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1. Organization’s overview and operations management challenges

My former employer, Merck Group, is a multinational conglomerate headquartered in

Darmstadt, Germany, with operations in more than 66 countries and employing more than

62,000 people globally, including during my time there. Merck is an industry-leading research

and technology firm with deep roots in the medical and biological sciences as well as the

consumer electronics sector. Merck is a corporation that works in the biotechnology,

pharmaceutical, and academic research sectors to create and distribute innovative medications,

specialty chemicals, and other goods.

Vision: In order to save and better people's lives all over the world, Merckrely on cutting-edge

science.

Mission: Our mission is to increase access to our medicines and vaccines so that they may be

used to promote the health and well-being of people and animals everywhere. Those who will

benefit from our goods or services must always be kept in mind when Merckmake decisions.

Operational Challenges Faces by Merck and operational Management

 Making operational choices

Decisions were made at two levels; however they were made by top research and development

professionals at Merck research labs (MRL), where marketing was seen as lacking. As a

consequence, judgments that were not inclusive were made. Decision making was certain to

suffer as a result of the two's poor communication.

 Functional Difficulties
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Functional excellence had been the establishment of Marcis' profitable success. It made efficient

but costly and cross-function decision making difficult. Purpose of the marketing department

became increasingly vague, reducing its capacity to influence MRL.

 The company's management

Merck workers acquired hubris and complacency as the result of company's years of success.

Some employees also complained that Merck was too bureaucratic, with too much time spent in

management meetings. Vagelos needed to resolve these concerns immediately if his manoeuvre

was to be successful.

 Poor global coordination

Merck had a problem with worldwide business coordination, as seen by periodically difficult

interactions between WHHM and Merck's national organizations, as well as those units and

MRL. The most difficult job was gaining global coordination throughout the firm by product

category while maintaining functional excellence.

 Inadequate policies for employee development

Employees at Merck complained about a lack of clearly defined career routes and were harshly

critical of the company's HR department for a lack of employee development programmes.

 Outcomes

Merck feel that the CEO, Vagelos, not only advocated improper methods to resuscitate the firm,

but did not take the time together with the management committee is to analyzing of the business

environment of internally and outside, to handle all of the issues that the company faced.

Merck's path to recovery was hampered

Operation Challenges Challenge Management

 Making operational choices  Marketing of company

 Communication of staff

 Poor global coordination  Maintaining functional

excellence

 Inadequate policies for  Hiring employee

employee development

 Functional Difficulties  Increasing company

capacity

Merck Company Overview of 4 Vs

All operational processes convert raw resources, equipment, money, knowledge, and time into

outputs. Variation, Volume, Visibility, Variety and are the 4 Vs and how these are achieved.

Volume:

The volume of products required to fulfill market demand. The physical quantity generated.

Merck Group manufactures Vioxx in large quantities. Merck offers millions of Vioxx and other

pharmaceuticals throughout the globe and is known for its product and service consistency.

Scarcity increases both sales and brand recognition. It takes advantage of customer FOMO.

Buyer confidence is shown in volume. Volume serves as the foundation for market research and

strategy.

Variety
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It refers to the variety of items and services available for sale. V stands for variety. Selling a

variety of products or services enhances sales and profit potential while lowering the danger of

firm closure if demand for one or two things falls.

Merck distributes a wide range of products, including vaccines and medications that are sold on a

regular basis. Among its well-known products are Vioxx, the HPV vaccination Gardasil, Januvia,

Claritin, and Zocor. Merck manufactures medications for a wide range of diseases. It preserves

product variety.

Variety provides for more customization to satisfy the demands of the customer. Variety reduces

the amount of a product or service.

Variation:

External factors alter demand over time. Several factors make variation prediction difficult. The

COVID-19 outbreak, for example, rocked the world in every aspect. Most business processes do

not exist as distinct things, but Merck groups a variety of variants that must be managed together.

As inputs, these approaches need variation points and drivers. Drawing and conceptualization of

process variations have received little attention. To overcome gaps, the Merck group need

knowledge and maturity. Transactional and production processes suffer from quality issues when

operations do not follow a consistent pattern.

Visibility:

A company's whole value chain is visible. Customers must try out the company's

products/services. Manufacturing has a lower profile than services. For example Merck Group

offers trace software on the website, allowing clients to see where their products are at any given

time. Software is critical that potential customers may easily locate the organization they are
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looking for. The majority of people have had the experience of being lost. Driving around

seeking find a workshop of company, warehouse, store, head office, retail, customer service

centre, or anything else is inconvenient. Organizations must have good signage in order for

people to locate them. Otherwise, it might be disastrous. High-visibility signage benefits easy-to-

find regular customers.

Operations management ensures that the four Vs and high productivity are maintained across the

Merck group. Processes are developed by operations managers to improve volume, diversity,

volatility, and visibility. Merck Group's operations staff directly supports the success of

marketing, sales, finance, and human resources. It solves all strategic decision concerns in order

to maintain productivity. Merck Group, a multinational consumer goods corporation, uses

operations management to maximize all four Vs.

Lean Management of Merck Group

Lean and Six Sigma process techniques fail to use data to optimize the pharma supply chain.

