Biotech s Supply Chain Transformation

Transcription

1 Biotech s Supply Chain Transformation Do We Really Need to Collaborate? October 19, 2009 Wayne McDonnell Director, Healthcare & Life Sciences 2009 AMR Research, Inc. Page 1

2 Healthcare Value Chain Coverage Model Life Sciences AMR Research is an advisory & research firm focused on supply chain and enterprise strategies Not consultants provide research based advice for strategy development In life sciences, 18 of top 20 global companies rely on our research and advice Suppliers and CMOs MFGs Wholesale Distributors Pharmacies PBMs Payers Providers Pharma Biotech Med Dev Generic Healthcare Patient 2009 AMR Research, Inc. Page 2

3 Disconnected Supply Chain Capabilities Processes & IT Deployed in Silos Across the Value Chain Actual Demand Forecast Focus on supply React CRM Demand ERP..+ Product Supply PLM Product 2009 AMR Research, Inc. Page 3

4 AMR Supply Chain Top 25 Driving Supply Chain Excellence 2009 AMR Research, Inc. Page 4

5 Apple 2. Dell 3. Procter & Gamble 4. IBM 5. Cisco Systems 6. Nokia 7. Wal-Mart Stores 8. Samsung Electronics 9. PepsiCo 10. Toyota Motor 11. Schlumberger 12. Johnson & Johnson 13. The Coca-Cola Company 14. Nike 15. Tesco 16. Walt Disney 17. Hewlett-Packard 18. Texas Instruments 19. Lockheed Martin 20. Colgate Palmolive 21. Best Buy 22. Unilever 23. Publix Super Markets 24. SonyEricsson 25. Intel 2009 AMR Research, Inc. Page 5

6 2007 Supply Chain Top 25: Stock performance 5/31/07 12/31/ Full Year Top % 17.89% DJIA -2.70% 6.43% S&P % 3.53% 2009 AMR Research, Inc. Page 6

7 2008 Supply Chain Top 25: Stock performance 5/29/08 12/31/ Full Year Top % % DJIA % % S&P % % 2009 AMR Research, Inc. Page 7

8 New Capabilities in the Context of Life Sciences Service Provider produce to demand Customer Demand S&OP Supply Supplier User/ Consumer Patient Value-Based Trade Offs Contract Manufacturer Demand-Driven Value Network A system of technologies, processes & organization that senses & responds to zero latency demand signals across a value- driven network of customers, suppliers, & employees. Product Design partner 2009 AMR Research, Inc. Page 8

9 Leaders Leverage Operations & Innovation Excellence Operational Excellence (Perfect Order, Cycle Times Total Supply Chain Cost) Leader Higher cash flow, profits, etc. Winners Continuous Business Strategy translation Portfolio of Strategic Priorities Demand-driven Product Supply Strategy Building usage insights into innovation Laggard S D P Losers Laggard Innovation Excellence (Time to Value, Return on R&D) Leader 2009 AMR Research, Inc. Page 9

10 What Distinguishes Leaders? Outside-in focus Embedded innovation Extended supply chains Balanced excellence Attitude Metrics Supply chain talent Outcome Supply chains that are Predictable and reliable Flexible and have: Profitable demand response Sustainable growth Satisfied customers 2009 AMR Research, Inc. Page 10

11 The Value Chain Transformation Becoming Demand Driven 2009 AMR Research, Inc. Page 11

12 Stages of Value Chain Transformation/Change Maturity Internally Focused Externally Focused Cost to Deliver Perfect Orders Responsive to Demand Cost to Deliver Growth and Profitability Cost to Serve Demand - Driven Build and Extend Core Demand Management Processes Customer / Brand Driven Control III IV II I Value Driven Network Joint Value Outcome Focused Performance Management Markets Focused Growth & Market Share Cost to Serve Profitable Perfect Orders Profitability Integrate and Consolidate Business Process Infrastructure Cost Focused Acquire Merge Partner Legacy Growth Business Units and Functions Revenue Focused 2009 AMR Research, Inc. Page 12

13 The Five Pillars of SC Transformation 1. Global Supply Chain Transformation seen as a Strategic Imperative Scope - end to end business growth & performance vs product supply Prioritized and operationalized from the Outside In Inside Out capabilities as base Led from CEO level 2. Downstream Processes and Collaboration Capabilities Demand, segmentation, end to end processes, visibility Immediate priorities; S & OP, demand visibility 3. Business Prioritized Information Management and IT Strategy IT enablers and an Enterprise Architecture 4. Leading and Operationalizing The Transformation Change leadership scope Change management 5. Addressing the Global Talent Skills Shortage Skills to manage the end to end business process network 2009 AMR Research, Inc. Page 13

