TSM Pharmaceutische

Groothandel, B.V.

Group No.10
Pratibha Kamat -036
Anupam Bakshi 073
Mohammad Tanweer -090
Prajakata Kadu 101
Shreshth Agarwal - 114
Anjali Gupta -151

Answer1:
Card System:
1. 20% of the pharmacists rely on time tested card system for inventory
management.
Reason: It was quite simple to operate & it functioned properly.
Method: Whenever the pills were sold, PA would remove a corresponding
number of cards & the process continues until they reach the final card in the
envelope. The PA would then re-order the pharmaceutical the same amount
previously specified on the card.
Drawback: In many pharmacies, the PA could not determine the re-order
quantities as they were set many years ago. So in this case they manually
entered orders into the Electronic data interchange (EDI) system that the
wholesaler provided them.
In absence of any system, PA would simply order on the telephone.
Advantage:
They served their customers in a better way.
They could use the system in a more appropriate manner.
They did not want to learn the functionalities of the Stock Management System

Integrated Stock Management System:

1. 10% of the pharmacists use Integrated Stock Management System.
Advantage: These pharmacists had significantly lower operating cost than
those who did not use the system. These new pharmacists enhanced revenues &
saved costs to a large extent.

Manual Card system

1. Pharmacy could order 72 lines of
pharmaceuticals per day.

2. Average time to process an order

was 2mins per line.
3. Using this system, the pharmacy
made 12 mistakes per order due
to overload of work & incorrect
data input. It took them 4 min
per mistake to recover the entire
process.
Calculation
of Profit:
4. Monetary
value of Inventory is
18400.

Integrated System
1. 62 lines ordered.
Order size was reduced- i.e.
superior ISM inventory tracking
& efficient ordering software
models.
2. Average time to process an
order was 12 sec per line
3. No. of mistakes dropped to 3
nos. because the program
eliminated several manual
entry points & unnecessary
paperwork.
4. Monetary value of Inventory is
13800.

Information:
Number of person required= 9
Number of PAs=6
Number of pharmacist=2
Number of maintenance person=1
Salary of 1 PA= 28000/yr
Number of hours served by 1 PA= 1584hrs/yr (i.e. 36 hrs *44 weeks)
Salary per hours per PA= 17.67
Overtime cost per year= 8hrs per day* 17.67 * 1.25* 52weeks =9188.4 per year
So, Total cost for 6 PA =6*28000+9188.4= 177188.4/year
Let the cost of an order be =X
Let cost of a line=Y
Before the use of ISM by a pharmacy(Card System)
Total cost = salary of PAs+ inventory cost + ordering cost +cost of mistake in ordering
Hours of mistake in ordering per year= 4/60 *52*6= 20.8 hrs/year
Cost of mistake per year=20.8*17.67= 367.53
Total cost per year=177188.4 +18400 + (72Y+X)*52weeks*6days +
367.53=195955.93+312*(72X+Y)

After the use of ISM by a pharmacy:

Assumptions:
1. If 1no PA is reduced for a pharmacy as the mistakes per order have reduced and
the order taking method has been automated by the use of ISM.
2. Time to rectify the mistakes per order is reduced to 3 min as the dependency on
the PA is reduced.

Total cost=salary of PAs+ inventory cost + ordering cost +cost of mistake in ordering
Hours of mistake in ordering per year= 3/60 *52*6= 15.6 hrs per year
Cost of mistake per year=15.6*17.67=278.652/year

Total cost= 149188.4+ 13800 + (62Y+X)*312+278.6552

Total cost=163267+ (62y+x)*312
Profit after using ISM= 32688.87+3200Y
Hence, by using ISM software the pharmacy company is able to get the profit by
reducing the number of PA and by decreasing the inventory cost
Summary: The ISM was an easy to use, turnkey system that minimized manual data
entry points. It was an automated inventory monitoring system. ISM eliminated all the
un-productive work & helped the pharmacists to spend more time caring for the
customers. It was easy to implement & use, customer friendly. The system would have
to be implemented only once per pharmacy & in future the pharmacy would only simply
have to purchase the upgrades.

Answer 2
The total cost to TSM for providing this service is 2500(Euros)
The competitors are charging the price between 4000 to 7500(Euros)
There are three approaches of pricing
1. Cost based pricing
2. Competitor based pricing
3. Value based pricing

1. Cost based pricing

Price= Total cost*(1+profit margin percentage)
Note:
1. Competitors are charging the price from 4000 to 7500 Euros which means
profit margin between 60% to 200%
As TSM is entering into consulting service for the first time, they should charge less than
competitors, around 100% margins.
Therefore they should charge the price approximately 5000 Euros.
2. Competitor based pricing
According to competitors price range(4000-7500), they should charge around
4000 Euros.

3. Value based pricing

Value in Use= (Va-Vb)-(Pa-Pb)
Benefits to customer

TSM is a pharmaceutical company and now entering into consulting segment.

Therefore they are known to the problems faced by pharmacy companies while
performing operations. They can give a better solution to this problem by
providing ISM software. They are able to provide more value than the
competitors.
As TSM is giving more value than competitors and has competitive advantage
over competitive firm (consultancy firms) hence TSM should charge premium
price for the service.
As TSM is providing value based service so they can charge a skim price for the
service. Hence they should quote a price between 5000-6000 Euros.

Answer3:
Different pricing tactics
Different tactics can help the organization to attract more customers and maximize
profits.
A. Discounting
TSM is entering into consulting service for the first time. Therefore they should quote
the prices in such a manner that would help them to gain market share. Discounting will
help them to be competitive in market.
B. Odd value pricing or charm pricing
One of the most common pricing tactics that company should use is to price their
products just a few pennies lower so that the first number of the price is lower.
For example, if you were using charm pricing, you would sell your products for $19.99
instead of $20 because $19.99 seems like it is less. It pushes your product into the $10$19.99 price bracket so it appears to cost much less than $20.
C. Penetration
Penetration is a tactic in which company start at a fair price and to gain market share
before competitors catch up. Once TSM have a loyal customer base in consulting, they
are able to find ways to raise prices later. They can charge more by giving more
upgrades.

D. Price bunding
TSM can use price bundling tactic to offer its product to customer. Price bundling is a
practice of selling more than one product for a single, lower price.
For example sometimes when we signed up for high-speed Internet connection, we also
get cable TV and telephone offer? If so, you probably pay less than if you were to get
the three services separately. Firms bundle products or services together to encourage
customers to stock up so they wont purchase competing brands, to encourage trial of a
new product, or to provide an incentive to purchase a less desirable product or service
to obtain a more desirable one in the same bundle.
Similarly TSM can provide its software in bundles to attract customers.