IBP AT MERCK. Supply Chain Logistics summit - Barcelona. Didier Dayen Senior Director Global Advanced Planning. June 19 th, 2017

Transcription

1 IBP AT MERCK Supply Chain Logistics summit - Barcelona Didier Dayen Senior Director Global Advanced Planning June 19 th, 2017

2 Content Who is Merck? IBP concept Benefits & Key Success Factors Conclusion 2

3 Content Who is Merck? IBP concept Benefits & Key Success Factors Conclusion 3

4 Who we are - History Nearly 350 years of experience for patients and customers Friedrich Jacob Merck purchases the Angel Pharmacy (Engel- Apotheke) in Darmstadt Emanuel Merck begins production on an industrial scale In 1887, Merck opened its own office in New York, which gave rise to the subsidiary Merck & Co. three years later. Our U.S. subsidiary Merck & Co. is expropriated as a consequence of World War I WE ARE MERCK THE ORIGINAL Merck the original holds the global rights to the Merck name and brand. Exceptions are Canada and the United States, where we operate as EMD Serono, MilliporeSigma and EMD Performance Materials. 4

5 What we do Healthcare Prescription drugs and solutions to treat cancer, multiple sclerosis, infertility, cardiovascular and metabolic diseases Over-the-counter products for a healthy lifestyle Allergy products and (biosimilars) Life Science Innovative tools and laboratory supplies for the life science industry that make research and biotech production better, faster and safer Broad and in-depth portfolio of 300,000 products Industry leading e-commerce platform, SigmaAldrich.com Award-winning innovation Performance Materials A wide range of high-tech chemicals, such as: Liquid crystals and OLED materials for displays & lighting Effect pigments for coatings and cosmetic products Specialty chemicals for the semiconductor industry Functional materials for solar panels 5

6 Healthcare Our key therapeutic areas Oncology Neurodegenerative diseases Fertility Endocrinology CardioMetabolic disorders Erbitux Rebif Gonal-f Saizen Glucophage Colorectal cancer, head and neck cancer Relapsing multiple sclerosis Infertility Luveris /Ovidrel Female infertility Growth hormone disorders Serostim HIV-associated wasting Type 2 diabetes Concor Cardiovascular diseases Euthyrox Thyroid disorders 6

7 Our business sectors in numbers 2016 Sales in million EBITDA pre exceptionals * in million Research and development in million 2,511 6,855 1,106 2, (17%) (45%) (23%) (43%) (13%) (11%) 5,658 1,652 1,496 (38%) (34%) (76%) 15 bio 4.9 bio 2 bio Healthcare Life Science Performance Materials 7

8 We are global Sales by region 2016 in million Employees by region 2016 (as of December 31) 1,136 (8%) 559 (4%) 4,735 (31%) 4,140 (8.2%) 1,045 (2.0%) 24,438 (48.5%) We operate around the world and have a strong presence in growth markets. 129 nationalities are represented at Merck and our employees work at sites in 66 countries around the world. 4,736 (31%) 3,858 (26%) 10,754 (21.3%) 10,037 (20.0%) 15 bio 50'000 Europe North America Asia-Pacific (APAC) Latin America Middle East and Africa (MEA) 8

9 Global Supply Chain organization From Local Steering C2 C3 C2 C3 C2 C3 C2 C3 C2 C 3 To Global Steering C2 C3 C2 C3 C 2 C3 Affiliate 1 Affiliate 1 Affiliate 2 Affiliate 3 Affiliate 4 Affiliate 5 C2 C3 C2 C3 Affiliate 3 Affiliate 4 Affiliate 5 Affiliate 2 C2 C3 C2 C3 Affiliate 6 Affiliate 6 Global SNO MDA Semoy Subcontractors 9 Spittal Mollet Mexico API Other MDA Semoy Subcontractors Spittal Mollet Mexico API Other

10 Content Who is Merck? IBP concept Benefits & Key Success Factors Conclusion 10

11 Integrated Business Planning (IBP) Demand Planner we forecast 200 Commercial: due to our sales initiative we will sell 400 Manufacturing: we have capacity for 350 Integrated Plans Finance: we have budget of

12 One single plan aligned between Commercial, Controlling and Supply Chain Integrated Business Planning The IBP main objective is to align different business forecast into one integrated plan providing higher transparency, increased efficiency, better financial forecast (OP, Fn), improved gap identification, better supply chain decision, faster definition of mitigation plan The Integrated Business Planning is the evolution of S&OP into a fully integrated management and supply chain collaboration process Oliver Wight, White Paper series 12

