Inventory Optimization - Medical Device Supply Chain Council

Transcription

Inventory Optimization
May 23, 2006
Todd Jackson, VP of Supply Chain Planning at Boston Scientific
Sean Willems, Chief Scientist at Optiant
Agenda
BSC Overview
– Key Stats
– Products
– History
Operations Excellence at BSC
– Early challenges
– Resolution of challenges
Multi-Echelon Inventory Optimization at BSC
– Supply chain structure
– Advances
Boston Scientific Corporation Confidential
2
Boston Scientific is a global, multi-billion dollar company
focused on less-invasive medical devices and procedures
Boston Scientific Corporation Profile
General Facts:
Product Innovation:
• Founded in 1979 with 38 employees,
$2 million in sales. Now Fortune 500
company
• 9,790 Patents issued worldwide
• $680 Million invested in R&D (’05)
• $540 Million in 40 Investments (’05)
• World’s largest medical device company
dedicated to less-invasive therapies
• Portfolio of 15,000 products, many with
market leading positions
®
• The TAXUS drug eluting stent has been
the most successfully launched product
in the history of the industry
• Corporate HQ: Natick, MA
• Regional HQs: Singapore, Paris, Tokyo
• Website: www.bostonscientific.com
Financials:
•
•
•
•
$6.3 Billion Revenue (’05)
29% CAGR* (’02-’05)
$1.5 Billion Net Income (’05)
NYSE: BSX
Demographics:
• 20,000 Employees
• Direct marketing & sales in more than
40 countries
• 16 Primary manufacturing locations in
U.S., Ireland & Costa Rica
* Compound Annual Growth Rate
3
Over 25 years of Innovation has led to a broad
portfolio of more than 15,000 products
Sampling of Boston Scientific’s Product Portfolio
Detachable Coils
Balloons
Grafts
Enteral Feeding
Ablation
Cardiac Mapping
Embolics
Stents
Stone Retrieval
Embolic Protection
Biopsy Systems
Peripheral Dilatation
Ureteral Stents
Catheters / Guidewires
Neuro-stimulation
4
Boston Scientific has evolved from early pioneer to
industry leader
Global Leadership in Interventional Medicine
TAXUS Express
U.S. FDA approval
Revenue ($Millions)
$6,283
6283
5,624
First clinical
trial of drugeluting stent
BSC acquires
eight companies
in two years
3,476
2,919
2,842
2,664
1,831
John Abele and
Pete Nicholas
partner to form
Boston Scientific
3
8
13
16
'79
'80
'81
'82
'83
2,673
2,234
BSC goes public
with IPO on NYSE
2
Phase IV
Next Chapter
1,551
1,191
31
47
71
116
159
22
99
230
'84
'85
'86
'87
'88
'89
'90
'91
315
380
449
'92
'93
'94
Phase I Less-Invasive Medicine
Pioneer/Leader
'95
'96
'97
'98
'99
Phase II Strategic Mass
(Via Acquisitions)
'00
'01
'02
'03
'04
'05
Phase III Stent Integration
& Drug-Eluting Stent Leadership
5
BSC’s Operations Excellence Approach
6
BSC boasts one of industry’s best performing
supply chains given the formidable challenges
BSC Supply Chain Performance
Key Challenges
• Highly regulated operations environment
• High supply chain complexity
–
–
–
–
–
High level of vertical integration
High number of supply nodes
Direct distribution to the customers
Large number of BSC owned distribution centers
Large number of suppliers
• High Level of organic growth
– Entry into new markets
– Emphasis on growth in new geographies
– 15,000 products
Next day delivery on most orders
Consistent 98% service levels
Industry leading inventory turns
Globally expanding scope (40+ countries)
Advanced planning capabilities and supply
chain visibility
• Exceptional forecast accuracy for both
mature and new products
• Relatively short manufacturing and
• Growth through acquisitions
– Supply chain integration for the new companies
– Scalability of BSC processes and systems
• Continuously evolving product portfolios
– 40% revenue from new products
– Constantly rationalizing product lines
•
•
•
•
•
distribution lead times
• BSC has been recognized through industry