Managers still make key supply chain decisions using ERP systems, planning software, and

spreadsheets with poor data.

Wastes of Lean management

Two problems arises

Supply chain data is delayed. Static and frequently of Merck Group is out-of-date. Thus, the

organization cannot intelligently react to an interruption or big demand change without definite

real-time data from many sources. It lacks strategic and tactical dexterity.

Manual labor is extensive. Pharma supply chain professionals spend countless hours manually

combining data from different systems and performing analyses in spreadsheets or business
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intelligence tools. Best-guess judgments based on this long, inaccurate, and expensive procedure

typically fail.

Pharma may achieve supply chain visibility and optimization with lean data management and

decision making.

Lean Management may help pharma businesses meet several supply chain goals by eliminating

waste and improving efficiency:

Production, Procurement, distribution savings, and inventory

Order fulfillment and faster manufacturing

Methods, Better data and forecasts

Disruption response improved and Change

Lean requires next-generation technology to handle massive amounts of fast-changing data and

provide intelligent suggestions. Pharma can dramatically enhance supply chain decision-making

using a lean architecture and digital transformation.

Lean Management Tools

Decision Intelligence, which combines internet-scale computational capacity, a virtualized

business data repository, and AI/ML, is used by major pharma corporations to optimize supply

chains.

Combining lean with Decision Intelligence does various things:

Decision Intelligence develops a near-real-time cognitive data layer with thousands of daily

Google-like data crawls across numerous internal and partner apps. That produces quick, precise,

granular information to adapt to changing circumstances.

AI and ML alert exception management and answer enquiries. Decision Intelligence

recommends best practices for inventory shortages, regional demand spikes, lead time

recalculation, etc.

The cognitive data layer may incorporate and digitize Lean and Six Sigma processes to enable

waste-reducing procedures and stakeholder participation. AI self-learning monitors decision

results.

It breaks with homeostatic, monolithic models. Supply chain managers no longer have to

manually examine massive amounts of data. Machines do the hard labor, freeing people to

concentrate on strategic planning and anomalies.

Months to Days Response Time

Data-driven judgments are the payoff. Take ahead time forecasting. Due to the lack of real-time

data, excessive manual labor, and hard-to-track upstream and downstream signal changes,

anticipated and actual lead times always differ.

Pharma companies might take weeks or months to react to lead time discrepancies and

unforeseen developments. By then, chances to quickly fix the fundamental problem are gone.

Decision Intelligence provides big pharma with real-time data and analytical depth. Lead time

variations might be noticed in days or hours and remedied in days. Cost reduction and income

preservation may save hundreds of millions.

It's realistic. Decision Intelligence helps Merck KGaA optimize its supply chain. Under a chief

digital officer or team that can drive acceptance, innovators will start small, experiment, and

scale up.

They'll also apply lean ideas from manufacturing to the supply chain in a new technological

architecture.
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Supply chain analysis

the globe. Merck want low- and middle-income patients to have quick, safe, and inexpensive

access to our goods. This, Merck think, can be done via effective supply chain management and

the use of local manufacturers. Our initiatives in this area reflect our high standards for

enhancing healthcare access for underprivileged communities.

Strategy for local supply chain solutions

Merck choose methods to development of a product and production that permit us to control cost

of products while also allowing for local supply chains that support the local economy. Merck

collaborate with pharmaceutical firms and other supply chain players to strengthen supply chains

in underdeveloped nations and ensure targeted drug delivery. Some of our goods are

manufactured directly in the locations where they are required, allowing us to create minimizes

travel time, local capacity, gain cost savings and distance that may be passed on to the customer.

Company pharmaceutical supply chain is well-organized to guarantee that our goods arrive at the

correct location at right time and in quantity and proper condition.

Taking use of technology opportunities to get efficient market access

The cornerstone of effective supply chain management is accurate business forecasting. Merck

employ standardized Biopharmaceutical business planning techniques throughout our Group,

including a particular software platform that allows us to plan for specific drug demand centrally.

The data collected by the software platform is utilized to manufacture and supply drugs based on

demand, preventing local supplies from running out or expiring.

For our clients in northern Africa, Merck use a software-based solution that provides them with

continuous access to our e-shop, allowing them to swiftly and simply acquire medications

permitted by the different regulatory agencies. The method increases demand transparency while
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decreasing lead times and miscommunications. Both tools, when combined, allow us to respond

to local requests faster than ever before, especially in growing areas.

Collaboration with partners to accomplish more

Our collaborations and partnerships are based on the Group-wide interchange of centrally stored

information, which enables us to more efficiently arrange joint supply chains.

Medicine donation data sharing platform

NTDeliver is a digital information tool that promotes openness in supply chains for medicine

donations made possible by public-private partnerships. Deliveries from firms implementing

donation programmes are clearly shown, from World Health Organization (WHO) purchase

orders through delivery to the first warehouse in the target country. This enhances the

coordination of our activities and gives WHO, local experts, and us a clearer picture of the in-

country inventory. Following a test in 2017, in which Merck followed supplies all the way to the

target country's treatment site, Merck fully deployed the system in 2018. Merck began utilizing

NTDeliver last mile monitoring as a regular reporting tool in Kenya's school-based

schistosomiasis deforming programmed. This technology is now fully operational for gathering

and aggregating field data, and it has assisted us in reaching out to over 12,000 teachers

throughout Kenya. Merck have begun to incorporate the first level of impact data requests from

instructors, such as the number of students treated, in addition to supply chain data.

