How the Global Supply Chain Organization is Managing the Transition at Eli Lilly & Company. Ronald Bohl

Transcription

1 How the Global Supply Chain Organization is Managing the Transition at Eli Lilly & Company September 2009 Ronald Bohl

2 global research based pharmaceutical company dedicated to creating and delivering innovative pharmaceutical based health care solutions $12.3B $20.3 billion sales 19% reinvested in R&D 40,500 employees in 146 countries Human Health Products: Strattera, Cialis, Zyprexa, Cymbalta Prozac, Humulin, Evista, Xigris, Gemzar, Alimta, Fosteo, Humalog, Byetta Animal Health Products: 21 manufacturing sites 92 contract manufacturers 160 Sales affiliates / DC s Page 2

3 Lilly s Supply Chains Supply Chain Complexities: - # of products 420 dosage formulations going into 2850 SKU s - technology (tablets, capsules, vials, cartridges, patches, devices) - bulk technology (fermentation, recovery, biotech's) - Quality model (laboratory, regulatory reqt s) - Product protection distribution, storage, anti-counterfeit serialization, tampering - Product life cycle CMO s Affiliates Hospital Fill - finish sites Co-Marketing Pharmacy Patient Vendors Bulk sites Page 3

4 Product Life Cycle is all about making the right decisions at the right time Supply Chain Design Supply Chain Operation % of cost fixed Lilly Research Must happen during development to support regulatory requirements Must balance risk of clinical failure with speed to market of successful products Submit Must enable a robust and responsive supply after launch Process design & construction Capital Funding Must ensure 98% customer service in all scenarios Must effectively utilize fixed assets and working capital Must adapt to the marketplace in spite of regulatory influences Must optimize capacity and inventory across the supply chain 0 Hypotheses Generation Capacity & Sourcing Candidate Development Commercialization LAUNCH On the average we are looking at a time period of 10 years prior to launch. Production Page 4

5 Supply Chain Operations: maintaining 98-99% customer service level and maximizing profitability Hypotheses Generation Supply Chain Design Candidate Development Commercialization Global Supply Chain Operations 1. Demand Management 2. Inventory, risk & Customer Service Level 3. Supply chain Key global processes planning 4. Global Capacity Balancing and Profit Maximization Production 5. Launch Management 6. Operational Excellence Supply Chain Operations LAUNCH Page 5

6 Issues Facing Lilly Today Gap in the pipeline of new products along with loss of key patents will reduce demand Pressures for health care reform create uncertainty Worldwide recession puts pressure on spending Cost reductions required to fund research Emerging markets require investment New Products require investment Increased product requirements for safety Lilly desires to meet worldwide health care issues Page 6

7 What is Global Supply Chain Doing? Maintain excellence in operating the Supply Chain Processes Operating Standards for Supply Chain Excellence Page 7

8 What is Global Supply Chain Doing? Maintain excellence in operating the Supply Chain Processes Operating Standards for Supply Chain Excellence Assure Sales & Operations Planning (S&OP) processes are maintained Page 8

9 Sales & Operations Planning Occurs at 3 Levels: OBJECTIVE Assure global supply is optimized across the supply chain to meet the total global demand Unit of Measurement--Level 10 Kgs ,107 5,550 6,022 6, , Aug Aug-16 5,960 5,550 6,368 6,586 7, Feb-13 4,790 4,790 8,289 11, Jul-12 5,107 5,550 6,022 6, ,801 5,550 6,022 6, ,000 11,000 10,000 9,000 Level 10 Kgs 8,000 7,000 6,000 5,000 Supply Chain Global S&OP 4,000 3, Forecast-Base Demand Used GDMS 8 Qtr GMR 5 Year Signal Forecast Rolling Forecast Production Plan (Level 10) Production Capacity (Level 10) Previous Demand Signal Product A Global Plan Site Lead Team Site S&OP Affiliate Lead Team Affiliate S&OP OBJECTIVE Assure demand realization and high levels of customer service are achieved considering all sources of supply OBJECTIVE Managing capacity and cost to assure all demands pointed there way are met on-time and in-full Page 9

