G 21: Rating importance of innovativeness)
1. 43% feel STRONGLY INNOVATIVE is their organization.
2. 21% feel MEDIUM INNOVATIVE is their organization.
3. 36% feel MODEST INNOVATIVE is their organization.
4. No Respondent feels that organization is NOT at all INNOVATIVE !
1. 43% feel STRONGLY INNOVATIVE is their organization.
INNOVATIVE is their organization.
3. 36% feel MODEST INNOVATIVE is their organization.
4. No Respondent feels that organization is NOT at all INNOVATIVE !
PART C: SERVICES
Q.1. How the Procurement of services
(Tick only one)
1. Fully Materials Management Dept.
2. Partly by Materials Management
3. Fully by Administration Dept.
4. Partly by Materials Management
5. Partly by Materials Management,
requires it.
(Graph No. 4.G 22: Mode of practicing ‘Procurement of services’)
From the said details of the Graph, indications are as follow:
A. 56% are having combination of partly MATERIALS MGT., partly by ADMINISTRATION
& partly by CONCERNED DEPT.
B. 29% by fully MATERIALS MGT.
C. 15% are having combination of partly by MATERIALS & partly by ADMINISTRATION.
Fully Materials Management Deptt.
Partly by Materials Mgt & Partly by Administration
Deptt
Fully by Administration Deptt.
Partly by Materials Mgt & Partly by Concerned
Department who requires It.
Partly by Materials Mgt, Partly by Admin & Partly by
concerned Deptts who requires it.
PART C: SERVICES
How the Procurement of services is practiced in your organization?
agement Dept.
Partly by Materials Management & Partly by Administration Dept.
Fully by Administration Dept.
Partly by Materials Management & Partly by Concerned Department who requires it.
ly by Materials Management, Partly by Admin & Partly by concerned Dept.
(Graph No. 4.G 22: Mode of practicing ‘Procurement of services’)
From the said details of the Graph, indications are as follow:
are having combination of partly MATERIALS MGT., partly by ADMINISTRATION
& partly by CONCERNED DEPT.
by fully MATERIALS MGT.
are having combination of partly by MATERIALS & partly by ADMINISTRATION.
Fully Materials Management Deptt.
Partly by Materials Mgt & Partly by Administration
Fully by Administration Deptt.
Partly by Materials Mgt & Partly by Concerned
Department who requires It.
Partly by Materials Mgt, Partly by Admin & Partly by
concerned Deptts who requires it.
4
0
0
2
rned Department who requires it.
artly by concerned Dept. who
are having combination of partly MATERIALS MGT., partly by ADMINISTRATION
are having combination of partly by MATERIALS & partly by ADMINISTRATION.
8
Q.2. How much money is spent on ser
Less than Rs. 100 Crs
Between Rs. 100 Crs to Rs.
Between Rs. 250 Crs to Rs
Between Rs. 500 Crs to Rs
Above Rs. 1000 Crs.
(Graph No.4.G 23: Organization’s
a. 29% are spending less than Rs. 100 crs.
b. 43% are spending between Rs. 100 crs. & Rs.250 crs.
c. 21% are spending between Rs.250 crs.& Rs.500 crs.
d. 7% are spending between Rs.500 crs. & Rs.1000 crs.
e. No Respondent is spending above Rs. 1
Less than Rs 100 Crs
Between Rs 100 Crs to Rs 250 Crs
Between Rs 250 Crs to Rs 500 Crs
Between Rs 500 Crs to Rs 1000 Crs
Above Rs 1000 Crs.
How much money is spent on services by your organization?
100 Crs.
. 100 Crs to Rs.250 Crs
250 Crs to Rs. 500 Crs
500 Crs to Rs. 1000 Crs
(Graph No.4.G 23: Organization’s ‘SPENT’ on services)
29% are spending less than Rs. 100 crs.
43% are spending between Rs. 100 crs. & Rs.250 crs.
21% are spending between Rs.250 crs.& Rs.500 crs.
7% are spending between Rs.500 crs. & Rs.1000 crs.
