Journal of Industrial and Systems Engineering

Journal of Industrial and Systems Engineering

A System Dynamics Approach for Value Chain Analysis in Pharmaceutical Industry

Document Type : Research Paper

Authors
Meysam Kharaghani 1
Mahdi Homayounfar 2
Mohammad Taleghani 3
1 PhD Candidate, Department of Industrial Management, Rasht Branch, Islamic Azad University, Rasht, Iran
2 Assistant Professor, Department of Industrial Management, Rasht Branch, Islamic Azad University, Rasht, Iran
3 Associate Professor, Department of Industrial Management, Rasht Branch, Islamic Azad University, Rasht, Iran
Abstract
Value chain (VC) is one of the fundamental concepts in production and operations management, used for creating and developing products and services, and distributing them to the end customers. Because of its importance to organizations success or failure, especially in the developing countries, this study aims to investigate the factors influencing VC in pharmaceutical industry, as a very important sector in Iran. For this purpose, pharmaceutical value chain experts in a public company (Sobahan Darou Co.) were extracted. Next, systems dynamics as a powerful approach for modeling complex systems, is applied to simulate the dynamics of the pharmaceutical VC. So, the interactions of the main variables of the system were translated to the dynamic hypotheses and constitute the causal loop diagram. Then, stock and flow diagram was formulated in form of the differential equations. To validate the proposed model, some structural and behavioral validation test were implemented which indicated model’s accuracy. Finally, four potential scenarios were defined based on the of the company's possibilities and the amount of change in marketing and sales costs, investment in skilled human resources and investment in research and development, and the effect of implementing these scenarios on four basic variables, namely customer satisfaction, financial strength, polution and VC efficiency were investigated. Based on the results, the fourth scenario has the greatest impact on customer satisfaction and emission reduction. The second scenario has the greatest increase on VC efficiency and financial strength.
Keywords
Value Chain
Profitability
Technology
System Dynamics
Subjects
Aliahmadi, A., & Nozari, H. (2023, January). Evaluation of security metrics in AIoT and blockchain-based supply chain by Neutrosophic decision-making method. In Supply chain forum: an international journal (Vol. 24, No. 1, pp. 31-42). Taylor & Francis.
Ayele, A., Erchafo, T., Bashe, A., & Tesfayohannes, S. (2022). Value chain analysis of wheat in Duna district, Hadiya zone, Southern Ethiopia. Heliyon, 7 (7), e07597.
Eisenreich, A., Füller, J., Stuchtey, M., & Gimenez-Jimenez, D. (2022). Toward a circular value chain: Impact of the circular economy on a company's value chain processes. Journal of Cleaner Production, 378, 134375.
Hainzer, K., Best, T. & Brown, P.H. (2019). Local value chain interventions: a systematic review. Journal of Agribusiness in Developing and Emerging Economies, 9(4), 369-390.
Hannibal, M., & Knight, G. (2018). Additive manufacturing and the global factory: Disruptive technologies and the location of international business. International Business Review, 27 (6), 1116–1127.
https://www.farsnews.ir/news/14000204000127.
Juergensen, J., Guimon, J., & Narula, R. (2020). European SMEs amidst the COVID-19 crisis: Assessing impact and policy responses. Journal of Industrial and Business Economics, 47 (3), 499–510.
Kharaghani, M., Homayounfar, M., & Taleghani, M. (2024). Value Chains Analysis: Application of Fuzzy Cognitive Map in Pharmaceutical Industry. Journal of System Management, 10(2), 63-78.
Khorana, S., Escaith, H., Ali, S., Kumari, S., & Do, Q. (2022). The changing contours of global value chains post-COVID: Evidence from the Commonwealth. Journal of Business Research, 153, 75-86.
Kokkinos, K., Karayannis, V. & Moustakas, K. (2020). Circular bio-economy via energy transition supported by Fuzzy Cognitive Map modeling towards sustainable low-carbon environment. Science of the Total Environment, 721, 137754.
Lambert, D.M., & Cooper, M.C. (2000). Issues in supply chain management. Industrial Marketing Management, 29(1), 65-83.
Low, G., Dalhaus, T., Meuwissen, M. P. M. (2023). Mixed farming and agroforestry systems: A systematic review on value chain implications. Agricultural Systems, 206, 103606.
Nozari, H., & Nahr, J. G. (2022). The impact of blockchain technology and the internet of things on the agile and sustainable supply chain. International Journal of Innovation in Engineering, 2(2), 33-41.
OECD. (2021). Global Value Chains: Efficiency and Risks in the Context of COVID-19. Retrieved from https://www.oecd.org/coronavirus/policy-responses/global-valuechains-efficiency-and-risks-in-the-context-of-covid-19-67c75fdc/.
Pananond, P., Gereffi, G., & Pedersen, T. (2020). An integrative typology of global strategy and global value chains: The management and organization of cross-border activities. Global Strategy Journal, 10(3), 421–443.
Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
Sengupta, S., Dreyer, H. (2023). Realizing zero-waste value chains through digital twin-driven S&OP: A case of grocery retail. Computers in Industry, 148, 103890.
Siyadat, S.H., Ghazinoory, S.S., & Manteghi, M. (2022). Analysis of Open Innovation Efforts alongside the biopharmaceutical industry’s value chain in Iran. Journal of Marketing Management, 17 (56), 41-64.
Srikar, T., Ratnamala, B.S.S., & Lakshmi, V. S. (2022). Evaluation and development of management model for sustainable value chain in Indian construction industry. Materials Today: Proceedings, 60(3), 1623-1628.
Strange, R., & Zucchella, A. (2017). Industry 4.0, global value chains and international business. Multinational Business Review, 25(3), 174-184.
Tavakkol, P., Nahavandi, B., & Homayounfar, M. (2023a). Analyzing the Drivers of Bullwhip Effect in Pharmaceutical Industry’s Supply Chain. Journal of System Management, 9(1), 97-117.
Tavakol, P., Nahavandi, B., & Homayounfar, M. (2023). A dynamics approach for modeling inventory fluctuations of the pharmaceutical supply chain in covid 19 pandemic. Journal of Optimization in Industrial Engineering, 16(1), 105-118.
Villalba, R., Venus, T.E., Sauer, J. (2023). The ecosystem approach to agricultural value chain finance: A framework for rural credit. World Development, 164, 106177.
Journal of Industrial and Systems Engineering
Volume 15, Issue 2 - Serial Number 2
Spring 2023
Pages 124-139

  • Receive Date 01 January 2023
  • Revise Date 04 February 2023
  • Accept Date 30 March 2023