Posts Tagged ‘Manufacturing’

Your supply chain is costing you money – Reason #5 Not having a supply chain risk management process

Published October 1st, 2014 by John Westerveld 3 Comments

supply chain risk management

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:

Reason #5: Not having a supply chain risk management process

In today’s society, unless you are rich enough that you can afford to replace your possessions, pay for your health care, and cover your liabilities, you have insurance (unless you are poor enough that you can’t afford the premiums).  Insurance is a form of risk mitigation. Insurance protects us against theft, fire, accidents, and health emergencies and if this were to happen, it can provide for our family when we pass.   Yet, a surprising number of companies (while they have traditional insurance) do not have a supply chain risk management “insurance” aka a supply chain risk management process. To put it another way, they have insurance to protect them if someone trips on their property and sues, but don’t have a risk management process to mitigate against their top supplier going out of business.  The insurance covers what could be a million dollar risk, supply chain risk management protects against what could be a MULTI-BILLION dollar risk.

Supply chain risk can be broken out into multiple different types;

  • Geographic:  This includes natural disasters and political unrest. These are the types of issues that impact supply for an entire region.  We saw this type of issue over the past several years with the Japan earthquake / Tsunami in and with the Thailand floods.  Political issues can also have a significant impact on supply. Conflicts, government policy changes, regulatory changes and coups can mean that supply is suddenly turned off or that a market is no longer available.
  • Supplier issues: This includes quality issues, delivery reliability, financial stability, reputation, strikes, and pricing changes.  We talked about many of these issues in the first post of this series – “Offshoring without getting the full picture”. The key point here is that in today’s connected supply chain, your suppliers are an extension of your own business.  If your supplier fails financially, it will impact your business.  If your supplier goes on strike or can’t deliver for some other reason, it will impact your business. If your supplier has had a shaky human rights record, your business’s reputation can get tarnished.  If your supplier decides that you need to pay more or global currency exchange rates drive up the cost of a component (and you have no alternatives ready to go) your margins can be significantly impacted.
  • Customer Demand: Interestingly, this is often ignored when people think about supply chain risk however, it can be one of the biggest factors.  If your demand decreases, you have excess inventory or idle capacity.  If your demand disappears completely you are out of business.  If your demand increases significantly, your supply chain can be overwhelmed and delivery becomes an issue.

IT  security: This is also often ignored when thinking about Supply Chain risk.  If you’ve been watching the news lately, you know that hackers seemingly are able to access corporate records at will.  Imagine now, if hackers accessed your design systems…. Your customer records, your accounts payables / accounts receivables.  Imagine if your proprietary designs and customer records were sold to your competitors.  Not a pleasant idea to think about but something that is happening every day despite the billions of dollars spent on IT security.

In the post “Innovate approaches to Supply Chain Risk”  I describe 4 key action areas that companies developing a more systematic, focused and proactive supply chain risk management approach need to address as outlined in a report by SCM World;

  • Identifying and assessing risk – This includes visibility across the supply chain including a good understanding of the companies involved.  Leaders like Cisco and IBM utilize dialog with suppliers and customers as well as visual risk mapping and scenario planning techniques
  • Quantifying and prioritizing risk – Given that all companies operate on limited resources, focus on those areas that will deliver the biggest benefits. One way is to plot likelihood of occurrence against business impact. While this approach can work well for recurring operational risks like supplier performance, it doesn’t work as well for hard to predict incidents like natural disasters.  One approach suggested in the article is that supply chain managers assign financial impact and time to recover factors at a site and component level.  This tends to identify critical but low-spend suppliers that may otherwise be overlooked.
  • Mitigating Risk – inventory tracking and dual sourcing are considered to be the most effective risk mitigation strategies.  Also increasing use of standard components, segmented and regionalized supply chain strategies and business continuity plans
  • Speeding Recovery – Business continuity plans that have been developed and tested with suppliers are key to rapid recovery

Supply chain risk management is like insurance.  You hope you never need it, but if you do, you will consider it the best investment you ever made.

Do you have a supply chain risk management process in place? What risks worry you and how do you mitigate against them? Comment back and let us know!

