A System Dynamics Approach for Value Chain Analysis in Pharmaceutical Industry

Given the importance of increasing value in various industries, the continuous improvement of value chains has always been one of the main priorities of governments. This issue is particularly significant in key industries, especially the pharmaceutical industry, which, by ensuring public health, leads to improved quality of life. This study aims to investigate the factors influencing value chain (VC) in Iran pharmaceutical industry. For this purpose, pharmaceutical VC experts in the Sobahan Darou company were interviewed. Next, systems dynamics is used to simulate the dynamics of the pharmaceutical VC. So, the interactions of the main variables 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 examined which indicated model’s accuracy. Finally, four potential scenarios were developed based on the company s facilities and increase in marketing and sales costs, investment in skilled human resources and investment in research and development, and the effect of 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 heghest effect on customer satisfaction and emission reduction. While the second scenario led to highest increase on VC efficiency and financial strength.