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AZ makes China focus of global supply chain but delays service implementation

AstraZeneca says it will make its new China sourcing centre an important part of its global supply chain

AstraZeneca (AZ) has revealed that it will make its new China sourcing centre an important part of its global supply chain, according to a report from China Interfax.


In an interview, AZ officials said they hoped the companyís new China sourcing centre, which was established at the beginning of 2007, would account for 90 per cent of all future global purchases. The Shanghai-based centre sources APIs, formulated products, R & D services, chemicals and laboratory instruments.


President of AZ China, James Ward-Lilley, said that setting up the China sourcing centre would be just one step in the process to pushing forward AZ's current "In China for China" strategy to its next level "In China for Global" strategy.


The UKís second-largest pharmaceutical company's reason for launching the China-based centre was due to improvements in intellectual property protection and the high quality of manufacturing in China, according to the report.


Ward-Lilley added that Chinese manufacturers and domestic drug development competency had improved enough over the last 15 years that high production levels and high quality products had generated big opportunities for AZ to expand its global sourcing.


AZís global executive operations vice-president, David N Smith, said that the sourcing centre in China would begin with active pharmaceutical ingredients and formulated products and then expand into other areas.


Smith explained that AZ had spent approximately USD 9bn (EUR 6.6bn) a year on purchasing, and was seeking efficiency improvements of approximately 10 per cent over the next three years. AZ sees the establishment a sourcing centre in Shanghai as instrumental to achieving this cost-saving objective.


The report revealed that Steve Fishwick, who is the director of Asia sourcing for AZ, said that the sourcing centre in China had achieved purchases to the value of USD 25m (EUR 18.4m). However, he said the company planned to see purchases for H2 2007 to reach between USD 20m to USD 25m (EUR 14.7m to EUR 18.4m). He added the company was looking to have the sourcing centre achieve total purchases valued at USD 100m (EUR 73.5m) in 2010.


In terms of Active Pharmaceutical Products (APIs), Smith explained that AZ was planning to retreat from API manufacturing in the short-term by outsourcing all of its API products. The company presently produces 85 per cent of its APIs and outsources the rest.


AZ extends supply and delivery service implementation phase
AZ has decided to extend implementation phase of its supply and delivery service, which was announced back in April 2007, forward to early 2008.


The company said it was pleased with the progress it was making with its agents AAH Pharmaceuticals and UniChem and that the decision to extend the implementation phase has been made internally and was not a reflection of either companyís performance.


According to AZ, the extension of the implementation phase was initiated to achieve the following goals:


ï More support to ensure customers have accounts with AZ agency partners


ï Ensure that the new supply and delivery system is robust and provides the service that customers need 


ï More consultation with customers and gaining insight on how AZ can help them to help patients gain the maximum benefits from their medicines


ï Align all aspects of the new arrangements with AZís own internal structures, which are changing as a result of the companyís ongoing internal organisational review to make the business more customer-focused


AZ says it is committed to taking responsibility for ensuring that a modern and simplified supply and delivery service is in place for all community pharmacies, dispensing doctors and hospitals.

4th July 2007


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