 

Posted in Inventory management, Sales and operations planning (S&OP), Supply chain management, Supply chain risk management


Your supply chain is costing you money – Reason #4 Making key decisions by modelling the supply chain in Excel

Published September 24th, 2014 by John Westerveld 5 Comments

Reason #4 Making key decisions by modelling the supply chain in Excel

Making key decisions by modelling the supply chain in Excel

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:

In my career, I’ve had the pleasure of working with several top tier supply chain companies. Companies that are household names. Companies that have been in business for decades. Companies worth billions of dollars.  Companies that are forced to use Excel to manage large swaths of their advanced supply chain planning.  Companies that are starting to realize that while Excel is a powerful tool and can be used for lots of things, it isn’t the tool to use to run your supply chain.

Excel excels (if you’ll pardon the pun) at many things.  But modelling complex supply chain relationships isn’t one of them. There are many issues with using excel that have been written about numerous times in this blog.  A sampling are here, and here.

I can briefly summarize the main points;

Companies use Excel because their traditional planning systems don’t allow them to view and understand aggregate data and more importantly, don’t allow them to effectively react quickly to change.  However, because people need this information and because people (especially those in supply chain) are very smart and come up with ingenious ways to solve problems, they extract data from their ERP systems and build complex models in Excel.

So we understand why companies turn to Excel; they can’t get what they need from ERP.  Now let’s look at why Excel shouldn’t be used to run your supply chain.

Errors – Excel is a free form modelling tool – which means anyone can build a spreadsheet for just about anything.  Many of these spreadsheets are not validated or tested, meaning that the model is only as good as the persons that create the model.  Millions of dollars have been lost to Excel errors.

Everyone has their own version – While you can password protect and lockdown Excel spreadsheets it is difficult to do effectively and many companies simply don’t do it.  This means that often there are multiple copies of the same spreadsheet, all slightly different.  I’ve been in meetings where what appears to be the same spreadsheet tell different tales because someone made a data or formula change.  Eventually everyone has their own version and are all going off in different directions.

Excel is not supply chain software – it doesn’t matter how good your Excel model is, you simply cannot model the complexity of the supply chain in Excel. This means that the best you can do is build an approximation of your supply chain in Excel.  As we know, in supply chain, details do matter and the small detail that is approximated in your model might be the detail that costs you.

So if ERP can’t do it and Excel isn’t the tool, what tool can help you make supply chain decisions?  This tool needs to have the following characteristics;

End to end visibility – To make supply chain decisions, you need to have visibility across your supply chain. You need to be able to see where inventory exists, what capacity is available and what the issues are.

Simulation – The ability to create a scenario, make a change and instantly see the impact of what that change means that you can try things out and know with confidence that it’s going to work.

Full supply chain analytic model – Supply chain planning is very complex and while most vendors have similar basic logic there are many differences between systems, even within implementations of a given system.  To effectively model this logic, you need a tool that can simultaneously model the supply chain logic from all these different systems.

Collaboration - No one person has knowledge of the entire supply chain in their head.  You need to be able to work with others to resolve complex issues.  So an effective supply chain decision tool will need to allow you to quickly identify who you need to work with and then share your scenario with those people.

How do you make your major supply chain decisions? Comment back and let us know!

 

Posted in Demand management, General News, Inventory management, Response Management, Supply chain collaboration, Supply chain management


Your supply chain is costing you money – Reason #3 Not having end-to-end supply chain visibility

Published September 17th, 2014 by John Westerveld 0 Comments

LA freeway is like complex streets of supply chain

Not having end-to-end supply chain visibility

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:

Imagine this scenario.  You are a supply chain leader. It’s Friday afternoon and your thoughts are turning to the upcoming weekend with your family.  The phone rings – it’s your VP of sales. A prospect that your company has been chasing for years has finally agreed to place an order.  It’s a big one and they need it fast.  Really fast.  Inside cumulative lead-time fast.  The question is can you do it.  Can you commit to this order with confidence that you can deliver?

Traditional ERP offers a couple possible options.  1) Load and pray. Accept the order and hope / pray that everything aligns and you actually can deliver on time… maybe event at a profit. The problem with this approach is that very often, you can’t deliver and you lose a customer and worse your reputation.  2) Fire drill (I knew a company that actually called it that). This is where you e-mail each node in the supply chain with the order requirements, have everyone do a feasibility analysis on accepting the order and then wait for the results. The results, however may take several days / weeks to come in.  By that time the customer and their lucrative order have moved on.