10 What is Global Supply Chain Doing? Maintain excellence in operating the Supply Chain Processes Operating Standards for Supply Chain Excellence Assure S&OP processes are maintained Streamline the processes - (Lean Six Sigma) Page 10

11 Lean Six Sigma at Eli Lilly & Co. Page 11

12 What is Global Supply Chain Doing? Maintain excellence in operating the Supply Chain Processes Operating Standards for Supply Chain Excellence Assure S&OP processes are maintained Streamline the processes (Lean Six Sigma) Reduce complexity Synchronized Lean Page 12

13 Results in: Orders Orders Avg Order Size 7,714 8,989 4,373 13, ,000 10, ,000 10,000 15,000 An increase in Packaging orders by 76% While simultaneously the average order size decreases by 34% This means packaging will experience more packaging setups while each order spends less time on the equipment June 19, 2009 R Bohl GSC

14 One Typical Solution Labor Machine Total Labor hours Total Machine hours Add 40% more direct and indirect labor Thousands Headcount (FTE) Thousands Setup% 38% Add 4 more packaging lines % % 20% 40% Packs/FTE Packs/Machine hour , , ,000 Thousands 0 1,000 2,000 Bottom line: Cost per pack increases by 14% when the market demands less cost June 19, 2009 R Bohl GSC

15 Alternative to Managing Complexity Customer Service Implement a Synchronized Lean program to meet the increase in demand without adding cost Inventory Cost Lean principles applied in manufacturing attack the sweet spot of the usually conflicting objectives June 19, 2009 R Bohl GSC

16 Creating a Lean Vision FAT COW Current State: # products 958 Volume: 65,000,000 # orders 5000 A replenishments 10 B replenishments 6 C replenishments - 3 Set up time 2.5 hours Set up hours 11,960 Direct labor hours 116,700 Indirect to direct hdct 3/1 Lead time 34 days Cycle time 13 days Remaining shelf life 84% June 19, 2009 R Bohl GSC Path forward requires 1. Commitment 2. Vision 3. Consulting / Education 4. Governance 5. Tools / Processes along the transition Future State: # products 1100 Volume: 75,000,000 # orders 7700 A replenishments 10 B replenishments 8 C replenishments - 6 Set up time 1.2 hours Set up hours 11,500 Direct labor hours 154,000 Indirect to direct hdct 1.5/1 Lead time 10 days Cycle time 3 days Remaining shelf life 92% Lean, Flexible Cow

17 Synchronized Lean Flow in Packaging Implement pull system (Kanban capacity signal) to trigger authorization to produce Daily / shift Dispatch List for each of the twelve packaging lines sets priority and triggers the pull. Push product through based upon lean six/sigma tact time Purchase Materials Inspect Materials Dispense Packaging QA QA Dispatch list without dates determine next item to produce only triggered through kanban pull signal QP Optimize Packaging Optimize Shipping Pick / Pack & Ship June 19, 2009 R Bohl GSC Eliminate by incorporating in Schedule. Identifying capability across 12 packaging lines and incorporating shipping sub optimization to align weekly packaging schedules. Use calendar logic in SNP to accommodate. Total Lead time 10 days

18 The journey to a Synchronized Lean finishing environment Current status Implementation of Replenishment Repetitive Cycles Use of SOQs Each SKU managed individually (unique & time-consuming plans every time) Sub-optimization of different steps leading to long and variable lead times Complicated shipment consolidation With improved capacity reduce the number of shifts and capacity on each line reducing local cost. After a first round of improvements Decision? Capitalize on improvements locally Use of POQs (variable Qty) Fixed schedules in Mfg (product Change-over wheel). time reductions Easier to (SMED) manage. and additional improvements Synchronization derived of from Mfg and the repetition of the Shipping: fixed schedules shorter lead mean times less and capacity The requirements. frequency easier shipment of As replenishment a result: consolidation is increased. This Capacity means More constraints more stable orders inputs alleviated to fill to MRP the and/or available capacity no need No that to invest more would orders in help capacity and to reduce no (cost more inventories, improve avoidance). capacity shelf-life requirements and less dependency than currently on sales forecast Alternatively, being accuracy. utilized more These volume benefits can be would be realized managed at with the expense existing resources. of the manufacturing capacity to manage more orders, although higher levels of repetitions may deliver other benefits faster. Leverage local and external opportunities: Synchronized Lean environment Local benefits (Mfg) External benefits (DCs)

