Supply Chain Management

Sanofi-aventis touts its dedication to a streamlined supply chain process on their website with mention of reduced cycle times, optimized supply chains and the establishment of global sourcing. In fact, in 2007, three high-level representatives, including the Director of Long Term Demand Planning and Head of Forecasting, were featured as speakers at a conference for demand planning and supply chain excellence for pharmaceutical companies held in London. Sanofi-aventis consistentlys review the efficiency of its supply chain management as well as delivery of final goods to patients.

One example is a decision made in November of 2007 to reduce the number of wholesalers distributing their medicines in the UK. Wholesalers were reduced to three, AAH, Phoenix, and UniChem who would be offering national coverage across the UK and Northern Ireland. These wholesalers were chosen since they already distribute nearly 90% of all medicines in the UK and have many arrangements in place with one or more of the other wholesalers, which ensures a continuity of supply. Mike Isles, the supply chain director at sanofi-aventis UK said: "Pharmacists, hospitals, and dispensing doctors are important customers for sanofi-aventis and are the vital link in ensuring that we can get our medicines to patients who need them. Under this new arrangement we can maintain the service levels that our customers experience today whilst improving supply chain efficiency in the delivery of our medicines to patients."

Another example of delivery quality at sanofi-aventis was found when Sanofi Pasteur, the vaccines division of the sanofi-aventis group, presented a special award in July of this year to their delivery partner Envirotainer for going 48 consecutive months without losing a single dose. Envirotainer makes temperature controlled air cargo containers which are used by Sanofi-Pasteur to transport vaccines. Air France was also recognized as a Sanofi-Pasteur partner in this success.

Unfortunately delivery mishap occurred in July of this year when thieves in the USA stole a truck loaded with a shipment of pharmaceuticals from sanofi-aventis. Blood thinners, antihistamines, nasal sprays, and acne treatments were among the products stolen. According to figures from Freightwatch International, thefts of pharmaceuticals have rose in 2008 by a third with criminals actively targeting drug shipments. Goods that are stolen in this way tend to re-enter supply chains legitimately through parallel markets, leading detectives to say they are “stolen to order.”

According to a job profile interview conducted with sanofi-aventis’ Director of Supplies in the R&D Clinical Supply Chain, supply chain managers are divided into two groups: the project managers and the clinical studies managers. Project managers determine need among active principles, finished products, as well as packaged products for all on-going projects. Supply plans are also checked based on development plans and production activities.

Clinical studies managers are responsible for defining treatment forms that will be provided to patients through clinical tests. Quantities of treatments needed are determined as well as coordination of logistics and supply activities. There is a lot of interaction with other R&D departments in this supply-chain example. Communication is extremely important regarding the results of supply plan feasibility and ensuring project and clinical teams are both on the same page. Solutions also need to be proposed when difficulties arise, and skill sets need to be in place to choose the best option. Also, a thorough understanding of projects, studies and development, and supply plan analysis is also required.

Since we could not locate much more specific information regarding sanofi-aventis’ supply chain, information was found regarding the five key links in the pharmaceutical supply chain which we can assume sanofi-aventis follows. These five links are: internal staffing, storage and security, packaging requirements, distribution considerations, and returns and destruction.

Internal staffing refers to the people at the site of production, R&D, and more. As seen from the profile provided by sanofi-aventis above, communication by departments is a necessity showing their demand for accountability. This helps reduce internal theft, loss of quality, and more. Organizations are obligated to maintain current lists of individuals with access to where products are stored

Storage and security are huge concerns for all pharmaceutical companies. Drugs are classified based on abuse potential with the highest being in C-I and C-II. Tylenol, anti-anxiety medications, and non-narcotics are classified in C-III, C-IV, and C-V categories. Security methods are determined based on these classifications with the highest requiring storage in vaults with 24 hour alarm systems. C-III, C-IV, and C-V are stored in bolted cages, typically located in warehouses. A minimum of two observers need to be present for all handling activities and all records are subject to audit by the DEA who makes unscheduled visits and inspections. Since sanofi-aventis manufactures many kinds of drugs, it is likely that they follow these security procedures for their products. However, in the example of theft given above, sanofi-aventis may need to up their security in delivery procedures if they are losing shipments to truck thieves.