Why are there only these two options with traditional ERP systems? It comes down to the disconnected nature of these systems. Companies that have grown through acquisition typically have multiple ERP systems distributed throughout the enterprise. Even if systems are from the same vendor, they will often be at different versions and are not interconnected.  So a scheduler at one plant has no visibility as to the inventory position, capacity or material supplies at another plant.   The only recourse is to pick up the phone or pound out an email to find out…or guess.

There is a third option, one where you can commit to a customer order with confidence. This new approach enables you to simulate the addition of the new order, see the impact across the entire supply chain, try out different options to resolve any shortages and most importantly know that you can commit to and actually deliver this order…and respond in hours not days or weeks.

This option requires a new tool and a new way of thinking. This approach requires lightning fast simulation and, most importantly, visibility to all the nodes of your supply chain. Let’s look at these one by one;

  • Simulation – To simulate the impact of a major supply chain change like a large order you need to have several things; 1) Analytics that model the results from each of the ERP systems involved in your supply chain.  2) An in-memory data model that bypasses the slow read/write cycles used by disk based systems resulting in lightning fast supply chain calculations and 3) the ability to instantly create scenarios – effectively a copy of the entire database within which you can try out multiple approaches to resolve supply chain issues 4) the ability to share and collaborate with other members of your team.
  • Visibility– Imagine trying to drive a car where you have no visibility to the side, none behind nothing out front except through a little 4” by 5” window.  Yes, you might be able to successfully navigate but the chances of you making a very expensive mistake is pretty high. The sad thing is that this is how many of us navigate the complex streets of supply chain. Traditional ERP often are siloes of information locking off other nodes because they are using different versions or worse, entirely different versions. In our drop in situation, you could have sufficient inventory at a different site but never know it because you can’t see it. But visibility goes beyond the raw data.  Many traditional ERP systems limit visibility because they are designed to show one part, one order at a time.  You cannot look at aggregated data without running specialized reports or extracting the data and loading it into a BI tool.Visibility also means understanding the impact of your decisions on key corporate metrics. Knowing that when you make a decision, that it make sense not only from the context of your department, but also for the company as a whole.

How do achieve supply chain visibility?  Comment back and let us know.

 

Posted in Demand management, General News, Supply chain management


Your supply chain is costing you money – Reason #2 Poorly executed or non-existent sales and operations planning

Published September 10th, 2014 by John Westerveld 4 Comments

sales and operations planning gears

Reason #2: Poorly executed or non-existent sales and operations planning

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous post here:

Tell me if you’ve heard this one before.  Your company has implemented an S&OP process.  At first it showed some promise, but now it has turned into a blamefest attended if at all by lower level representatives that aren’t empowered to make decisions.  No one trusts the numbers, inputs are late and you aren’t seeing any improvements month over month and people are starting to wonder “why bother”.  Sound familiar?

So how does a poor S&OP process cost money?

  • Excess and obsolete inventory. S&OP is all about aligning manufacturing and sales. When you don’t make what you sell and don’t sell what you make you create inventory.  Lots of it.
  • Lost sales.  This is the corollary to the above.  Typically companies with poor planning don’t have too much of everything.  They have too much of things that aren’t needed and too little of things that are.
  • Lost market opportunities.  Companies without an effective S&OP are typically much slower to react to market changes.  This means that their competitors will beat them into new markets and products.

A well-executed sales and operations planning process can transform a company; allowing them to better control inventory and costs while meeting rapidly changing demand pictures.  It does this by gaining alignment across the sales, demand planning, manufacturing and finance organization.  In effect making sure all areas of the company are working towards the same plan and towards the same goal.  5 years ago, I wrote a blog post in which I discussed the 3 pillars of S&OP. They are;

Process:  Trying to run sales and operations planning without a clearly defined process is like driving in a city where no one obeys the rules of the road….you probably won’t get where you are going.   If there were no process driving S&OP, then there is a very good chance that key information would not be presented (or presented poorly), key people would not be in attendance and that critical decisions would not be made.  It is important that the structure, timing and agenda of S&OP is documented, published and adhered to.   If the process needs to change due to changing business requirements, those changes need to be documented and published.

