How the Global Supply Chain Organization is Managing · PDF fileHow the Global Supply Chain Organization is Managing the Transition at Eli Lilly & Company ... 60% are strategic in

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

September 2009

Ronald Bohl

[email protected]

“… global research based pharmaceutical company dedicated to creating and delivering innovative pharmaceutical based health care solutions…”

$1

2.3

B

May 2009Ron Bohl

Eli Lilly and CompanyPage 2

40,500 employees in 146 countries

21 manufacturing sites92 contract manufacturers160 Sales affiliates / DC’s

Human Health Products: Strattera, Cialis, Zyprexa, Cymbalta Prozac, Humulin, Evista, Xigris, Gemzar, Alimta, Fosteo, Humalog, Byetta

Animal Health Products:

$20.3 billion sales19% reinvested in R&D

Lilly’s Supply ChainsSupply 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

May 2009Ron Bohl


Affiliates

Co-Marketing

Bulk sitesVendors

CMO’s

Fill - finish sitesPharmacy

Hospital

Patient

Supply Chain Design Supply Chain Operation

•Must ensure 98% customer service in all scenarios

•Must effectively utilize fixed assets and working capital

•Must adapt to the marketplace in

Product Life Cycle is all about making the “right” decisions at the right time

•Must happen during development to support regulatory requirements

•Must balance risk of clinical failure with speed to market of successful products

•Must enable a robust and responsive supply after

60

80

100

Submit

% o

f co

st

fixed

Lil

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esea

rch

May 2009Ron Bohl


•Must adapt to the marketplace in spite of regulatory influences

•Must optimize capacity and inventory across the supply chain

responsive supply after launch

LAUNCH

0

20

40

HypothesesGeneration

CandidateDevelopment

ProductionCommercialization

% o

f co

st

fixed

On the average we are looking at a time period of 10 years prior to launch.

Capacity &Sourcing

Capital Funding

Process design & construction

Lil

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Supply Chain Operations: maintaining 98-99% customer service level and maximizing profitability

80

100

Supply Chain Design Supply Chain Operations

1. Demand Management

2. Inventory, risk & Customer Service Level

Global Supply Chain Operations

May 2009Ron Bohl


0

Production

LAUNCH

20

40

60

80

HypothesesGeneration

CandidateDevelopment

Commercialization

Key global processes3. Supply chain

planning4. Global Capacity

Balancing and Profit Maximization

5. Launch Management

6. Operational Excellence

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

May 2009Ron Bohl


• Emerging markets require investment

• New Products require investment

• Increased product requirements for safety

• Lilly desires to meet worldwide health care issues

What is Global Supply Chain Doing?

• Maintain excellence in operating the Supply Chain Processes

Operating Standards for Supply Chain Excellence

May 2009Ron Bohl





• Assure Sales & Operations Planning (S&OP) processes are maintained

May 2009Ron Bohl


2002 2003 2004 2005 2006 2007

3940 4623 5,107 5,550 6,022 6,483 -

3461 4119 4,614 -

3940 Aug-12 - -

4710 Aug-16 5,960 5,550 6,368 6,586 7,600 -

4790 Feb-13 4,790 4,790 8,289 11,567 - -

3983 Jul-12 5,107 5,550 6,022 6,483 - -

3728 4294 4,801 5,550 6,022 6,483 - -

Unit of Measurement--Level 10 Kgs

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Level 1

0 K

gs

Sales & Operations Planning Occurs at 3 Levels:

OBJECTIVE

Assure global supply is optimized across the supply chain to meet the total global demand

May 2009Ron Bohl


3,000

4,000

2002 2003 2004 2005 2006 2007

GMR 5 Year Forecast-Base Demand Signal Used GDMS Forecast 8 Qtr Rolling Forecast

Production Plan (Level 10) Production Capacity (Level 10) Previous Demand Signal

Product A Global Plan

Supply ChainGlobal S&OP

Affiliate Lead TeamAffiliate S&OP

OBJECTIVE

Assure demand realization and high levels of customer service are achieved considering all sources of supply

Site Lead TeamSite S&OP

OBJECTIVE

Managing capacity and cost to assure all demands pointed there way are met on-time and in-full




• Assure S&OP processes are maintained

• Streamline the processes - (Lean Six Sigma)

May 2009Ron Bohl


Lean Six Sigma at Eli Lilly & Co.