Packaging requirements state that drugs are packaged in ways preventing tampering and theft. Packaging is defined as a full-service pharmaceutical contract packager. They are an FDA registered facility, licensed with the DEA to package C-III, C-IV, and C-V drugs. Packaging is done at this facility in the form of bottling, blister packaging, promotional packaging, and many more services.

Distribution considerations are also subject to federal laws. Distributors are responsible for ensuring that scheduled drugs are shipped only to individuals and sites that bear valid license to receive these materials. The DEA maintains a central database of these licensees.

Returns and destruction are a very critical point in drug handling. In the case of a clinical trial ending, all unused supplies of drugs must be returned for reconciliation. The reconciliation process requires that there be an accounting for every tablet for DEA investigations will be started.

Some new ideas we recommend is for sanofi-aventis to introduce more logistics security into their downstream flow of products especially since medication theft presents a serious risk to sanofi-aventis (among other pharmaceutical companies). This can be done by enforcing their distributors to be equipped with GPS tracking devices on each trailer giving them the ability to track the delivery in real time. In the event a truck falls outside its destination route, it would trigger an alert and contact with the driver would be made to see if the truck has been stolen and the reason why it deviated from its route. Having the right technology in place would allow for sanofi-aventis to better track their shipments and quickly identify and recover lost/stolen shipments.

Project Scheduling

A project is a form of operation that is used to produce a unique product, activity or service. The management of a project differs considerably from an ongoing operation. At sanofi-aventis, there are a countless number of projects taking place from the top management level to departmental and team level. An example of a typical project is Spectrum Migration which occurred when sanofi-aventis updated the System Network Topology.

Project Overview

Spectrum is a network application used to monitor the activities of the Global WAN [Wide Area Networks] as well as LAN [Local Area Networks]. The version 6.x currently in use today is considered obsolete and is no longer supported by the vendor. A new enterprise-wide platform has been implemented, which provides the most recent version. Approximately 15 production applications have been identified to migrate to this new platform. As part of this project, end users will be trained on the new platform and an E-Learning solution will be provided. This approach will help users to build or view reports without ETS support, increasing efficiency and reducing the time needed to produce information for decision making.

Project Tasks

The Spectrum Migration took place over the course of 3 months with each tasks broken down into Lots. Each lot had a predecessor and were broken down into the following tasks (activities):

1. Lot 0

• Conceptualization and Brainstorming

2. Lot 1

• Pre-Study
• Pilot
• Acceptance
• Implementation

3. Lot 2

• Pilot Analysis
• Technical Workshop
  

4. Acceptance

5. Implementation

6. Guarantee

Gantt Chart

A Gantt chart illustrates a project schedule with start and finish dates. At Sanofi-aventis, Critical Path Method (CPM), Program Evaluation and Review Technique (PERT) and Gantt Chats are often used. For the Spectrum Migration project, a Gantt chart was developed using “Soft Key” software.

The Gantt chart was used to outline the different phases and activities of the project and allowed for all members involved to coordinate, manage, communicate and take accountability for their involvement in the project.

Recommendations about the Project

The committee did a great job putting the project together. One recommendation would be to add an additional task to Lot 2 that would involve a "train-the-trainer" session. This would entail spending extra time training supper users who would then train end users. The advantages of the train-the-trainer approach are that it allows for smaller groups of people to get trained giving them individualized attention and overcome learning barriers. Although the Technical workshop worked for many users, having a resourceful super user at arm’s reach could prove to be beneficial during the transition to a new system.

Quality Control

Sanofi-aventis has a clear need for very specific quality control measures due to the stringent government regulations associated with the pharmaceutical business. While some companies may simply face the threat of an unhappy customer, pharmaceutical companies hold responsibility for the health and physical well-being of end users of their products. Also, due to the extremely expensive nature of new product development, they must carefully weigh and measure the potential upsides and downsides of entering into the development of a new product. There must be a system, or many systems, in place to ensure that quality prevails and resources are not squandered on projects destined to fail from the start.