Executive Commitment:  It is very difficult (bordering on impossible) to implement an effective S&OP process without executive commitment.  Why?  First let’s ask what is the purpose of S&OP?  The purpose of S&OP is to align supply and demand and the various departments contributing to that alignment. Departmental alignment can only occur if the top level department executives are involved in the key decisions…because those top executives have the decision making authority.  Sales and Ops is a failure if the representative at the meeting needs to go back to their executive to get a decision.

Effective S&OP Tools: This includes the tools to analyze the data, present information and make decisions.  Effective S&OP tools also include the ability to integrate the data that drives S&OP.  While Excel can be fine to do the initial S&OP model, moving to the next level of S&OP effectiveness requires a more integrated, responsive and collaborative application.

S&OP is a powerful tool if performed well. Inventory reductions, improved efficiency, improved customer service and reduced expedites are all expected benefits.  However, If there is no buy in, if executive commitment isn’t there, if data isn’t reliable and doesn’t drive action your S&OP process won’t delivery these results.

Have you experienced poor S&OP planning processes?  How about excellent planning?  Comment back and share!

Posted in Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management


Your supply chain is costing you money – Reason #1 Offshoring without getting the full picture

Published September 3rd, 2014 by John Westerveld 2 Comments
Here, there and everywhere | The economist
Here, there and everywhere | The economist

Reason #1: Offshoring without getting the full picture

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  In a series of blog posts, I’ll outline these issues and discuss some ideas around how to avoid these practices.

We all understand the appeal of moving manufacturing offshore;   In many cases, offshore manufacturing is considerably cheaper, is apparently easier (just send the requirements and they build it!)  But before you pull the trigger, make sure you understand these cost factors that don’t often get considered;

Longer lead time – The product that at one time was manufactured in your plant and then shipped to your customer (often in the same country) is now being shipped by boat.   Instead of a 1 week lead-time, you are looking at a month or more.  This significantly changes the supply chain picture and must be considered in terms of additional safety stock requirements (which will drive up inventories) and your order promise policies.

Communication issues – Dealing with people in other countries has its challenges; language barriers can make communicating detailed technical issues a challenge.  Meetings are difficult to set up because one side or the other will need to take the call outside of normal business hours. And if you decide to meet face to face, you are looking at long travel times.

Increased transportation costs – Has anyone noticed that the price of fuel is going up? Kind of hard not to notice actually.   And I don’t think we are going to see fuel prices declining any time soon.  These high fuel costs impact the shipping lines too and those costs will get passed on to you.

Loss of control and oversightSupply chain is complex.  Anyone remember the complexity of managing a multi-part engineering change? Expediting multiple lines on a customer order?  Implementing a manufacturing process change, Resolving a significant quality issue? Tough to get everything working together, right?  Now imagine trying to do these things when you have no control over the manufacturing process.  The bigger issue is that in the public’s eye, there is no difference between the company manufacturing the product and the brand that owns it.  So, if the company manufacturing your goods has an accident or mistreats their employees, your brand is going to get dragged through the dirt.

Intellectual Property loss – Very often, your design, your manufacturing processes are a closely guarded secret, and rightfully so.  This knowledge is what sets you apart from the competition. When you offshore your manufacturing you are, by necessity, letting your secrets out to the world.  And because you are dealing with a foreign country you may not have recourse if the company you contracted to make your product goes ahead and copies your product.

So, as I mentioned earlier, moving your manufacturing offshore could well improve your financial position.  That being said, before you make the move make sure you investigate and consider these additional cost factors.

Do you have other costs associated with offshoring?  Have any interesting stories? Comment back and let us know.

 

Posted in General News, Inventory management, Supply chain management


What the Analysts Are Saying About…A&D Supply Chains

Published July 18th, 2014 by Bill DuBois 0 Comments

What the Supply Chain Analysts Are Saying About A and D

Are you looking for some reading material to pass the time on your next flight? Even if you’re not you should check out Supply Chain Insights, Supply Chain Metrics That Matter. For the past several years, Supply Chain Insights has been delivering this research series.  What caught my eye is that for each report, they do a deep dive on a specific industry and use a mix of financial data, survey research results and interactions with their clients to help get a better understanding of various industries’ supply chains.