FACTORS OF RISK and Management

Merck highly encourage to carefully considering risks listed below. These risks materialize, our

company's economic status and operational performance, as well as the liquidity of companys

securities and trading price, may deteriorate, and you may lose all or a portion of your

investment.
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External Threats: Many hazards occur as a consequence of the business environment that is not

immediately addressed.

Competition is fierce in the oil, gas, and petrochemical sectors. The oil and gas industries and

enterprises compete fiercely to supply the fuel demands of commerce, industry, and families.

Competition brings down product prices, has an impact on oil product marketing, and

necessitates a constant management emphasis on lowering unit costs enhancing efficiency.

Price Risk: Oil prices are influenced by global supply and demand. Political events (particularly

in the Middle East) and the conclusion of OPEC meetings may have a significant impact on

global supply and oil prices. A lengthy period of low prices or other indicators might result in an

impairment review of the BP Group's oil and natural gas assets, in addition to the negative

impact on revenues, margins, and profitability from any potential fall in oil and natural gas

prices. This review would include management's long-term forecasts for oil and natural gas

prices. Such a review might result in an impairment charge, which could have a major impact on

the BP Group's operational results in the period in which it happens.

Royalties and taxes are also levied on the oil sector, which are often higher than those imposed

on other economic activity. As a consequence of new laws and regulations or other

circumstances, Merck may be required to limit or discontinue certain activities, resulting in

decreased output or higher expenditures.

Political instability: Merck have operations in rising nations undergoing political, economic,

and social upheavals. Political expropriation, nationalization or instability of property, civil

unrest, insurgencies, acts of war, and strikes have all occurred in certain nations. Any of these

events might interrupt or end our operations, causing our development efforts in these places to

be reduced or abandoned, or our output to collapse, leading us to spend more expenditure.

Currency fluctuations: Although crude oil prices are typically established in US dollars, refined

product sales may be made in a number of currencies. Currency fluctuations may cause foreign

currency difficulties.

Economic Risk in the Petrochemicals and Refining Industry: Because of both periodic surplus

and supply constraints, refining profitability may be variable across geographical markets.

Supply and demand changes in the petrochemicals market may impact pricing and profitability

in the chemical industry sectors.

Current Challenges

The battle to recover the company's previous greatness is far from over; there is still work to be

done, and management must commit to it.

1. Continued efforts to improve internal planning and resource allocation. A bad internal

planning system is one of the impediments to recovery and development. The resource allocation

process must transition from function-based to strategy-based, with productivity savings invested

in research and development, marketing, and sales.

2. The first cross-functional process did not represent actual global business integration.

According to a 1997 research, WBSTs had not been completely intergraded in Merck's

functional organization.

3. Untapped market potential a lack of worldwide marketing coordination results in inadequate

communication between the marketing and research teams, lowering the company's performance.

4. There is fierce rivalry. Merck lost more than half of the market for new prescriptions in the

Cholesterol medication category to the upstart Lipitor in 1997. This poses a challenge in terms of

boosting sales while maintaining a double-digit growth rate in both sales and profit.

5. Plans for growth in 1998, the business plans to continue its internal growth strategy by

launching five new medications.

Recommendations

Merck & Co. Inc. is trading at an all-time high of $130 per share. Under Gilmartin's leadership,

the company's performance has improved, with market value climbing from $38 billion in 1994

to $156 billion in 1998. To sustain this expansion, consistent strategies for meeting the business

needs of the current business environment should be devised. The following recommendations

are made:

1. Regular business environment evaluations should be undertaken to help in strategy design,

implementation, and evaluation. In contrast to Vagilos' stint as CEO, these will help management

comprehend the company's issues and possibilities, as well as how to capitalize on them.
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2. Change the management culture

Because of the company's long-term success, the management team promotes a culture of

complacency and hubris. The company's culture must be modified to encourage people to take

chances and stimulate innovation.

3. To achieve objective communication, a clear channel of contact should be created between the

marketing and research departments. This will improve decision-making and cooperation inside

the organization.

Reference

 Brown, S., Bessant, J. and Jia, F., 2018. Strategic operations management. Routledge.

 Dai, T. and Tayur, S., 2020. Om Forum—Healthcare operations management: a snapshot

of emerging research. Manufacturing & Service Operations Management, 22(5), pp.869-

887.

 Hörner, E., 2020. Alliance management at merck: Establishing an operational 100-day

plan for alliance launches and management. Advances in Pharma Business Management

and Research, p.63.

 Struble-Fitzsimmons, D., Feld-Glazman, R., Dominick, E., Alexandrou, S., Rider, E.,

Bogosian, C., Norton, J., Pacheco, L. and Andreassi, E., 2021. A Retrospective Quality