0 Integrating a Global Supply Chain: Essential Strategies Pharma Manufacturing Cambridge, Massachusetts June 23, 2004 Cheryl Capps Vice President Supply.

1

Integrating a Global Supply Chain:Essential Strategies

Pharma ManufacturingCambridge, Massachusetts

June 23, 2004

Cheryl CappsVice President

Supply Chain Planning & Optimization

Bristol-Myers Squibb

2

BMS Facts

27 Pharmaceutical plants

5 Chemical Plants

135 Markets Planned

150 + Contract Mfgs

100 + Distribution Centers

2 SAP instances, 24 BPCS instances, and 6 msc. ERP systems

6000+ SKU’s, 15000+ SRC’sPharmaceutical Plant Chemical Plant Inventory

BMS: A $20B Pharmaceutical and Related Healthcare Business

…significant supply chain complexity

3

Our Vision Is Clear…

One Plant, One Team, One PlanSeamless Integration, Flawless Execution

… but what does it really mean?

4

Conceptualizing an Integrated Supply Chain is like asking a group of people to conceptualize Heaven…

What does it look like? How do you get there?

While everyone agrees that it’s a nice place and we should go there, that’s where the agreement ends!

5

What does Integration Mean to Us?

Every participant in the supply chain is working from a different plan

Little or no visibility beyond local unit

Disjointed metrics, inconsistent reporting

The same data has a different meaning at every site

High variability in non-CGMP processes (like planning)

One global supply chain plan

Daily, global visibility of planning data

Standard, global metric calculation and reporting

Consistent data definitions

Minimum standards for key processes

From To

Before you can optimize the supply chain, you must integrate it

6

What Capabilities are required by “Integration”?

Complete visibility of— Inventories— Demand— Plant production plans and

constraints Simultaneous planning at

multiple levels— Market and plant at the same

time Organizational alignment

Consistent metrics that drive supply chain, not local performance

Consistent practices— Tightly defined business rules

for interactions between sites— Practices that ensure the

accuracy of critical data— The same data means the

same thing to everyone Global master data

Integration is the ability to create and execute

a single plan for the entire supply chain.

7

Why do we fail?

The usual suspects:

Lack of senior management support Unrealistic objectives Lack of resources Poor project management IT focus/IT led Poor change management

But many companies get all of these things right and still fail to realize the desired benefits!

8

Essential Strategies

Step 1: Develop a compelling case for change

Step 2: Create a vivid picture of the future

Step 3: Identify the gaps in capabilities between the “as is” and the “to be” state

Step 4: Build a road map

Step 5: Design the project

Step 6: Establish change management program

There are 6 essential strategies to integrating a supply chain

9

Essential Strategies

Develop a compelling case for change— Easy to understand— Tailored to stakeholder group

* Conceptual * Emotional* Financial * Technical

— Integrated with other key business strategies

Assume that the detriments of the “as is” state are not widely understood.

Step 1:

10

“As-Is” Scenario

Demand Data Supply Chain Issue

Supply Data

Non US Markets

Bulk Sites

TollingPartners

3rd PartyMfgs

Replenishment

Orders

Finishing Sites

Finishing Sites

Finishing Sites

Finishing Sites

Central Planning

US Market

Cannot balance supply and

demand

SAP Sites

In SAP Sites

In- Transit

Tolling

3rd Party Mfg

In US DC’s

In Non-US

DC’s

BPCS Sites

Central Planning

3rd Party Mfg

Tolling Partners

Distribution

MTO Market Orders

In BPCS Sites

Market Impact

•Unreliable delivery

•Long lead time

•Minimum order qtys.

•Excessive Inventory

•Resource Intensive

Multiple formats systems & schedulesManual, resource intensive,

inaccurate

11

Essential Strategies

Create a vivid picture of the future— Right scope

Narrow enough to be manageable Broad enough to allow true integration

— Well defined Endpoint What does success look like?

— Tailored to stakeholder group Detail for the “Detailed”, Simple for the “Simple”

Assume that the benefits of the “to be” state are not inherently obvious

Step 2:

12

The Future State Process – Level 1

Demand DataBalance Supply &

Demand

Supply Data

Global Forecast&

Net Requirements

Global Inventory&

Capacity Data

Statistical Tools

Markets

NetworkPlanning

MFGSites

Trade Sales

•One Format•One delivery system•Set calendar

•Full-picture•Real Time

APSSystem

S&OP

•One Plan•Collaborative Process•Data-based decision making•Assigned Accountability