I spread my Supply Chain wings at an Aerospace company and since Aerospace and Defense is a key vertical market for Kinaxis, the recent Supply Chain Metrics That Matter: A Focus on Aerospace & Defense report was downloaded on my laptop to read on my next flight. The research benchmarks A&D companies against other industries and looks at the top five A&D companies over the last decade. Although it didn’t give any suggestions on what to do when you find yourself in row 32, you know the one next to the washroom, it did discuss the challenges the industry is facing as well as offering up solid recommendations for areas of improvement.

From a challenges perspective, here are the highlights covered in this report.

The obvious challenge is the complexity in the A&D industry. The report uses the Boeing 747-8 International as an example. It has about 6 million components which are manufactured in 30 countries by 550 unique suppliers. Think about those design, sourcing and delivery challenges. I always thought getting through security these days was complex.

With such a heavy reliance on first, second, third, fourth and fifth tier suppliers and in some cases having only one or two suppliers for specific components, it’s easy to see how delays and budget overages can happen. A supply chain based so heavily on external sources is susceptible to more risk than catching a flight on time out of Newark. As Supply Chain Insights mentions, this is having a significant impact on the company’s bottom line.

Interestingly, to help address the issue of ensuring materials are available when needed; the research indicates that A&D companies have “developed some of the most advanced sourcing techniques and practices.” Companies like Lockheed Martin, are looking at new strategies for materials (raw or otherwise) that are harder to source, especially in the cases where increased Supply Chain volatility have thrown a wrench in their “Just In Time” approach. The challenge is balancing reduced material delays with rising inventory levels and longer Days of Inventory.

To help address these challenges, Supply Chain Insights makes a few recommendations that I think are spot on. Suppliers, in particular of materials that are sole sourced, play such a large and important role in the A&D supply chain, it’s vital that there be a focus on supplier collaboration and communication at every level.  A big part of this is increasing visibility into the supply chains to ensure they can anticipate and plan for potential disruptions. Focusing in these areas will help reduce supply chain risk, and make A&D companies better prepared to deal with inevitable disruptions when they do occur.

Thanks to Metrics That Matter, not only did I get some valuable A&D insights but it took my mind off of sitting in row 32 on a delayed flight out of Newark. The report covers a lot more ground than what I’ve discussed here, so feel free to download a full copy of Supply Chain Metrics That Matter: A Focus on Aerospace & Defense report here. (No registration required.)

Posted in Best practices, Demand management, General News, Supply chain collaboration, Supply chain management


Three Distinct Capabilities of Best in Class – From the supply chain leadership series

Published April 16th, 2014 by CJ Wehlage 2 Comments

supply chain leadership seriesAs I mentioned in my last post of this series, I am starting a blog series on “supply chain leadership”. I hope to pose thought provoking, and forward looking questions to executives in my supply chain network. This series will provide insights into the most pressing challenges, innovative items in supply chain leader’s budgets, and how these executives have handled talent, complexity, end-to-end S&OP, and technology. Next up is Clarence Chen, Partner at AT Kearney.  I have known Clarence from his days at PRTM as Partner of Electronics & Semiconductors.  His background and opinions on the future of supply chain is truly fascinating.

1. As we enter 2014, how would you describe the most pressing supply chain challenges?

Some of the most pressing supply chain challenges in 2014 continues to be that of delivery, quality and cost.  I think the factors that compound those challenges are changing at a faster pace than most industries are able to cope with, thereby making attainment of the core supply chain objectives even more challenging.

There are two vectors for those factors:

1)  At a geo-demographic level there are the shifting patterns of demand and growth along with cost factors rising quickly in some geographies/countries and inputs into production.

2) At a technological level, the pace of innovation continues to accelerate.  Not only is the pace of NPI increasing in technology, but that same clock speed is now moving into broad sectors as trends such as the internet of things/devices become more pervasive beyond traditional high tech penetrating into industrial, healthcare, automotive sectors, etc.