May 2009Ron Bohl






• Streamline the processes (Lean Six Sigma)

May 2009Ron Bohl


• Reduce complexity

– Synchronized Lean

Results in:

Orders

Orders

4,373

7,714

Avg Order Size

13,552

8,989

June 19, 2009 R Bohl GSC

0 5,000 10,000 0 5,000 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

One Typical SolutionMachineLabor

Total Labor hours

117

166

0 100 200

Thousands

Headcount (FTE)

962

Total Machine hours

35

47

0 50

Thousands

Setup%

38%

Add 40%

more direct

and indirect

labor

Add 4 more

packaging

lines


69

96

0 100 200

1

2

Packs/FTE

859

722

0 500 1,000

1

2

Thousands

29%

38%

0% 20% 40%

Packs/Machine hour

1,704

1,488

0 1,000 2,000

labor

Bottom line: Cost per pack increases by 14% when the market demands less cost

Alternative to Managing Complexity

CustomerService

Implement a

Synchronized

Lean program to

meet the increase

in demand

without adding

cost


CostInventory

Lean principles applied in

manufacturing attack the

sweet spot of the “usually”

conflicting objectives

Creating a Lean Vision

Current State:# products – 958

Volume: 65,000,000

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

FAT COW


Volume: 65,000,000

# orders – 5000

A replenishments – 10

B replenishments – 6

C replenishments - 3

Set up time – 2.5 hours


Direct labor hours – 116,700

Indirect to direct hdct – 3/1

Lead time – 34 days

Cycle time – 13 days

Remaining shelf life – 84%


Direct labor hours –154,000

Indirect to direct hdct – 1.5/1

Lead time – 10 days

Cycle time – 3 days

Remaining shelf life – 92%Path forward requires

1. Commitment

2. Vision

3. Consulting / Education

4. Governance

5. Tools / Processes along the

transition Lean, Flexible Cow

Synchronized Lean Flow in Packaging

Purchase

Materials

Inspect

Materials Dispense Packaging QA QA

Daily / shift Dispatch

List for each of the

twelve packaging lines

sets priority and

triggers the pull.

Implement pull system (Kanban

capacity signal) to trigger

authorization to produce

Push product through based

upon lean six/sigma tact

time

Dispatch list without dates

determine next item to produce only

triggered through kanban pull signal


QP

Pick / Pack

&

Ship

Optimize Packaging

Optimize Shipping

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

Current status

Implementation of

Replenishment Repetitive Cycles

After a first round of improvements

•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

•Use of POQs (variable Qty)

•Fixed schedules in Mfg (product

wheel). Easier to manage.

•Synchronization of Mfg and

Shipping: shorter lead times and

easier shipment consolidation

•Change-over time reductions (SMED) and

additional improvements derived from the

repetition of the fixed schedules mean less •The frequency of replenishment is increased.

The journey to a Synchronized Lean finishing environment

Capitalize on improvements locally

Leverage local and external opportunities: Synchronized Lean environment

External benefits (DCs)Local benefits (Mfg)

Decision ?

easier shipment consolidation

• More stable inputs to MRP

• No more orders and no more

capacity requirements than currently

being utilized

repetition of the fixed schedules mean less

capacity requirements. As a result:

• Capacity constraints alleviated and/or

no need to invest in capacity (cost

avoidance).

•Alternatively, more volume can be

managed with existing resources.

•The frequency of replenishment is increased.