19 What is Global Supply Chain Doing? Maintain excellence in operating the Supply Chain Processes Operating Standards for Supply Chain Excellence Assure S&OP processes are maintained Streamline the processes (Lean Six Sigma) Reduce complexity Synchronized Lean Project Tango Page 19

20 Communications with Contract Manufacturers Lilly has 92 Contract Manufactures, approximately 60% are strategic in our supply and demand realization processes Gathering information is difficult and resource / time consuming Creating a collaborative environment where data can be shared and information flows are timely does not exist Who s driving and who s riding? Page 20

21 Collaboration Vision CMOs and Suppliers Internet LillyNet Toolbox Collaboration Services Identity Management Access to Web Services Business Process Management Quality Management Non-Conformance Management CAPA Management Product Complaint Management Adverse Event Management Batch Release Certificate of Conformance Demand & Supply Demand Management Planning Supply PO or Process Orders Inventory Management Material Testing Test Methods & Specifications Sample Management Test Request / Results Certificate of Analysis All provided in a configure to CM package Technical Transfer Mfg. Process (MBR, Tickets) Engineering Change Process Validation CM Approval CM database -Identity -Joint Operations Group -Roles Company Confidential Copyright 2008 Document Management Mfg. Requirements (Contracts) Quality Agreement SOPs Batch Records Regulatory Affairs Submissions Variances Annual Product Review 21

22 Project Tango Overall Implementation Strategy Elements Design to Pilot Global Implementation Face of Lilly SNC - sap Life Cycle Document Management Regulatory Affairs Material Testing Quality Management Design Develop Test Validate Revise design if needed Document Dev Go no/go Dev. Education / Training / user manuals CMO & CM Operate Pilot / s Evaluate Go no/go Pre-operation Selection Approval Training IT requirements Operation Support Governance Problem ID Resolution Stabilization Evaluate go no / go Assure walk away Ready for Prime Time Global implementation into CMO and CM s Technical Transfer

23 High Level Implementation Plan Create the Vision Life Cycle Mgmt *2009* *2010* *2011* J F M A M J J A S O N D J F M A M J J A S O N D J F M A MJ Communicate and Configure design /test Face of Lilly STD GLB PRO design / test pilot Rollout (1) Document Routing (Regulus) STD GLB PRO design / test pilot Rollout (1) GBIP Supply Demand SNC Rel 19 design / test pilot Rollout (2) Document Electronic Sig. (Regulus) STD GLB PRO design / test pilot Rollout (2) Material Testing(GLIMS) STD GLB PRO design / test pilot (?) Rollout (3) Quality Mgmt (Trackwise) STD GLB PRO design / test pilot (?) Rollout (3) Regulatory Affairs STD GLB PRO design / test pilot (?) Rollout (3) GBIP Supply Demand SNC Rel 21 STD GLB PRO design /test pilot Rollout (3) Reporting Company Confidential Copyright 2008 Page 23 23

24 What is Global Supply Chain Doing? Maintain excellence in operating the Supply Chain Processes Operating Standards for Supply Chain Excellence Assure S&OP processes are maintained Streamline the processes (Lean Six Sigma) Reduce complexity Synchronized Lean Project Tango Postponement / Distribution Page 24

25 AH Postponement / Distribution Strategy Base sites producing unlabeled bags based upon demand signal coming from Central Supply Chain Finishing RDC s producing labeled product based upon short term sales order demands Base Site Molecule Mfg Regional Distribution Center - Finishing Safety stock of unlabeled bags is kept at the base sites to protect against the variability of supply Safety Stock at RDC based upon variability of demand and over the replenishment lead time Page 25

26 AH Postponement / Distribution Strategy Keeping Inventory Where it is Most Flexible Base Site Molecule Mfg Regional Distribution Center - Finishing Send me more Monesin Page 26

27 IN SUMMARY How is the Global Supply Chain Organization Managing the Transition 1. Maintain the Basics 2. Maintain the Core Processes 3. Improve Productivity and Reduce Cost 4. Reduce Complexity Page 27