To cope with these factors, companies have to rethink the core supply chain capabilities of plan, source, make, deliver and the skills and resources required to manage supply chains in 2014 and beyond.   Companies will need to manage with greater precision, tightness, and control over their supply chain assets and partners. Those who don’t master that well will risk high E&O and overall inventories, supply-demand mix issues which impact service levels, and slow response times to changing market demand patterns

2. The End-to-End supply chain strategy has been well documented. What capabilities does your company have that is better in class for integrating end to end?

The best-in-class companies have three distinct capabilities that are more developed than others.  First is a thorough mastery of the demand management process – not just focused on forecasting, but on developing a better “quality” of demand.  This emphasizes factors such as being able to understand whether shifts in demand represent a timing issue driven by big deals, or whether the market is fundamentally at new level of demand, and then driving the rationalization of actual demand against a plan. Second is an ability to propagate demand across an extended supply chain, taking into account the key control nodes and depth of the supply chain, and balancing that against supply, inventory, service and supply chain level constraints. Third is the ability to collaborate with key long lead time suppliers to ensure that they are able to meet the forecast and execute against actual requirements. This direct control of the end-to-end supply chain minimizes bullwhip effects, and enables the responsiveness required in today’s volatile environments.

3. How aligned and connected are you to the many supply chain nodes?  What are the reasons you would want to improve this alignment?

Back in 2010, on the heels of a severe component shortage environment as companies emerged from the 2008 market downturn, I conducted a survey with 14 leading computing and storage companies to better understand how some coped better than others with the upswing in demand, and extreme supply shortages.  The findings validated that those companies with greater visibility and control of their extended supply chain fared much better in recovering supply than those companies that did not.  By visibility and control, it means that those that had visibility at component level, and sometimes at tier 3 level visibility, coupled with planning and orchestration across the extended supply could then proactively allocate precious supply to demand priorities and manage tightly the placement of P.O.s at the extend lead times. In particular, those that modeled what their contract manufacturers and key supplier suppliers (e.g. die banks with silicon devices) and were able to balance S-D at each node fared the best.

I love Clarence’s insights, especially on the main challenge: delivery, quality, and cost.  These are the core objectives from the past 20 years, and remain the core challenges.  However, as he notes, demand demographics and speed of NPI cycles are stressing the core in new ways.  Most people want visibility.  But, a lot don’t drill into the question, “What will you do with visibility?”  As Clarence notes, the quality of demand needs to improve.  What segments are relevant?  You need to propagate this relevance throughout your supply network.  What are the insights to this change?  And, then you need to collaborate with the key nodes to execute the change.

You can see those supply chains that can prioritize change, analyze the end-to-end impact, and collaborate in real time are doing so with better margin  and operating costs, capturing more market share, and controlling supply chain risk and disruptions better.

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Posted in Demand management, General News, Inventory management, Sales and operations planning (S&OP), Supply chain collaboration


7 Life Sciences Supply Chain Processes That Require an Integrated Approach

Published April 7th, 2014 by Trevor Miles @milesahead 0 Comments

The emerging or intensifying industry dynamics that I discussed in an earlier blog post, along with significant shifts in strategy, are having a direct and material impact on the way Life Sciences supply chains must operate. The compounded effect of a host of complexity drivers is creating the need for supply chain transformation. By satisfying the following seven supply chain processes in an integrated manner, Life Sciences teams will be better equipped for success in today’s new, complex world.

  1. Collaborative launch management – clinical, regulatory and commercial
  2. Jurisdictional control to respect regulatory needs during planning
  3. Consensus demand planning across affiliates and countries
  4. Risk evaluation and recovery to deal with shortages and FDA shutdowns
  5. Shortage analysis and reporting for FDASIA compliance
  6. Supply and capacity planning to balance demand across regions
  7. Expiry management to balance long supply lead times and shifting demand

Let’s take a look at each of these in more detail.

Coordinated Launches

The effective launch of a new product is critically important in any industry, but it is of particular importance in the Life Sciences industry given the long time it takes to bring a new drug to market from discovery through clinical trials and commercialization, with regulatory oversight and conformance throughout the process. When the ‘long tail’ trend is coupled with shorter patent protection, the margin and market captured during the early launch period will be crucial to the recovery of the R&D investment, and thus the pressure to streamline and coordinate clinical trials and the regulatory process with the commercial launch has become intense.