benchmarking and national awards in the
areas of manufacturing, logistics, customer
service, and inventory performance
– Lean Manufacturing facilities
• 2005 Shingo Prize at Maple Grove (MN)
• 2006 Industry Week “Best 10” at Wayne (NJ)
– Boston Scientific’s Quincy Call Center
• 3x North Face Award for Customer Service
• 2005 J.D. Power: Customer Service excellence”
– Inventory performance benchmarked in top
quartile of Medical Device Industry
7
However it wasn’t always like this… we experienced all the
challenges reminiscent of a poorly performing supply
chain
• Constant firefighting mode
• Frequent stock-outs
• Frequent expedites involving
premium freight
•
•
•
•
Excessive inventory
Poor inventory mix
Pre-1999
Poor forecast accuracy
Long manufacturing and
transportation lead times
• Frequent write-offs of excess and
obsolete inventory
• Suboptimal logistics network
• Poor risk mitigation
Stage 1:
Functional
Focus
Discrete supply
chain processes
and data flows well
documented and
understood
Performance measured
at functional level
Stage 2:
Internal
Integration
Company-wide
process and data
model continuously
measured at the
company, process,
and diagnostic levels
Stage 3:
External
Integration
Strategic partners
throughout the global
supply chain
collaborate to:
•
Identify joint
business
objectives and
action plans
•
Enforce common
processes and data
sharing
•
Define, monitor,
and react to
performance
metrics
Stage 4:
Cross-Enterprise
Collaboration
IT and eBusiness
solutions enable a
collaborative
supply chain
strategy that:
•
Aligns participating
companies’
business objectives
and associated
processes
•
Results in real-time
planning, decisionmaking, and
execution of supply
chain responses to
customer
requirements
Supply Chain Maturity
8
We undertook a Supply Chain Transformation in the late
90’s, that was grounded in four basic guiding principles
3) Improved supply chain responsiveness
by compressing the order fulfillment lead
times by driving lean thinking from
manufacturing through distribution
1) Hybrid replenishment process that uses
forecasts to make capacity plans and raw
material purchases, but consumption data to
drive production schedule mix
Forecasts used to plan capacity
7 50
10 0%
25.0
MRP
1 0 0 .0 %
7 00
DRP
90 %
9 0 .0 %
6 50
80 %
6 00
20.0
8 0 .0 %
5 50
70 %
7 0 .0 %
60 %
4 00
50 %
3 50
3 00
Tier
Tier22
40 %
15.0
6 0 .0 %
5 0 .0 %
10.0
Service Level
4 50
Inventory Turns
Daily orders based on
recent consumption
Units of Demand
Weekly orders based on global
consumption and safety stock
changes
Percentage Accuracy
5 00
Weekly orders based
on forecast
4 0 .0 %
2 50
30 %
3 0 .0 %
2 00
Tier
Tier22
1 50
Customer
Customer
20 %
5.0
2 0 .0 %
1 00
10 %
1 0 .0 %
Pr e v io u s F o r ec a s t:
A c tu a l S h ip me nts :
F or e c as t A c c u r a c y T ar g e t
Forecast vs Actual
2) Globally-pooled safety stocks that are
analytically determined based on
demand/supply volatility and lead time
S e r v ic e L e v e l:
Oct- 01
Dec-01
Nov-01
Jul-01
T a r g e t S e r v ic e L e v e l
Sep-01
Jun-01
Aug-01
Apr-01
May-01
Jan-01
Mar-01
Feb-01
Oct-00
In v e n to r y T u r n s ( B a c kw a r d ) :
Dec- 00
0.0
Nov-00
Oct-01
Dec-01
Nov-01
Jul-01
F o r ec a s t A c c ur a c y
Sep-01
Jun-01
Aug-01
Apr-01
Cu r r e nt F or e c a s t:
May-01
Jan-01
Mar-01
Feb-01
Oct-00
Dec-00
Nov-00
Jul-00
Sep-00
Aug- 00
0%
Jun-00
0
Jul-00
50
Tier
Tier22
Sep-00
Tier
Tier11DC
DC
Aug-00
(1-3
(1-3days)
days)
Product
Jun-00
Supplier
Supplier
Plant
Plant
0 .0 %
T a r g e t Tu r n s
Turns,Service
4) Consolidated spend and procurement
practices that leverage global demand and
volume to drive efficiency
Fact-Based
Communication
and Decision-Making
Systems and Tools
9
Supply Chain Network Configuration
Suppliers
Plants
~50 large strategic
suppliers servicing
multiple plants