Sanofi-aventis does subscribe to Six Sigma for certain areas of their company, which we will further discuss, however they also have their own permutation of quality control processes that is tailored to best suit their needs. They use a practice known as Industrial Quality and Compliance (IQC) Strategy. This strategy is the framework that they adhere to for any process that requires quality control, from the manufacturing of the pharmaceuticals, to the packaging, to the logistics of delivering the product. To develop any areas requiring quality control they follow the six steps within the strategy which are Define, Ensure, Empower, Integrate, Manage, Communicate. These steps are sanofi-aventis’ guidelines to quality control excellence no matter what the specific process may be.

In the first step of the process, Define, the exact requirements of the quality control process should be spelled out. This definition should also be supplemented by guidelines showing how these requirements should be met. These guidelines can take their lead from the best parts of other previously rolled out processes or policies from within the company and also possibly adopt ideas from sources outside the company. Part of this step is also to take note of and integrate current industry and regulatory trends into the process plan.

In the second step of the process, Ensure, involves auditing any sites involved in the process to ensure that they are capable of carrying out the proposed directives. It is necessary at this point to ensure each site has trained and experienced employees and provide support and training as needed. This is the step where they test out the feasibility of the process definition. If the resources or expense to implement the process is not worth the benefit, they may go back to the drawing board and repeat step one as needed. Once this step is checked off the list, they can then empower the sites to maintain the process and set up a way for continuing compliance to be reported. An escalation process for risk management is also developed. Training continues during the Empowerment step as these systems are implemented. The risk management aspect of the strategy continues into Step Five of the process, Integrate. At this time the escalation process for risk management is integrated and this process is continuously improved upon. At least once per year, new regulations and needs are considered and they too are encompassed in the quality control process. This allows the process to continue to evolve to meet the ever changing needs of the company.

The Management step of the process encompasses ensuring that the process is adhered to. It puts in place audit processes for suppliers and subcontractors, as well as internally, and spells out how discrepancies found in the audit process can be corrected. Finally comes Communication, which further deals with reportings of compliance and reviews with the teams at regular intervals. This part of the strategy also turns their quality process into a public relations tool in the sense that the process itself can be used to illustrate the company’s commitment to quality. Sanofi –aventis also maintains an intranet site for each of their processes as an information and training resourse.

As previously mentioned, sanofi-aventis does also subscribe to Six Sigma as a means of quality control, but they leave the research and development segment of the business out of it. Research and Development does require quality control, however it is also an intensely creative process. Many companies that forced this segment to deal with the restrictive nature of Six Sigma found themselves losing valuable employees as a result. Six Sigma is a very successful guideline for sanofi-aventis in addition to the idea of the IQC Strategy and they have embraced it. It allows the company to reduce wasted resources and keep their manufacturing processes lean by following the Six Sigma DMAIC steps, which are define, measure, analyze, improve and control. It helps sanofi-aventis to compete with Asian pharmaceutical companies that have the advantage of lower labor costs and less stringent environmental restrictions, by keeping the organization lean and mean.

Our suggestion with regards to areas for improvement would be to simplify their control processes by integrating the IQC Strategy and the Six Sigma methodology. In much the same way that they have created their own specific guideline in the form of the IQC, we feel it would help to streamline things by using a best-of type compilation of the two methods to form one unique, sanofi-aventis specific guideline. They can further foster employee dedication to the process by perhaps having periodic awards for employees that best demonstrate adherence to the methodology or for those who make a significant contribution to the processes improvement.

Quality Management

The four dimensions of quality include design, conformance, availability, and field service.

Quality of Design

Design is primary the responsibility of a cross-functional design team. Sanofi-aventis' approach to quality by design include the following elements:

• Identifying, through e.g., prior knowledge, experimentation, and risk assessment, the material attributes and process parameters that can have an effect on product.
  
• Determining the cross-functional relationships that link material attributes and process parameters to product.
  
• A systematic evaluation is derived through their marketing department, understanding and refining of the formulation through the Research and Development and industrial manufacturing process adhering to specification.
  
• Using the enhanced product and process understanding in combination with quality risk management, they establish an appropriate control strategy which, include a proposal for design space(s) and/or real-time release testing.
  