No Respondent is spending above Rs. 1000 crs.
4
6
3
1
0
Q.3. Do you take specific goals of cost reduction for procuring services?
At Corporate level
At Business level
At Operation level
At Concerned Dept. Level
(Graph No.4.G 24: Levels and cost reduction in services)
A. 30% Respondents take the goals of cost reduction at
B. 29% Respondents take the goals of cost reduction at
C. 26% Respondents take the goals of cost reduction
D. 15% Respondents take the goals of cost
LEVEL.
Q.4. Which method is adopted for procurement of the following services?
(Table No. 4.T 25: Services procured by the organizations on ‘Exclusive’ source basis)
At Operation level
26%
At Concerned
Deptt. level
Do you take specific goals of cost reduction for procuring services?
At Concerned Dept. Level
(Graph No.4.G 24: Levels and cost reduction in services)
. 30% Respondents take the goals of cost reduction at BUSINESS LEVEL.
B. 29% Respondents take the goals of cost reduction at CORPORATE LEVEL.
C. 26% Respondents take the goals of cost reduction at OPERATION LEVEL.
D. 15% Respondents take the goals of cost reduction at CONCERNED DEPARTMENT
d for procurement of the following services?
(Table No. 4.T 25: Services procured by the organizations on ‘Exclusive’ source basis)
Number of Companies
Method
At Corporate level
29%
At Business level
30%
At Operation level
At Concerned
Deptt. level
15%
reduction at CONCERNED DEPARTMENT
(Table No. 4.T 25: Services procured by the organizations on ‘Exclusive’ source basis)
By
Outsource
1
By
Materials Mgt.
2
By
Other
3
Unit A MANUFACTURING
1. Services Utilities Supply 2 1 10
2. Utilities Maintenance 3 1 9
3. Machinery Maintenance 3 1 9
4. I / T 2 1 10
Unit B OFFICE
1. Services Utilities Supply 8 2 3
2. Utilities Maintenance 8 1 4
3. Sales Promotion 0 6 8
4. Insurance Service 1 1 12
5. Market Surveys 5 0 9
6. I / T 3 1 9
7. Hotel Booking 1 1 11
8. Air / Bus / Trains Booking 3 0 10
9. Cafeteria 5 1 7
10. General office Maintenance 6 1 6
11. Capital items 1 9 3
12. Stationery & Misc. Purchasing 0 8 5
Unit C LOGISTICS
1. Transportation 7 3 4
2. Clearing & forwarding 9 4 0
3. Warehousing 3 2 9
4. I / T 1 2 10
(Table No. 4.T 26: Services procured by the organizations adopting more than one source)
Number of Companies
Methods jointly
By
Outsource &
Materials Mgt.
1, 2
By
Materials Mgt.
&Other
2, 3
Unit A MANUFACTURING
1. Services Utilities Supply 0 1
2. Utilities Maintenance 0 1
3. Machinery Maintenance 0 1
4. I / T 0 1
Unit B OFFICE
1. Services Utilities Supply 0 1
2. Utilities Maintenance 0 1
3. Sales Promotion 0 0
4. Insurance Service 0 0
5. Market Surveys 0 0
6. I / T 0 1
7. Hotel Booking 0 1
8. Air / Bus / Trains Booking 0 1
9. Cafeteria 0 1
10. General office Maintenance 0 1
11. Capital items 0 1
12. Stationery & Misc Purchasing 0 1
Unit C LOGISTICS
1. Transportation 0 0
2. Clearing & forwarding 0 1
3. Warehousing 0 0
4. I / T 1 0
Observations can be concluded as follow:
A- MANUFACTURING SERVICES (Utilities, Maintenance, I/T etc.)
1. A mere 7% respondents are using Materials Dept.
2. 14 to 21% respondents are using “outsourcing”.
3. 64 to 71% respondents are using other departments.
B- OFFICE SERVICES (Utilities, Maintenance, Sales promotion, Insurance, I/T,
Transportation, Cafeteria, Capital items, Stationery, Hotel booking)
1. 64% respondents are using Materials dept. for CAPITAL ITEMS.