Suggested Network Plan

Collaborative Planning

Shape Supply & Demand

Purchase OrdersNet Requirement Plan

13

5.0 Shape Demand Plan

2.0 Determine Demand Requirements

5.2 Resolve Financial Impacts

3.0 Balance Supply/Demand

3.2 Load Inventories

1.0 Determine Supply Capabilities

4.0 Execute Supply Plan

4.2 Provide Raw Materials

Requirements

4.1 Create Production Schedule

4.3 Provide 3rd Party with Product

Requirements

2.3 Create Statistical Baseline

2.2 Load Demand History

2.6 Develop Sales Forecast

2.7 Simulate NPI Requirements

2.1 Collect Customer Data and Collaborative Input

3.3 Review Supply Chain Performance

2.5 Collect Promotion and Deal

Information

2.8 Approve Forecast

2.4 Collect Market Research / Analysis

“To Be” Operating Model

3.4 Update Market Segmentation / Service Level

Agreement

3.5 Update Inventory Targets

3.6 Run Planning Optimization

3.7 Perform “What If” on NPI

1.2 Determine WIP and Committed

Production

1.3 Determine Actual FG Inventory

1.5 Determine 3rd Party Supply

Capability

1.1 Determine Raw Material Supply

1.4 Determine Production Capacities

3.8 Prepare for S&OP Meeting

3.9 Conduct S&OP Meeting

4.5 Execute Production Schedule

5.1 Create/ Execute Demand

Plan

4.6 Perform Available To

Promise (ATP)

3.11Communicate Supply Side/ Demand Side

Impact

4.7 Deployment

3.12 Communicate Financial Plan

Impacts

4.4 Provide Tolling Partner with

Product Requirements

3.10 Adjust Supply Chain Tactical Plan

Process Design – Level 2

1.6 Determine Tolling Partner

Supply Capability

3.1 Consolidate Demand

14

Inputs

1.4.1Determine production parameters based on

demonstrated performance

Planned MfgImprovement

Maintenance History

Manufacturing Performance

1.4.2Modify

production parameters

based on new capability

1.4.4Gain consensus

on production capability

parameters

1.4.3Estimate

Maintenance needs by unit

Preliminary FG Production

capability profile (by site, by unit, by time period)

1.4 Determine Production Capability

Example II Process Design - 1.1

Process Design – Level 3

15

Essential Strategies

Identify the gaps in capabilities between the “as is” and the “to be” state.

— Seek input from a broad base of stakeholders

— Prioritize gaps based on degree of urgency and business value

— Group “related gaps”

Individual capability assessments and prioritization inputs provide the basis of the project plan

Step 3:

Gap Analysis

Assessment of performance in relation to the To-Be Operating Model

Capability Assessment Capability PrioritizationPrioritization of each of the To-Be Operating Model components based on Degree of Urgency and Business Value

Cross-Functional Input

BusinessCapabilityRelease

#1

BusinessCapabilityRelease

#2

BusinessCapability

Release #12As-Is

To-Be Operational

Model+ +…++ =

- Current Initiatives / Activities

- Scope

- Scalability

Driving Factors and Considerations- Benefit vs. Cost

- “Low Hanging Fruit”

- Domestic vs. International Capabilities

- Site Integration Issues

- Process Dependencies

- Technology Dependencies

- Organizational Dependencies

(Global Perspective with “80/20 Rule”)

17

Essential Strategies

Build a Road Map— Resist the urge to ‘eat the elephant in one bite’,

while insuring that the entire elephant will be eaten.

— Each “bite” should be large enough to deliver value but small enough to be completed in a 6 – 12 month time frame.

— At the end of each “bite” the supply chain should be in a “steady-state”.

…Achieve short term gains while insuring long term results

Step 4:

18

Business Capability Release Plan

The BCR plan can be viewed as a simple building model...

BCR 11:APS Scheduling Optimization

BCR 5 Network Planning

BCR 9Supplier Integration

BCR 6APS

Demand Planning

BCR 7APS

Supply Planning

BCR 1Demand

Consolidation

BCR 2Tolling

Automation

BCR 3S&OP

Standardization

BCR 4Inventory Visibility

BCR 12 ClosedLoop S&OP Process

BC

R0

A -

Sit

e A

ccele

rati

on

BC

R0

B - M

an

ag

em

en

t Tools

BCR 10Customer Integration

Change Management & Learning

BC

R8

– M

ark

et

Rem

ed

iati

on

OptimizationPhase II

Extension

OptimizationPhase I

Integration

Foundation

BCR 4A Data Integration

… A solid framework of tools, processes, and data

19

Essential Strategies

Design the Project— Build stakeholder ownership into the process

Plan for sustainability Minimize non-value add “we-they” activity Eliminate “hand-offs” where possible

— Integrate process technology and people If you can’t integrate multiple project elements, is it reasonable

to expect that you can integrate an entire supply chain?