14 The Core Elements of the Demand Driven Value Chain Customers and Patients Master Data Analytics Innovation Business Implications (Planning) & Tradeoffs (Finance & Tax ) Common Process Platforms & Processes (eg S&OP) Downstream Data/ Application Stack Business & Risk Tradeoffs S&OP Demand Translation Demand Visibility Supply Visibility Demand Management The Downstream Data Architecture Model Operations & Product Supply ERP MES Reliable Flexible Responsive Compliant Supply Capability Translation Turntable Innovation Agility by Design Profitable Perfect Order Customer Segmentation Model Sensed Demand Shaping Translations Demand Visibility & Insights Commercial Repository Demand Translation Demand Opportunity 3 rd Party Distributor Forecast Inv Reliable, Profitable Response from Supply Based on Demand Suppliers Takeaway: Visibility and collaboration are key, but risk/opportunity tradeoffs are inherent 2009 AMR Research, Inc. Page 14

15 The Journey To Agility Today s Operations Production Triggered By FORECASTS & EVENTS Produce Every SKU Every 2-wks Shorten Cycles < 3 Days Produce To Order Today, Ship Tomorrow/Today Production Plans Based on DEMAND FORECAST Customer POS Replenishment Demand Driven Replenishment Produce Every SKU Every Month FOCUS: Improve Reliability/ Capability Reduce Inventory Levels Eliminate waste and losses LEAN Produce Every SKU Every Week Produce to Replenish Inventory Journey Produce To Replenish Customer DC Inventory Withdrawal AGILITY FOCUS: Redesign Value Networks Demand Shaping Strategies Based on Value orchestrate as a system Compliant Reactive Lean and Efficient Responsive Agile Source: P&G / AMR Analysis 2009 AMR Research, Inc. Page 15

16 Process, Technology and Best Practices Combine To Improve Productivity Management Practice + Lean, 75 th percentile and above +8% +20% Business Transformation Enabled by IT 25 th percentile and below 0 +2% Intensity of IT Deployment + 25 th percentile and below 75 th percentile and above ERP, MES,. Source: London School of Economics McKinsey survey and analysis of top 100 companies in France, Germany, United Kingdom and United States 2009 AMR Research, Inc. Page 16

17 Leaders Crystallize the Operating Strategy Business strategy What are the right things to do to increase company value? Demand-driven value-network strategy What are the right ways to support the business strategy? What are the right trade-offs between value drivers for each value network? Align demand relationships Demand Networks Joint Value Creation Strategies Right product Design the Build platforms Supply supply chain strategyorganizational response systems and manage talent Design Networks Innovation Methodologies Supply Chain Network Design Business Process Continuous Improvement Capabilities Required How do I do the right things right? Align supply relationships Effective Supply Networks Execution of buyside strategies 2009 AMR Research, Inc. Page 17

18 Roadmap to the Demand-Driven Transformation Capabilities Value Network Performance Management Demand Visibility Automatic / Responsive Replenishment and Demand Shaping Global Product, Supply, and Network Optimization Value Network Redesign Downstream Customer and Consumer Capabilities Segmented Channel Management, Cost to Service Responsive Supply Demand Intelligence, Operations Sales Planning Process and Collaboration Value Chain Performance Metrics, and Master Data Management Costs to Deliver, Operations Excellence, Measurement Strategy, Cycle Time Harmonizing Core Business Processes, Leveraging IT Investments, Costs to Deliver, Strategic Governance, Value Chain Continues Improvements Strategies Predictable Supply (Right First Time) and Costs (COGS); Waste and Loss Elimination, Lean Time 2009 AMR Research, Inc. Page 18

19 Driving Supply Chain Excellence An Internal View 2009 AMR Research, Inc. Page 19

20 Leaders Derive Significant Benefits from Demand Visibility Level of change seen amongst better demand forecasters in profitability performance over the last 12 months Benefits realized as a result of demand forecast accuracy improvement 67% 42% Source: 2008 AMR Healthcare Study 2009 AMR Research, Inc. Page 20

21 Demand Regional Planning Hubs Market Demand Management Regional Planning Hubs Centralized or Center-Led Sales & Operations Planning Supply Network Management EMEA Demand Forecast EMEA Supply Plan EMEA Plants AP LA/SA AP LA/SA Supply AP Plants LA/SA Plants Demand Forecast NA Supply Plan NA NA Plants 2009 AMR Research, Inc. Page 21