Such systematic approaches have achieved the desired quality of their products and have helped the regulators to better understand the company’s strategy. For example, a cross-functional team of experts could work together to develop an Ishikawa (fishbone) diagram that identifies potential variables which can have an impact on the desired quality attribute. The team could then rank the variables based on probability, severity, and detect ability using failure mode effects analysis (FMEA) or similar tools based on prior knowledge and initial experimental data. Design of experiments or other experimental approaches could then be used to evaluate the impact of the higher ranked variables, to gain greater understanding of the process, and to develop a proper control strategy.

Quality of Conformance

A related dimension of quality is confor­mance, or the degree to which a product's design and operating characteristics match pre-established standards. Both internal and external elements are involved. Within sanofi-aventis, conformance is commonly measured by the incidence of defects: the proportion of all units that fail to meet specifications. Industrial Quality and Compliance Chemistry assures that all active pharmaceutical ingredients, including feed grade products, are manufactured and controlled in compliance with sanofi-aventis quality standards and regulatory requirements.

Availability & Reliability

In terms of availability, it defines the continuity of service to the customer. The availability of their product is guided by statistical number generated through marketing. These variables and procurements from suppliers drives the batch production of their products instantaneously.

Reliability which is also a comparative dimension of quality, reflects the probability of a product's failing within a specified period of time. These may refer to the amount of doses that is prescribed before the effect wore out. For example, it would be reliable if sanofi-aventis claimed that 2 pills of Ambien CR could put someone to sleep in 2 hours and it actually did. These measures would require a product to be in use for an extensive period of time because they are more relevant to durable goods than they are to products and services that are consumed instantly. It could also refer to the primary operating characteristics of a product. For sanofi-aventis, drugs would be traits like providing instant relief from ailments, non or less side effect, safe handling, and comfort of use. This dimension of quality combines ele­ments of both the product and user-based approaches. The connection between performance and quality, however, is more ambiguous. Whether performance differ­ences are perceived as quality differences normally depends on individual prefer­ences. In these terms, the reliability of a product would correspond to its objective charac­teristics, while the relationship between per­formance and quality would reflect individ­ual reactions

Field Service

The fourth and final component of quality is field service. This is termed “Lifecycle Management.” It involves reactive issues like problem solving and corrective actions relating to consumers. In all cases, sanofi-aventis' products and services were designed to meet patients’ needs and the intended application. They guarantee the shelf life of their products to consumers through their integrity. A product that fails frequently is likely to be scrapped earlier than one that is more reli­able. Consumers of their products are actively compensated for proven cases of drug reactivity. Sanofi-aventis has also established Regional QU management which is responsible for communicating the findings of the Local Recall Committee’s assessment to the R&D Recall Committee within 48 hours and providing the ultimate recall decision back to the Q&C GMP QU Site Head. Immediately upon identification or notification of a possible recall situation, all suspect products must be placed in quarantine status pending a full investigation. They have demonstrated competence in all their undertakings.

Their level of competence and promptness in the delivery of their products, which is available worldwide, is immeasurable.

Quality Systems at sanofi-aventis

Sanofi-aventis embraced the Six Sigma methodology in 2000 and have run their processes using DMAIC. Currently, sanofi-aventis adopted a hybrid quality system called IQC (Industrial Quality Compliance). This was designed to bridge the inadequacies of Six Sigma experienced with their Research and Development process.

Recommendations for Quality Improvement

Sanofi-aventis is still struggling with on-time delivery. Management mainly sees manufacturing as a cost center. About 40% of the plant equipment is over 10 years old and some are manually operated. Elements in the operational excellence toolkit, such as Quality by Design, Process Analytical Technology and advanced process control are being underutilized. Models are not yet flexible enough to adjust production capacities based on demand. In addition, regulatory compliance and plant safety were lower this year.

If aanofi-aventis wants to increase the benefits of quality, company leadership must make operational excellence a priority. Leadership, especially at the C-level, is critical in reducing product prices, improving product quality, improving operational and manufacturing flexibility, accelerating production speed, and improving workplace safety.