2. 57% respondents are using Materials Dept. for STATIONERY /Misc. items
3. 43% respondents are using Materials Dept. for SALES PROMOTION.
4. For all other services, a mere 7% respondents are using Materials Dept.
5. For INSURANCE, MARKET SURVEYS, I/T, HOTEL booking, TRANSPORT booking
most of the respondents are using other departments. % of respondents vary from 57% to 86%.
C- LOGISTICS (Transportation, C&F, I/T)
1. A mere 14% to 29% respondents are using Materials dept.
2. Outsourcing is preferred for Transportation & Clearing & Forwarding.(50% and 64%
respondents respectively)
3. For warehousing & I/T, other departments are being used and preferred. (64% and 71%
respondents respectively.)
In combination the services are being procured by only “ONE” respondent, perhaps the
reason could be MNC’s policy or to keep minimum two vendors for each service or overall
procurement (more of traded items) is being thru’ outsourcing.
PART D: MOTIVATION
Q.1. How would you rate the efforts taken by Management to motivate employees for cost
reduction in your organization?
(Table No.4. T 27: Ratings for motivation to employees)
Rating No. of companies
1 Excellent 7
2 Very Good 4
3 Good 3
(Graph No. 4.G25: Respondents’ ratings for overall motivation in the organization)
A Excellent rating is given by 50% respondents.
B Very Good rating is given by 28
C Good rating is given by 21.5% respondents.
Efforts taken to motivate employees are being rated from GOOD, VERY GOOD to
EXCELLENT. No respondent has rated either POOR or FAIR.
Q. 2.How would you rate your Organiza
achieve cost reduction as TARGETT
(Table No.4.T 28: Ratings for motivation to employees to achieve cost reduction)
Rating No. of companies
1 Excellent 7
2 Very Good 5
3 Good 2
2
36%
3
14%
A Excellent rating is given by 50% respondents.
B Very Good rating is given by 28.5% respondents.
C Good rating is given by 21.5% respondents.
Efforts taken to motivate employees are being rated from GOOD, VERY GOOD to
EXCELLENT. No respondent has rated either POOR or FAIR.
How would you rate your Organization that employees are good enough motivated to
achieve cost reduction as TARGETTED?
(Table No.4.T 28: Ratings for motivation to employees to achieve cost reduction)
No. of companies
1
50%
14%
Efforts taken to motivate employees are being rated from GOOD, VERY GOOD to
good enough motivated to
(Table No.4.T 28: Ratings for motivation to employees to achieve cost reduction)
(Graph No. 4.G 26: Motivation to employees for achieving cost reduction)
A. 50% of respondents have rated EXCELLENT.
B. 36% of respondents have rated VERY GOOD.
C. 14% of respondents have rated GOOD.
D. Not a single respondent has rated
Organizations are rated high on motivating employees to achieve cost reduction as targeted. This
speaks about the seriousness of Management towards approach on cost reduction.
Q.3 Following could be the reasons for motivating employees fo
“Management Level” do you agree?
(Table No. 4.T :Reasons for motivating employees for achievement of cost reduction at
‘Management Level’.)
Sr.No. Reasons
2
36%
3
14%
(Graph No. 4.G 26: Motivation to employees for achieving cost reduction)
of respondents have rated EXCELLENT.
B. 36% of respondents have rated VERY GOOD.
C. 14% of respondents have rated GOOD.
D. Not a single respondent has rated POOR or FAIR.
Organizations are rated high on motivating employees to achieve cost reduction as targeted. This
speaks about the seriousness of Management towards approach on cost reduction.
Q.3 Following could be the reasons for motivating employees for cost re
o you agree?
