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This article throws light upon the six main components of a system. The components are: 1. Sub-System 2. Synergy 3. Open and Closed Systems 4. System Boundary 5. Flow 6. Feedback.
Component # 1. Sub-System:
Each part of the bigger whole is a sub-system. These parts make the whole organisation. Each sub-system is part of the larger system which, in turn, is subÂsystem of a still larger system. For example, department is a sub-system of the organisation which is a sub-system of the industry, which, further is a sub-system of the national economy which is a sub-system of the world economy.
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Component # 2. Synergy:
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The sum total of parts is less than that of the whole. If every department works independently, total output would be less than what is produced by them together. Synergy defines relationships amongst all parts of the organisation e.g., if production and marketing departments have independent sub-departments to provide them finance or labour, it will be less efficient than a system where both (production and marketing department) are connected with one finance or personnel department of the organisation as a whole.
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Thus, systems approach does not just talk of the parts and their sub-parts but also their arrangement. All the parts and sub-parts are arranged in such a manner that output of the whole (achieved through coordination amongst subÂsystems) is more than the total of the output of individual parts.
Component # 3. Open and Closed Systems:
System can be open or closed. Open system actively interacts with the environment. It receives inputs as raw material, labour, capital, managerial and technical expertise from the environment and sells outputs (goods and service) to the society. The Government (framing the policies and imposing taxes) and competitors also interact with business organisations.
A closed system has no or very little interaction with the environment. Practically, all organisations are open systems though degree of openness with the environment varies according to nature of their operations. A manufacturing organisation, for example, is far more open than a religious organisation (a temple or a church).
Component # 4. System Boundary:
Each system has a boundary that separates it from the environment. The world outside the boundary of the system is its environment. This boundary is overlapping (flexible) in case of open system and non-flexible (rigid) in case of a closed system. More the interaction of an organisation with its environment, more flexible is its boundary. System boundaries are increasingly flexible in the modern world.
Component # 5. Flow:
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It represents the movement of inputs (men, material, money, machine etc.) into the system from the environment, their transformation into outputs (goods and services) and supply of outputs to the environment.
Component # 6. Feedback:
Feedback mechanism helps in knowing whether or not output is accepted by the environment. The information is feedback to the organisation so that organisational operations can be assessed and if need be, corrected. Feedback means response of the environment to organisational outputs.
The systems approach to management is diagrammatically represented as follows:
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- Graicunas Theory on the Span of Management | Theories | Management
The Group’s key risks are classified based on impact and probability, and categorised as being uncontrollable, able to influence or controllable.
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Analysis of risks
An overview of the Group’s key risks and mitigating activities is presented below:
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| Risk | Management or control |
Commercial | |
| Trading/Consumer | |
| Data indicates that South African consumers are still heavily indebted and trading remains slow | Regular meetings with advisors to assess changes in markets Contract manufacturing for multinationals Retrenchments implemented during the year Sales and marketing investment continued behind major brands |
| Industry consolidation | |
| Local and overseas industry consolidation can put pressure on the business at a customer, principal and entity level | Regular monitoring of international and local corporate activity, and geographical diversification in emerging markets continues, primarily Africa and India |
| Portfolio/Product management | |
| Investment in productive and innovative pipelines through in-house development, partnering and acquisition strategies to ensure sustainability Reliance on licensors and agencies for a significant portion of revenue Ageing formulations Long lead times for MCC approval of new product registrations Stringent regulatory environment | Adcock Ingram continues to interact with multinationals to gain partnership, co-promotion and distribution agreements Extending our footprint into new markets, e.g. Rest of Africa and India Diversification in over the counter products, e.g. well-being and personal care Member of PTG, SMASA and SAMED Reformulation programme in place for older formulations Identifying and assessing international acquisition and partnering opportunities Innovation is a critical outcome for our research and development facilities, now extended to India |
| Sustainability | |
| Competing for talent | |
| Skills shortages and ability to recruit top talent in certain areas of the business, exacerbated by the drive to employ suitably qualified employment equity candidates | Retention strategies have been implemented, including mentorship programmes and comprehensive wellness programmes, performance reviews and implementation of the DNA formula for success Graduate Development programme implemented to fast-track and enhance depth of managerial talent |
| Pace of transformation | |
| Participation in the meaningful transformation of our society is critical for the sustainability of our business Customer pressure to do business with transformed entities is increasing in the private sector | Further staff share allocations made during the year relating to the BEE schemes Level 3 BEE status obtained The Transformation Committee of the Board monitors all elements of the scorecard on a quarterly basis Central procurement monitors suppliers’ BEE ratings Employment Equity targets in place Owner-driver scheme successfully implemented in August 2012 |
| Safety and security | |
| Criminal activity involves monetary risk and the safety of employees and products | On-going liaison with SAPS, Ethics hotline, ongoing review and monitoring of safety and security measures |
| Environmental issues | |
| The need to reduce water and energy use, and carbon emissions Waste management | Energy audits conducted Impact on bio-diversity being explored Environmental policy and management system introduced |
| Facilities | |
| Potential disruption in supply due to upgrade of facilities Continuous supply from third party manufacturers | Significant plant upgrade and build programme now completed Annual review of insurance strategy and portfolio Increased focus on validation and quality control |
| IT | |
| Adequacy and effectiveness of IT governance and integration of IT systems | Formal disaster recovery plans and back-up strategies are in place IT structures are in place to provide support to all operations |
| Compliance | |
| Medicine regulatory | |
| The pharmaceutical industry remains a highly regulated environment and Adcock Ingram must adhere to all relevant quality standards | All facilities have been or are in the process of being upgraded to PIC/S standards All South African facilities will seek international accreditations Rigorous quality standards are applied External audits conducted on regulatory compliance |
| Legislative environment | |
| Price controls, including potential international benchmarking, the capping of logistics fees, change in State procurement methodology and National Health Insurance | Adcock Ingram is an active participant in industry organisations and proactively engages with Government The Group actively communicates legislative requirements across the business, conducting training for directors and staff on legislative issues |
| Product contamination, recall and liability | |
| Consequences of adverse drug effects, including monetary loss and reputational damage | Product liability insurance is in place Crisis management plans developed Increased focus on quality assurance Manufacturing complexity reduced at South African sites |
| Financial | |
| Supply and cost pressure | |
There are a limited number of suppliers of active pharmaceutical ingredients, and most of these supply in a foreign-denominated currency Product sales mix evolving with reduction in margins Regulated price increases not keeping pace with input cost increases | Stockholding of strategic active ingredients increased Forward cover in place on all imports Cost reduction and continuous improvement programmes in place Integration of Critical Care service functions, including distribution Central procurement function negotiates all significant cost inputs Staff reduction programme implemented in 2012 |
| Foreign exchange | |
| Currency volatility and the recent Rand weakness impact on purchase of active ingredients and finished goods sourced internationally | Forward cover taken on all imports Management performs weekly reviews of the Group’s foreign exchange exposure Inventory holdings of fast-moving items are evaluated and strategic holdings purchased when the Rand is considered to be trading favourably |
| Liquidity and trading risk | |
| Markets continue to be under liquidity pressure which could become a risk to the business in the event of a need for gearing | Investment grade status with major South African institutions and unutilised short-term bank facilities of R1 billion in place |