Undoubtedly, obtuse integration of manufacturing with other operations will result in the greatest benefits of operational excellence.

Service Process Design

Service Product Bundle

The three elements of the product service bundle are explicit services, implicit services, and facilitating goods. Explicit services are those that are able to be experienced or are tangible. Implicit services are the psychological ramifications of the service (such as feelings about an experience), and the actual product itself is the facilitating good. Sanofi-aventis offers all three of these elements to their customers in the following ways:

1. Explicit services: Since sanofi-aventis is a drug manufacturer, it doesn’t exactly have a store or location where consumers can go to “experience” the product. However, something of this nature is simulated on their company website: http://www.sanofi-aventis.us/. On this website, individuals who are prescribed a sanofi-aventis manufactured drug can research patient information and prescribing information. Furthermore, there is a product information services number clearly displayed on the page allowing potential users to call with questions. The website also contains links to press releases and social responsibility actions taken by sanofi-aventis. This gives consumers a good idea of how the company operates, mission statements, and helps build a feeling of trust and reliability through a proven reputation.

2. Implicit services: When dealing with medication, having a reputable image and presentation seems obvious. The psychological component to this is that patients (who may be nervous or uneasy about beginning a new medication) feel safe and healthy. Open and honest information about potential medication side effects helps reduce the fears of the unexpected and may lead to a better mental state for new patients. Beyond this, clearly presented information also helps prescribing doctors feel confident in the use of the drug, which is relayed to the patient in the waiting room when a prescription is being handed out.

3. Facilitating goods: The physical good for sanofi-aventis is the drugs they manufacture. Sanofi-aventis produces a wide array of medications, however, it is necessary for their success that all drugs be provided with the same levels of service (both explicit and implicit) to maintain a consistently reliable image. As the book states, it is important not to overemphasize on one component. While drug safety is a top priority at sanofi-aventis, informing and supporting the end users ultimately becomes just as important when it comes down to the product being prescribed.

Service Matrix

The closest fit for sanofi-aventis on the service matrix is the “Co-routed services” option. Customers have choices about the drugs they choose to take and dosage levels, however the product itself is produced in the same manner with the same chemical components. Patients and doctors access the same patient/doctor website for prescribing and drug information, and customers call the same product information hotline for further questions. On the operations side, sanofi-aventis is required by law to produce their drugs in F.D.A approved methods. However, as stated on their webpage, they are also committed to the implementation of cost-competitive technologies and reducing material, supplies, and service costs. While there is room for differentiation in distribution and operations, they are still limited in terms of regulations regarding the actual construction of the drug.

Customer Contact & Employee Support

Sanofi-aventis interacts with their end-user customers via the internet, over the phone and in face to face interactions with doctors and pharmacies. One system sanofi-aventis has in place at the Kansas City location regarding customer support is that it is broken down into Primary Processing Units (PPUs). This gives each associate the capability of interacting directly with customers to continue their focus on meeting customer needs while producing high quality products. Face-to-face contact is also made between sales reps and doctors when marketing a new drug, at which point electronic and physical pamphlets and instructional brochures would be provided. In the pharmaceutical industry, there is little self-service involved aside from the already posted drug information that anyone can access on their website and read on their own. This falls on the “permeable” area of the customer contact matrix.

Sanofi-aventis has a strong focus on flow control as well. Another feature of the above mentioned PPUs is that each has the authority and available resources to make fast decisions to meet manufacturing objectives. All employees making up a PPU sit closely together which reduces any possible process barriers and helps facilitate flows of real-time communication and actions. This ensures that no employee is working alone, and that everyone is informed of decisions.

Technology

The use of a customer portal via their website is an example of how technology enables sanofi-aventis to effectively communicate with customers. There are various levels of customers who can regisater on their website such as Current Direct Purchasing Customer, Wholesaler Contract Administrator, and Group Purchasing Organization . This enables customers to place and track orders, check product availabilities and inventories and get product information. The use of technology is also used by the sales representitives that go on the filed to meet with doctors. Each carry a mobile device such as a handheld computer, tablet or laptop providing the doctor with up-to-date real time information. These technologies are very important as it enhances existing business relationships.