(Table No. 4.T :Reasons for motivating employees for achievement of cost reduction at
1
50%
14%
Organizations are rated high on motivating employees to achieve cost reduction as targeted. This
speaks about the seriousness of Management towards approach on cost reduction.
r cost reduction at
(Table No. 4.T :Reasons for motivating employees for achievement of cost reduction at
No. of
Companies
1 Employees are totally involved & their participation is encouraged.
12
2 Employees are specially trained to achieve cost reduction 10
3 Employees are encouraged to generate new ideas.
14
4 Employees are encouraged for collaboration than competition
13
5 Employees are encouraged to learn from problems.
14
6 Employees are being empowered 13
(Graph No. 4.G 27: Reasons of motivation to employees)
Employees are totally involved & their…
Employees are specially trained to…
Employees are encouraged to…
Employees are encouraged for…
Employees are encouraged to learn…
Employees are being empowered
12
10
14
13
14
13
No. of Companies agreed the reason for motivating
employees for cost reduction at “Management Level”
• 100 % respondents agree that Employees are encouraged to generate new ideas.
• 100 % respondents agree that Employees are encouraged to learn from problems
• 93% respondents agree that Employees are encouraged for collaboration than
competition.
• 93% respondents agree that Employees are empowered.
• 86% respondents agree that Employees are totally involved & their participation is
encouraged.
• 71% respondents agree that Employees are specially trained to achieve cost reduction.
Training for cost reduction- may be there is a lot of scope. Possibly all the employees are
not trained to concept, implementation, methods etc.
Participation might not have been taking place to the fullest extent & thus a grey area.
Q.4. Following could be the reasons for employees getting motivated for cost reduction. Do
you agree?
(Table No. 4.T 30: Reasons for employees getting motivated for achievement of cost
reduction at ‘Employees’ level’)
Sr.
No
.
REASONS No. of
Organizati
ons
1 Employees feel that Organization is “Risk Pruned”. (Risk Taking Ability
is good of the organisation.
10
2 Employees feel that Organisation is “Risk Averse”. (Organisation is
not ready to take risk)
4
3 Employees feel that there is Creation of Trust among the employees. 13
4 Employees feel that management demonstrates respect for employees. 13
5 Employees feel that there is appropriate recognition for contribution. 14
6 Employees feel that management has sincere concern for employees. 13
7 Employees feel there is distinct mission taken by mgt.& highly involved. 12
8 Employees feel that there is challenging tasks for them. 12
9 Employees feel that there are values for meritocracy. 12
From the above table it can be safely concluded that
• 100% Respondents feel that Employees feel there is appropriate recognition.
• 93% Respondents feel that Employees feel that there is a creation of trust among
employees & management has respect for employees, also management has sincere
concern for Employees.
• 86% Respondents feel that Employees feel there is distinct mission taken by management
& they are highly involved in that mission, also, employees feel there is a challenging
task & values for meritocracy.
• 71% Respondents feel that Employees feel that organization is “Risk Pruned” however
29% Respondents feel that Employees feel Organization is “Risk Averse”
These are good enough reasons for Employees to get motivated. This also speaks about
organization’s seriousness, sincerity and long term strategy towards Employees
motivation, growth and involvement.
Q.5. Which of the following methods get reflected in “Performance Appraisal” of
an employee in your organization ?
* Actual v/s Target - Performance is validated.
* Financial impact is validated, especially reduction in cost per unit
Or positive change in profitability or any other.
(Graph No.4.G 28: Performance validation-Actual v/s Target)
(Graph No. 4.G 29: Validation of financial impact for performance appraisal)
Even though organizations are motivating Employees for achieving cost reduction, it
seems from above observation that very hardly it gets reflected in Annual Performance
Appraisal.
29% respondents only agree that “Actual v/s Target” is validated & gets r
the Performance Appraisal. 71% have negative answer on this account.
71%
Actual v/s Target
86%
Financial impact is validated
(Graph No. 4.G 29: Validation of financial impact for performance appraisal)
Even though organizations are motivating Employees for achieving cost reduction, it
seems from above observation that very hardly it gets reflected in Annual Performance
29% respondents only agree that “Actual v/s Target” is validated & gets r
the Performance Appraisal. 71% have negative answer on this account.
29%
Actual v/s Target - Performance is
validated.