Revenue Trends throughout the Product Life Cycle

phamacutical supply chain graph

Jurisdictional Control

In addition, mandates by regulatory bodies require jurisdictional control of demand satisfaction to account for third country sourcing, validation, and shelf life requirements, amongst others. This requires sophisticated attribute based planning to link demand characteristics to supply characteristics while simultaneously analyzing and reducing expiry risk, especially when inventory postponement strategies are used.

Consensus Demand Planning

For tax, legal, and regulatory reasons, many Life Sciences companies establish semi-independent sales affiliates or subsidiaries in some jurisdictions or sell through third parties. Creating a consensus demand plan across all the affiliates and subsidiaries is not a trivial task. Often, each demand region will forecast in different units (doses, standard packs, grams of API, etc.); almost always in different currencies; at a different cadence (quarterly, monthly, weekly); and over different time horizons. However, manufacturing needs to create a single forecast using a consistent unit of measure so that they can net the demand against available supply and determine future manufacturing capacity needs. To make matters worse, the affiliates are often less than fully transparent about their on-hand inventory.

Risk Evaluation and Recovery (including Shortage Analysis and Reporting)

Current technical architectures do not provide the capabilities needed to address new requirements under FDASIA ̶ reporting obligations for drug shortage issues and more active inspection of production facilities for instance. Information flow is typically limited to EDI exchanges with little or no ability to understand, for example, the impact of an API supply de-commit on future treatment —drug or device— availability in a regulatory region. To do this, Life Sciences companies will require much greater visibility and what-if scenario capabilities to both inspect and affect the global supply chain across Third Party Operators and into the supply base.

Tender Analysis and Management

Many manufacturers lack the required process standardization in manufacturing, inventory and expiry management, and other core business disciplines to make the required trade-offs during tender analysis between demand satisfaction, expiry risk, and constrained capacity utilization, ultimately leading to effective supply and capacity planning to balance demand across regions. Collaboration across the players in the supply chain is often insufficient and inefficient to achieve these tradeoffs. Given the harsh penalties imposed for non-conformance, being able to make the trade-offs to maintain profitability span the life cycle of the tender, not simply the tender acquisition phase.

Expiry Management

Streamlining manufacturing and distribution processes in order to satisfy demand while reducing unit cost is therefore becoming increasingly important in order to maintain profitability, reduce inventories and enhancing competitiveness within the industry. This is especially true given the long manufacturing lead times, often as long as 12-18 months in bio-pharmaceuticals, which lead to the need for expiry risk and stop sell analysis capabilities to balance effective demand satisfaction with efficient capacity utilization.

A New Technology Paradigm for a New World

phamacutical supply chain graph #5Legacy demand planning and supply chain planning systems were not designed for today’s complexities, and consequently don’t meet the many challenges that have emerged. As a result, Life Sciences companies are adopting process improvements and new technologies targeted at removing business “silos,” improving collaboration, and increasing productivity.

For a true breakthrough, you need an integrated solution. People must be able to leverage a single system with one set of data, supported by comprehensive analysis and decision-making capabilities, no matter what the process or the problem.

To keep a finger on the pulse of the supply chain, today’s solutions must:

  • Embrace the reality that today’s supply chains are multi-enterprise in nature and, thus, must provide comprehensive visibility into the extended supply chain to regain an understanding of the manufacturing commitments and inventory positions throughout the supply network. Visibility is an essential pre-requisite for effective orchestration of the business.
  • Proactively bring to light major variances to plan, identifying not only specific events, but also identifying and quantifying the consequences to customer service, revenue, margin, and a number of other financial and operations metrics, and thereby flagging those that could do most harm to the business.
  • Arm decision-makers with scenario simulation capabilities for risk trade-off and response, to model and compare situations quickly and appropriately to ensure a profitable response is put into action. And it must facilitate and incorporate human judgment, since many of the decision requirements are extremely difficult, if not impossible, to capture in a mathematical model — the foundation of an optimization system.
  • Foster collaboration for team-based decisions that tap the collective insight of the right people in the organization — those that understand the potential impact of any event and proposed action alternatives.

 

Posted in Best practices, Demand management, Milesahead, Pharma and life sciences supply chain management, Supply chain management