Service Recovery

When a drug company doesn’t do its job right, the consequences can be fatal. While we didn’t find any documentation on their corporate website about actions taken for specific recovery measures, typical measures taken are product recalls and legal settlements reached with those who have been harmed. Both measures damage the reputation of the company and is the reason why sanofi-aventis continuously repeats their commitment to quality and excellence. They also post their legal compliance measures regarding drug production, including any provisions for individual states. Furthermore, information is given regarding patient assistance such as telephone hotlines for reimbursements on specific drugs. Sanofi-aventis also participates in awareness programs regarding proper prescription information, medical care accessibility, and more. They are a member of the Partnership for Prescription Assistance which offers a “single point of access for more than 475 public and private patient assistance programs, including more than 150 programs offered by sanofi-aventis and pharmaceutical companies.”

Process Selection

Operations management can be defined as the activities that produce goods and services. At sanofi-aventis, an operation entails the culmination of pharmaceutical operations, industrial affairs, and research and development to produce regulated medications/drugs for our sound health.

Sanofi-aventis utilizes two product flows; Project and Batch Flow. A Project form of operations is used for products in the Research and Development stage. New medications at Sanofi-Aventis start in the Project form because they are working on one unique product and, while each new drug may have a very small amount of process similarity, the majority of the process needs to be approached as though it were being done for the very first time. This process form requires highly skilled research technicians and low or no automation in the process. Once the drug is approved by the FDA, the process then changes to a Batch flow. A Batch flow is characterized by the production of a product in batches or lots. Batch operations often use general purpose equipment that is not specialized to make just one particular product, but several, which offers great flexibility. For example, at Sanofi-Aventis, each batch of the product moves from one work center to the other. The tablet making process begins with blending/mixing and then moves on to a dryer. Next the product moves to the tablet press and finally to the tablet coater. Each of these machines can be reused to make different medications. The only difference might be which press is used to shape the raw powder into either round or special shaped tablets. Each batch is then assigned an expiration date and lot number. A Batch processes can be configured to handle low as well high volume orders.

Sanofi-aventis is currently celebrating the approval of Multaq® in the United States by the Food & Drug Administration in the United States. Multaq® is a multichannel blocker that inhibits various ion channels of cardiac cells. It is the first antiarrhythmic that has demonstrated in patients to decreased the risk of cardiovascular hospitalizations or death from any cause as well as the risk of stroke when used on top of standard therapies. This drug will now be making the leap from the Project Process to the Batch Process of manufacturing.

Batch Production of Tablets in Pharmaceutical Manufacturing

Products at sanofi-aventis are made-to-stock (MTS) which provide faster service to customers and reduces cost. The products are carried in inventory to immediately fulfill customer demand. Sanofi-Aventis carries a standard product line where medication strengths are specified by the producer and not by the customer. The customer cannot request a customized strength for his/her particular needs as all tablets of that particular brand are made identical and produced in advance. Although this does not provide the most flexibility to each particular customer, it enables amble inventory to be available to satisfy the customer need as soon as possible. After all, imagine if you were very sick and needed to wait for your medication to be manufactured before you can begin your course of antibiotics to begin to feel better? You most likely would not be very happy with the wait. There are some upsides to a more customized, made to order pharmaceutical, which will be addressed, but speed and cost trump the benefits of this option for the most part.

Sanofi-aventis falls in the project make-to-order/assemble-to-order category for new products that are still in the research and development phase and batch flow make-to-stock category of the Process Characteristics Matrix for finished goods products.

Of the four factors that appear to influence process selection, sanofi-aventis relies mostly on Labor, Technology and Market conditions. The industry dictates that sanofi-aventis hire skilled labor in the areas of chemistry, biology and pharmacology, which pay high salaries. The company must also consider the latest software suites and production machinery to enable more efficient productions while providing higher quality products. Pharmaceutical companies are also forced to straddle both the project and the batch process due to the fact that they only have the exclusive right to a drug for a certain period of time after its introduction to the mass market. After that point, revenues drop significantly as generic equivalents enter the market place. They need to constantly have project teams in place working on the next best thing to remain competitive. The company needs to use a batch flow rather than an assembly line process for two reasons. The first constraint is that they are bound by the shelf-life of the product and compliance with regularly changing FDA regulations. If the company mass produces a product and there is an FDA recall or the product expires prior to purchase, they stand to lose a large amount of revenue.