Yes No
14%
86%
Financial impact is validated
Yes No
(Graph No. 4.G 29: Validation of financial impact for performance appraisal)
Even though organizations are motivating Employees for achieving cost reduction, it
seems from above observation that very hardly it gets reflected in Annual Performance
29% respondents only agree that “Actual v/s Target” is validated & gets reflected in
the Performance Appraisal. 71% have negative answer on this account.
14% respondents only agree that Financial Impact is validated in terms of cost
reduction per unit on Finished Goods. 86% have negative answer to this.
This does not mean validation does not take place. It merely means achievement of cost
reduction is not reflected fully during the performance appraisal. Many organizations feel
that it is obvious contributions from Materials Management.
Q.6. How do your organization acknowledge employees for achievement of cost reduction ?
(Table No. 4.T 31: Acknowledgement to employees and various modes)
Sr.
No.
Method of acknowledging employee’s achievement No. of
Companies
% of
companies
1 Monetary Benefits are given / increase in perks
6
50
2 Promotion 2 14
3
Elevation
5
36
4 Special Awards / Bonus are given. 9 64
5 Certificates of Appreciation are issued. 9 64
6 Employees Tour / Travel Sponsored 3 21
7 Special Communication to all employees of Top
Management, of an achievement
7
50
# One can conclude that most of the organizations (50%) increase the salaries or perks of
employees.
# Special awards/bonus (64%) are given.
# Certificates of appreciation are issued. (64%)
# There is also special communication to entire organization of Employee achievement.
# Very few organizations promote/ elevate employees.
Q7. Do you think that in your organization
“Every Employee” contributes to cost reduction?
The respondents’ answer to this question is 50
culture is built in such a way that every employee thinks from cost reduction point of view. In
some organizations culture is yet to be developed.
(Graph No.4.G 30: Culture & cost reduction)
Q.8. In your opinion which could b
Affecting achievement of cost reduction /cost reduction target?
(Table No. 4.T 32: Responses on hidden factors at organizational level for not achieving
cost reduction.)
Sr HIDDEN factors at “Organisation Level”
50%
Do you think that in your organization culture is built in such
a way, that “Every Employee” contributes to cost reduction ?
communication to entire organization of Employee achievement.
# Very few organizations promote/ elevate employees.
Do you think that in your organization culture is built in such a way, that
“Every Employee” contributes to cost reduction?
respondents’ answer to this question is 50-50%. Some have responded informing that
culture is built in such a way that every employee thinks from cost reduction point of view. In
some organizations culture is yet to be developed.
e & cost reduction)
s
In your opinion which could be the HIDDEN factors at “Organization Level”
of cost reduction /cost reduction target?
: Responses on hidden factors at organizational level for not achieving
HIDDEN factors at “Organisation Level” No. of
50%
Do you think that in your organization culture is built in such
a way, that “Every Employee” contributes to cost reduction ?
Yes No
communication to entire organization of Employee achievement.
culture is built in such a way, that
50%. Some have responded informing that
culture is built in such a way that every employee thinks from cost reduction point of view. In
ation Level”
: Responses on hidden factors at organizational level for not achieving
% of
.
N
o.
compan
ies in
opinion
YES
organiz
ations
opining
YES
1 Absence of proper culture 6 43%
2 High Tension Environment 4 29%
3 Vague Decisions 4 29%
4 Appropriate Policies not in place 7 50%
5 Appropriate Policies are in place but not implemented.
5 36%
6 Absence of OPENNESS 4 29%
7 CRITICISM prevails. 3 21%
8 No “role-models” in the organisation 6 43%
9 Any other 1 7%
One can easily make inference that higher ratings are given to main four reasons;
1. 50% response that appropriate policies are not in place.
2. 36% response that policies are in place but not implemented.
3. 43% response for poor culture as well as no “Role-Models” in the organization.
4. However, one respondent has also talked about :
(a) Constraints of resources.
(b) Lots of documentation prior to implementation of cost reduction.
(c) Global policy laid down from Global Head Quarter.
These reasons perhaps could be due to MNC status of the respondent’s organization.