13 The IBP process is based on a sequence of meetings on local, regional & global levels 13

14 Constrained Forecast and Best Estimate reflect risks in Unconstrained Forecast Risks in Unconstrained Forecast Starting Point / Baseline: Unconstrained Forecast Supply Risk Reflection: Constrained Forecast Demand Risk Reflection: Best Estimate Tender Forecast Market Forecast Unconstrained Forecast Forecast by SNO & Commercial based on statistical forecast, historical demand and market outlook Complemented with demand from specific tender opportunities Includes demand with medium to high probability (~60-90%) Does not include demand with very low probability (~30%) Unconstrained Forecast Supply Risk Constrained Forecast Due to e.g. limited capacities, supply chain might not able to completely fulfill the unconstrained forecast Volumes which potentially cannot be fulfilled are called Supply Risks and are deducted from unconstrained forecast Resulting Constrained Forecast is commitment from SNO on what they will be able to deliver Unconstrained Forecast Demand Risks & Opportunities Best Estimate Unconstrained forecast includes volumes which will materialize with medium probability Volumes which potentially might not materialize are called Demand Risks & Opportunities and are deducted from the unconstrained forecast Resulting Best Estimate is commitment from Commercial on what they will be able to sell 14

15 Consensus Forecast equals minimum of Constrained Forecast and Best Estimate Breathing space: Our weapon against political forecast Full transparency on forecast and Demand risks / Supply constraints in JDA Calculated in JDA Maintained in JDA Maintained in JDA Maintained in JDA Calculated in JDA Calculated in JDA Consensus Forecast equals minimum of Constrained Forecast and Best Estimate (conservative view) Constrained Forecast Supply Constraint Unconstrained Forecast Demand Risks Best Estimate Consensus Forecast Breathing Space 15 Production Planning Un/Constrained forecast: What do we plan for Consensus forecast: What can we commit to Breathing space: difference versus the financial commitment (Consensus Fcst) and the forecast used for production (Uncon. or Constrained Fcst) Gap (<X%) allows development of business beyond current financial commitments Financial Planning Financial outlook (monthly) & Financial Forecast (quarterly): F1, F2, F3, OP

16 There are 4 key aspects within the IBP Process IBP Concept Cornerstones Bottom-Up Approach Globally standardized Bottom-Up approach for translation from volume to value Sequential aggregation of results from local via regional to global level Aggregation from SKU to Business Franchise level Integrated Forecast & Plans Consideration of different functional interests for achieving a consensus forecast Flexibility corridor between conservative financial commitments and business development ( Breathing Space ) Cross-Functional Alignment Formal alignment between Finance, Commercial, SNO, GM Cross-functional agreement on balancing risks & opportunities Jointly derived decision and action plans Single Source of Truth JDA / SAP-IBP leveraged as main tool for forecasting across functions (volume and value) using FusionOps/SAP IBP as reporting tool Interfaces through systems to meet functional requirements (Gauss, DPT) 16

17 JDA/SAP is leveraged as master tools across functions Technical Realization of IBP (high-level) Input Controlling BW Actuals in value and quantity OP 2016 Master tool F1/F2/F3 Operational Plan 2017 Output Controlling BW JDA leveraged as main tool Interfaces between JDA and controlling systems IBP Executive Dashboard available to all functions at local, regional and global levels 17

18 Content Who is Merck? IBP concept Benefits & Key Success Factors Conclusion 18

19 Perfectly aligned OP/Plans between Commercial, Controlling and GMS IBP main Benefits We have managed for the first time ever, in 2016, to prepare the 2017 OP in a fully integrated manner between Commercial, Controlling and GMS PERFORMANCE FINANCIAL FORECAST An increased performance on sales, service and costs thanks to the more reliable demand/supply balancing, the new breathing space concept and the daily demand alerts 1 2 A streamlined, cross-functional and integrated process for F1, F2, F3 and OP submissions and monthly LBE evaluation PEOPLE Engaged and aligned crossfunctional teams at local, regional and global levels structured around a well-defined IBP process 3 4 DIGITAL IBP Digital IBP providing real time visibility on next months future sales, Gross Margin projection & Price-Volume effect 19

20 Key success factors Strong Top-Management support (COO, Global Controlling, Global Commercial, SVP Supply Chain) Based on existing - S&OP process - JDA planning tool Agile development Strong focus on Financial alignment on initial phase 1 Team work Supply Chain, Commercial and Controlling at local, regional and global levels Key milestones IBP Project Kick-Off on Apr 2016 Worldwide roll-out in 50+ countries (>400 people trained) F2 delivered on Jul 2016 (>5 500 items planned) F3 delivered on Sep 2016 and final OP 2017 on Dec. 20

21 Content Who is Merck? IBP concept Benefits & Key Success Factors Conclusion 21

22 4 things to remember about Merck BioPharma 1) Bottom-up sales forecasting 3) Breathing space for upsides Each item Each month Quantity Supply Planning Financial Planning Value Unconstrained SFOR Breath. Space Consensus SFOR 2) Monthly Financial alignment 4) Single source of truth Commercial Controlling GMS 22 One set of numbers IBP Dashboard available to all

23 IBP AT MERCK Supply Chain Logistics summit - Barcelona Didier Dayen didier.dayen@merckgroup.com