Mass customization would essentially entail making a different product for each customer. Although it would be the ideal option for each customer, it would be very difficult to implement in the pharmaceutical industry. Not only would the process have to be changed from MTS to MTO/ATO, the cost would be very high and the customer would have to wait for their medications to be custom made. An ideal outcome of the mass-customization of medications may be the fact that people that were on an assortment of regular medications would not need to take so many pills. Various medications, adverse interactions and timing of dosage constraints permitting, could be combined into one “superpill”. The only way that we could foresee this working is if pharmacies and manufacturing plants worked together like never before. The pharmaceutical companies would need to set up mini manufacturing plants across the world to be in relatively close proximity to all pharmacies. Prescription filling requests at the local pharmacy would also have to be electronically linked to manufacturing plants. While this sounds like an appealing idea, the costs associated would be too prohibitive.

Inventory Management

Sanofi-aventis uses sales forecasting applications to determine inventory demands and master production schedules. They utilize the periodic review system for their finished goods where intervals are fixed, but drug quantities vary according to need. Sanofi-aventis defines a maximum quantity for each drug and periodically checks inventory levels, ordering just enough from their manufacturing plant to reach the maximum target inventory level while achieving a 100% service level. A periodical review system is an optional solution for the pharmaceutical industry due to the shelf life of the drugs being manufactured. Demands can change on the basis of customer orders or when the need for a product increases such as allergy medication or anti-viral vaccines. Sanofi-aventis maintains an up-to-date inventory system that provides real-time brand inventory levels.

Sanofi-aventis is also required to perform physical inventory counts on a regular basis. It manages its physical inventory by sorting it into five categories, which are as follows:

1) ST-01 – Inventories - Raw materials excluding spare parts
2) ST-02 – Inventories – Work in Progress (WIP)
3) ST-03 – Inventories – Finished Goods Excluding Samples
4) ST-04 – Inventories – Samples
5) ST-05 – Inventories – Spare Parts

The raw materials, WIP, and finished goods are recorded differently than samples and spare parts. First a “cost” is assigned, which consists of the cost of purchase less any discounts and including duties, taxes, shipping and handling. Cost does not take into account loss or gain as a result of currency conversion. Then, what sanofi-aventis refers to as a “Net Realizable Value (NRV)” is assigned which is the estimated selling price minus any processing costs and sales expenses. Finally the “cost” minus the “NRV” equals the “impairment”, which is recorded for each category in the inventory and is used in conjunction with the profit and loss of sanofi-aventis.

Physical inventories are performed using a method known as blind counting. The counting sheets used by the persons in charge of counting should not mention the theoretical quantities in stock. In addition, those counting should not have direct access to the inventory management system during or immediately prior to the physical inventory process taking place. This ensures a true physical inventory count.

A physical inventory is taken at least once per year, sometimes more often. Occasionally products become obsolete or un-saleable and are marked as such by reducing the NRV to zero through financial depreciation. Once the physical inventory is counted, entered into the system and posted, those numbers are recorded as the beginning inventory and will be adjusted on the next scheduled physical count.

About sanofi-aventis

Sanofi-aventis, formed in 2004 following the acquisition of Aventis by Sanofi-Synthelabo, is a leading global pharmaceutical company engaged in the research, development, manufacture, and marketing of healthcare products. As the third-largest pharmaceutical maker in the world, their extensive research and development efforts address key health care challenges in cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis and vaccines. Sanofi-aventis is dedicated to improving health and driving back disease by making innovative medicines accessible to people around the world.

Sanofi-aventis is headquartered in Paris, France and employs nearly 100,000 people in over 100 counties. Its U.S. headquarters is located in Bridgewater, NJ and is responsible for employing over 15,000 people across the county. Sanofi-aventis trades on the NYSE: SNY and Euronext: SAN and has an annual revenue of approximately $32 billion.