Q.9. In your opinion which could be the HIDDEN factors at “Employees Level”
Affecting achievement of cost reduction / cost reduction target?
(Table No. 4.T 33: Responses on hidden factors at employees’ level for not achieving cost
reduction.)
Sr.
No.
HIDDEN factors at “Employees Level”
No. of
organizations in
opinion YES
% of
organization
responding YES
1 No appreciation 5 36%
2 No opportunity to learn 4 29%
3 No conducive atmosphere 4 29%
4 No enough compensation 5 36%
5 No specific training given 7 50%
6 Cognitive Dissonance 2 14%
7 Discouraged for experimentation. 5 36%
8 Discrimination 2 14%
9 Vindictive approach of management 0 0%
10 Unfair practices 1 7%
The major HIDDEN FACTORS at employees’ level are:
1. Lack of TRAINING for cost reduction-50%
2. No appreciation-36%
3. Not enough compensation-36%
4. Discouraged from experimentation-36%
5. No opportunity to learn or no conducive atmosphere-29% each.
Part E: OTHER DEPARTMENTS
01. Which other departments are involved in significant contribution to cost reduction in your
organization?
(Table No. 4.T 34: Other departments contributing to cost reduction)
Sr. No. Departments No. of
organizations
% of
organization
opining YES
1 Research & Development 12 86%
2 Product Development 11 79%
3 Process Development 9 64%
4 Production 12 86%
5 Quality Control 8 57%
6 Sales & Marketing 8 57%
7 Distribution 9 64%
8 Human Resource 8 57%
9 Administration 8 57%
10 Finance 13 93%
The general opinion of Respondents is that, following departments contribute to cost
reduction. ( descending manner.)
1. FINANCE DEPT- 93%
2. RESEARCH & DEVELOPMENT & PRODUCTION-86%
3. PRODUCT DEVELOPMENT-79%
4. PROCESS DEVELOPMENT & DISTRIBUTION-64%
5. OTHERS- Q.C./HR/ADMIN/ SALES/MARKETING-57% each
(Graph No. 4.G 31: Other departments contributing to cost reduction)
Q 2: Rank the following tech
by organization &/or other departments.(
least priority)
(Table No. 4.T 35: Cost reduction techniques and priorities)
Sr. No. Techniques
1 Cause & Effect
2 Pareto Law
3 P D S A
4 Six Sigma
1211
No. of companies involving other
departments to contribute cost reduction
Rank the following techniques according to priorities practiced for
by organization &/or other departments.( Rank no.1 as top priority and Rank no.12 as
Cost reduction techniques and priorities)
No. of Companies
Priority Levels
I st II nd
Third Least
9 2 1 0
3 7 0
1
0 1 4 0
0 1 0 1
9
12
8 89
8 8
13
No. of companies involving other
departments to contribute cost reduction
No. of companies
niques according to priorities practiced for cost reduction
Rank no.1 as top priority and Rank no.12 as
Least
13
5 T Q M 1 0 0 0
6 T P M
0 0 0
0
7 Control Charts
0 0 1
0
8 Analysis of Variance
(ANOVA)
0 0 0
0
9 Brainstorming
1 1 4
0
10 Benchmarking 0 1 1 0
11 KAIZEN 1 0 2 0
12 Why? (5Times) 0 0 0 2
(Graph No.4.G 32 : Preference for ‘Cause & Effect’)
1
75%
2
17%
3
8%
Cause & Effect
1. The data indicates that most prefer “cause & effect” technique.75% respondents have given
FIRST priority.
2. 50% respondents have given SECOND priority to “PARETO LAW”.
3. 29% respondents have given THIRD priority to “PDSA” and “BRAINSTORMING”.
4. Few techniques like- SIX SIGMA, TQM, TPM, CONTROL CHARTS,
ANOVA,BENCHMARKING, FIVE TIMES WHY are not being practiced at all or have been
given low priority.
The Researcher’s observations during an interview time and during informal discussions and
chats on various occasions are captured in the next chapters in “Results & discussions” and also
in “Recommendations”.