— Standardize project methodology, terminology, required documents, and even presentation formats.

Use every opportunity to reduce variability

…Invest the time necessary to develop a robust project design

Step 5:

20

Project Team Structure

BCR 0-BManagement Tools

BCR 0-ASite Acceleration

BCR 1Demand Consolidation

BCR 2Tolling Automation

BCR 3S&OP Standardization

BCR 4Inventory Visibility

•Re-design existing functional processes and organization to support BCR solutions

•Design, build, test and deploy identified business capabilities

Business Capability Releases

Functional Process Owners

Site Network Planning

Markets SourcingDistributionLogistics

Inventory & Metrics Mgmt

Database Maintenance

Team Leader

s

Change Mgmt &Learning

BCR 5

Network Plng.

BCR 8Market Integration

BCR 6APS Demand Plng

BCR 7APS Supply Plng

Finance

BCR 9Supplier Integration

BCR 10Customer Integration … Build stakeholder ownership into

the process

21

The Project Office

Project Management

Process Integration

Technology Integration

Change Management

Project Administration Manages Consolidation

of Project Plans Reporting Measurement Resource allocation Remediation Insure adherence to

process

Develop overarching process solutions

Coordinate & guide teams

Ensures process integration among BCR’s

Manage evaluations & selection of technology solutions

Coordinate & guide teams

Ensure technology integration between BCR’s

Develop and implement CM strategy and work plan

Lead & facilitates CM activities

Directs design & implementation of training programs to ensure knowledge transfer and development

…People, process and technology integration required

22

Standard Project Methodology

Change Management

Test/ Pilot DeployBuild CapabilityDesign

Mobilize

BCR Duration

(Based on 12 Months)

1 2 3 4 5 6 7 8 9 10 11 12

BCRTeam

Today: Week 6 of the design phase

Complete - Week 5

Scope

Assumptions

Business Requirements

Business scenario inventory

Process Flows level 1, 2, 3.

Complete - Week 6

Draft process flow level 4

Business Rules

Draft application architecture

First cut roll-out/ release plans

Business Tools/ Metrics Inventory

Business Resource requirements

Draft Risk Management Plan

Weeks 7 & 8

Integrated level 4 process flow

Final application architecture

Final roll-out/ release plans

Legal & Regulatory Element inventory

Final Risk Management plan

Build/ Test Element Inventory

Detailed Build/ Test plan

23

Essential Strategies

Establish Change Management Program— Engage and gain commitment from Senior leadership

— Ensure employee understanding at all levels and promoting readiness and buy-in of key stakeholders

— Identify and develop skills and competencies required by SC Professionals; train sites and markets

— Facilitate the organizational transformation; clarify roles and accountabilities

— Establish programs to recognize/reward behaviors needed to sustain the model and promote the new culture

…Change Management is necessary to manage the journey and to facilitate transition to the future state.

Step 6:

24

Change Management Processes

CM1: Sponsorship

CM2: Build Project Team

CM3: Communications & Stakeholder Management

CM4: Change Advocate network

CM5: Performance Support & Learning

CM6: Knowledge Transfer

CM7: Readiness Assessment

CM8: Organizational Transformation

Supply ChainOptimization

... eight key change management processes leveraged.

Transfo

rmatio

n to th

e End-State

Vision

BCR 11:APS Scheduling Optimization

BCR 5 Network Planning

BCR 9Supplier Integration

BCR 6APS

Demand Planning

BCR 7APS

Supply Planning

BCR 1Demand

Consolidation

BCR 2Tolling

Automation

BCR 3S&OP

Standardization

BCR 4Inventory Visibility

BCR 12 ClosedLoop S&OP Process

BC

R0A

- S

ite A

ccele

rati

on

BC

R0B

- Manag

em

ent T

ools

BCR 10Customer Integration

Change Management & Learning

BC

R8 –

Mark

et

Rem

ed

iati

on

BCR 4A Integration

25

Lessons Learned…

Benefits are likely understated in the business case.

Process must always lead technology. Don’t let the “latest whiz-bang tool” distract you from your objective.

Insure that “process & technology” do not get too far ahead of “people”.

Do not underestimate the effort required to integrate and remediate data.

Continue to change business objectives to reflect capabilities delivered and planned.

Have a low tolerance for exceptions to global standards.

Link a balanced scorecard of metrics and process compliance to compensation

… It’s not easy, but it is achievable!