A cost benefit analysis in chronic medicine courier pharmacies : a case study
Beyers, Christiaan Frederick
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The South African pharmaceutical market is seen as part of the so called "pharmerging" markets, together with countries like India, China and Brazil. These "pharmerging" markets are the fastest growing markets within the global pharmaceutical industry. The distribution of chronic medicine in South Africa is a growing market, as the disease burden in South Africa continues to escalate, with the incidence of chronic conditions growing at a rapid rate. The study will focus on one of South Africa’s pioneer courier medication service providers, with more than twenty years’ experience in the healthcare industry. The company will be referred to as Pharmacy X. The mission of Pharmacy X is to provide the right chronic medication, to the right patient, at the right place, at the right time. It is imperative to ensure that a patient receives his/her chronic medication on the scheduled date of delivery to ensure compliance and customer satisfaction. To achieve a competitive advantage, companies increasingly depend on their supply chain partners to minimize cost and improve business processes. The core value chain activity of outbound logistics has been outsourced by Pharmacy X to several courier companies. This study will aim to understand the importance of the outbound logistics function within the value chain of the company and the costs involved with the outsourcing of the function. The primary objective of this study was to determine the feasibility of an in-house courier operation in the Bloemfontein area versus the current outsourced courier model. In order to achieve the primary objective of the study, several secondary objectives were set and reached throughout the four chapters of this study. The study applied cost benefit analysis techniques to determine the feasibility of the Bloemfontein courier investment project. All the cost benefit analysis techniques concluded that the Bloemfontein courier investment will be a financial viable operation. The Bloemfontein courier investment will increase shareholder value over the period of the project compared to the current outsourced model. The contribution of this case study to determine the feasibility of a courier operation investment can be of value to Pharmacy X. The current projected total courier cost of Pharmacy X for the 2013 financial year amounts to more than a third of the total operational cost. The findings within the case study can lead to a greater national roll out of courier operations in order to reduce costs and increase profit margins for Pharmacy X.