This means more orders to fill the available

capacity that would help to reduce inventories ,

improve shelf-life and less dependency on sales

forecast accuracy. These benefits would be

realized at the expense of the manufacturing

capacity to manage more orders, although

higher levels of repetitions may deliver other

benefits faster.

With improved capacity

reduce the number of shifts

and capacity on each line

reducing local cost.






May 2009Ron Bohl




– Project Tango

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

May 2009Ron Bohl


• Creating a collaborative environment where data can be shared and information flows are timely does not exist

• “Who’s driving and who’s riding?”

Collaboration Vision

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

CMOs and Suppliers

LillyNetToolboxInternet

Material Testing

CollaborationServices

• Identity Management

• Access to Web Services

• Business Process Management

All provided

in a

configure to

CM package

Internet

Material Testing• Test Methods & Specifications• Sample Management• Test Request / Results• Certificate of Analysis

Document Management• Mfg. Requirements (Contracts)• Quality Agreement• SOPs• Batch Records

-Identity-Joint Operations Group-Roles

CM database

Regulatory Affairs• Submissions• Variances• Annual Product Review

Technical Transfer• Mfg. Process (MBR, Tickets)• Engineering Change• Process Validation• CM Approval

Company ConfidentialCopyright © 2008 Eli Lilly and Company

21

Project TangoOverall Implementation Strategy

Elements Design to Pilot Global Implementation

Face of Lilly

SNC - sap

Life Cycle

Design Develop ValidateTest

Document

Dev. Education / Training / user

manuals

Dev Go no/go

Operate Pilot / s

Evaluate Go

no/go

Pre-operation

• Selection

• Approval

• Training

• IT requirements

Revise design if needed

CMO & CM

Ready for

Prime Time

Global implementation

into CMO and CM’s

Document Management

Material Testing

Quality Management

Regulatory Affairs

Technical Transfer

• IT requirements

Operation

• Support

• Governance

• Problem ID

• Resolution

Stabilization

• Evaluate go no / go

• Assure “walk away”

High Level Implementation Plan

*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 MJCreate the Vision Communicate and Configure

Life Cycle Mgmt design /test

Face of Lilly design / test pilot Rollout (1)

Document Routing (Regulus) design / test pilot Rollout (1)

GBIP Supply Demand SNC Rel 19 design / test pilot Rollout (2)

STD GLB PRO

STD GLB PRO

May 2009Ron Bohl


Document Electronic Sig. (Regulus) design / test pilot Rollout (2)

Material Testing(GLIMS) design / test pilot (?) Rollout (3)

Quality Mgmt (Trackwise) design / test pilot (?) Rollout (3)

Regulatory Affairs design / test pilot (?) Rollout (3)

GBIP Supply Demand SNC Rel 21 design /test pilot Rollout (3)

Reporting

STD GLB PRO

STD GLB PRO

STD GLB PRO

STD GLB PRO

STD GLB PRO

Company ConfidentialCopyright © 2008 Eli Lilly and Company

23






May 2009Ron Bohl




– Project Tango

– Postponement / Distribution

AH Postponement / Distribution Strategy

Regional Distribution

Center - Finishing

Base Site Molecule Mfg

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

May 2009Ron Bohl


Center - Finishing


Safety Stock at RDC

based upon variability

of demand and over

the replenishment

lead time

Safety stock of

unlabeled bags is kept at

the base sites to protect

against the variability of

supply

Regional Distribution

Center - Finishing


Send me

AH Postponement / Distribution Strategy

Keeping Inventory Where it is Most Flexible

May 2009Ron Bohl


Send me

more

Monesin

IN SUMMARY

1. Maintain the Basics

2. Maintain the Core Processes

“How is the Global Supply Chain

Organization Managing the Transition”

May 2009Ron Bohl


2. Maintain the Core Processes

3. Improve Productivity and Reduce Cost

4. Reduce Complexity

Documents

How the Global Supply Chain Organization is Managing · PDF fileHow the Global Supply Chain Organization is Managing the Transition at Eli Lilly & Company ... 60% are strategic in