A Biopharma Supply Network Design with Capacity Planning at Dendreon Corporation
Marouen Ben-Jebara
University of South Carolina Aiken, USA
Volume 14: 2020, pp. 29-52; ABSTRACT
Dendreon Corporation was a pioneer in the development and distribution of the first personalized prostate cancer treatment in the United States. In 2009, the company decided to invest in three manufacturing facilities, which added tremendous operating costs without a substantial increase in drug demand. This resulted in major financial problems with underutilized capacity. In 2012, the Board of Directors voted to close one of its three processing facilities located in California, Georgia, and New Jersey. The case study analyses the strategic decision for the company to expand its capacity without having a demand stabilized. It highlights the rationale behind such a decision, the consequences, and the possible solution to fix the situation. The decision to close one of the locations can be based on many factors. Given the nature of the product (highly perishable) and the nature of physical flow (bi-directional), transportation costs represent a major component of the Selling, General, and Administrative costs, and therefore selecting a location that minimizes the potential cost is crucial. The case study analyzes the current transportation network for Dendreon Corporation and provides recommendations to close a facility that will minimize the total transportation cost. A theoretical optimal configuration of using non-linear programming is proposed as well as multi-locations centroid methodology is developed.
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