22 The Hierarchy of Supply Chain Metrics: Availability and Perfect Order to Patients 20%-65% Error 77%-94% Demand Forecast Perfect Order SCM Cost days AP Cash-to-Cash Inventory Total AR 37%-69% Utilization Supplier Quality Supplier On-Time RM Inv Purchase Costs Dir Mtl Costs Cost Detail Production Schedule Variance Plant Utilization WIP + FG Inventory Order Cycle Time Perfect Order Detail Source: AMR Benchmark Analytix 2009 AMR Research, Inc. Page 22

23 Put The Customer First - High Tech Example Direct/Indirect/Partner Direct Products Supply Chain Demand Chain Business PC & Workstation Consumer PC Portables and Handhelds Monitors & Options Supplies Personal Printing Shared Printing Digital Imaging Commercial Printing Business Critical Servers Industry Standard Servers Network Storage Solutions Enterprise Solutions Consulting & Integration Sol. Managed Services Solutions Customer Support Solutions No touch Low touch Configure-toorder (CTO) High value & solutions Services Consumer SMB Public Enterprise 2009 AMR Research, Inc. Page 23

24 Large Life Sciences Example: Segmentation Volume, demand variability, technology and life cycle Commoditized Commoditized High Technology Technology Volume Specialized Short Lifecycle Long Specialized Short Lifecycle Long Commoditized Commoditized Technology Technology Low Specialized Short Lifecycle Long Specialized Short Lifecycle Long Low Demand Predictability High 2009 AMR Research, Inc. Page 24

25 The Need for a Common Definition & Platform Supply Chain Goal: Make the financial budget; Top-down focus Desire: Control and wants predictability of operations. Forecast definition: The Budget Goal: Maximize revenue & market share, wants guaranteed product availability Forecast definition: Sales Plan Sales and Marketing Demand-side Finance Supply-side Operations Goal: Factory optimization, improve costs and minimize demand uncertainty Forecast definition: Manufacturing Plan Goal: A feasible plan. Bottoms-up focus. Desire: minimize risk and disruption Forecast definition: The Demand Plan 2009 AMR Research, Inc. Page 25

26 Optimized Inventory Buffers with Postponement Strategies Cycle Stock Safety Stock Argentina Brazil DC Japan DC China FG Manufacturing days lead-time China DC 14 day leadtime Korea DC Asean Raw Material Suppliers days lead-time Singapore DC India Australia Raw material and FG at plants hold more inventory than current buffers 30% reduction in inventory simply by optimizing placement of buffers Mexico DC South Africa DC Poland Germany DC UK 2009 AMR Research, Inc. Page 26

27 Manufacturing Synchronization Synchronize production with consumption Day 1 Day 3 Day 5 Day 7 Day 9 Day 11 Day 13 Day 15 Day 17 Day 19 Day 21 Day 23 Day 25 Day 27 Day 29 Faster service response with less inventory - Improvement in response time - Eliminate excess inventory from large lot sizes Sales Inventory Key Enablers 60 Right First Time 50 Demand Visibility 40 Late Stage Postponement 30 Trade-off Management Day 1 Day 3 Day 5 Day 7 Day 9 Day 11 Day 13 Day 15 Sales Day 17 Day 19 Day 21 Inventory Day 23 Day 25 Day 27 Day 29 Faster customer response, lower inventories and reduced cost 2009 AMR Research, Inc. Page 27

28 Collaborative Practices or Relationships? Collaborative Relationships Relationship and process driven Continuous improvement to drive joint value creation Redesign for value Aligned metrics to the shelf Performance-driven business networks Collaborative Practices One off projects Suppliers and hospitals have different goals Not integrated into hospital and supplier workflows Enablers Aligned metrics to serve the patient Shared savings Joint business process innovation Cost-to-serve improvements Enablers CPFR VMI programs Data sharing: EDI, B2B, and portals Cost to Deliver Takeaway: Develop the vision that moves your organization towards collaborative relationships 2009 AMR Research, Inc. Page 28

29 The Key to Unlocking Value in Healthcare Collaboration! 2009 AMR Research, Inc. Page 29

30 Linking Strategy to Value in the Healthcare Value Chain Bi-directional Visibility Understanding Demand Inventory Management Compliance Value in Healthcare High Quality Patient Care at Optimal Economic Cost Enabling Technologies Communication Timely and Accurate Data Knowledge and Info Sharing Collaboration Sustainable Collaborative Relationships Joint Value Creation Business Process Innovation Extension of Supply Chain Services Business Process Governance Demand-Driven Value-Network Strategy Supporting the Business Strategy with Demand-Driven Capabilities Consciously Executing Value-Based Trade-Offs Outside-In Focus Coupled with Inside-Out Excellence Alignment Shared Vision and Goals Transparency Aligned Metrics 2009 AMR Research, Inc. Page 30

31 Questions? 2009 AMR Research, Inc. Page 31