1,000+ small
suppliers

~50 OEM vendors
supplying FG
products

16 BSC facilities in
the USA and
Ireland
2 Off-shore
Contract
manufacturers
Distribution Centers

1 Global CDC- USA

1 Int’l CDC -NL

17 Tier 2 regional
DCs

6 Tier 3 local DCs
Customers

Prime channel:
Direct hospital
deliveries

Few Distributors
in select
Emerging
Markets
10
Technical Environment:
BSC
BSC Hybrid
Hybrid Replenishment
Replenishment Model
Model Tightly
Tightly Couples
Couples Sales
Sales and
and Production
Production
MRP
Weekly orders based
on forecast
DRP
changes
recent consumption
Tier
Tier22
Supplier
Supplier
Plant
Plant
Product
Tier
Tier11DC
DC
(1-3
(1-3days)
days)
Tier
Tier22
Customer
Customer
Tier
Tier22
Guiding Principles
• Hold minimum stock in Tier 2 DC to buffer “local” demand
uncertainty over Tier 1 lead times
• Use analytical safety stock model
• Buffer supply and demand variability
11
BSC
BSC Hybrid
Replenishment Model
Model Tightly
Tightly Couples
Couples Sales
Sales and
and Production
Production
MRP
Weekly orders based
on forecast
DRP
changes
recent consumption
Tier
Tier22
Supplier
Supplier
Plant
Plant
Product
Tier
Tier11DC
DC
(1-3
(1-3days)
days)
Tier
Tier22
Customer
Customer
Tier
Tier22
Guiding Principles
• Ship daily to major Tier 2 DC’s based on previous day’s
sales
• Pool global safety stock in Tier 1 DC’s
• Set order frequency based on EOQ (daily for largest volume
orders)
12
BSC
BSC Hybrid
Replenishment Model
Model Tightly
Tightly Couples
Couples Sales
Sales and
and Production
Production
MRP
Weekly orders based
on forecast
DRP
changes
recent consumption
Tier
Tier22
Supplier
Supplier
Plant
Plant
Product
Tier
Tier11DC
DC
(1-3
(1-3days)
days)
Tier
Tier22
Customer
Customer
Tier
Tier22
Guiding Principles
• Plan capacity and raw materials purchases from forecast
• Produce prior week’s/day’s sales up to reorder point
• Produce complete mix weekly for most items
• Schedule production mix using actual sales rather than forecast
13
Supply Chain Performance through 2003
Consistent, Global Metrics
Service Level
Inventory Turns
100%
98%
96%
94%
92%
90%
4.0
3.0
2.0
1.0
0.0
1997
1998
1999
2000
2001
2002
2003
1995 1996 1997 1998 1999 2000 2001 2002 2003
Forecast Accuracy
Obsolescence
90%
80%
Mature
New
70%
60%
50%
$M
150
100
50
0
2000
2001
2002
2003
1997
1998
1999
2000
2001
2002
2003
Annual Operating Savings of $250M+ since 2000
14
Advanced Inventory Optimization
Inventory optimization solution integrated with SAP for monthly planning
•
•
•
•
Monthly inventory target calculation for 40,000 SKU-locations
High volume, low and intermittent demand items
Manufacturing and sterilization capacity constraints
Batch size constraints at each tier along with periodic review
A
Tactical finished goods planning:
SKU-location specific inventory targets
for finished items including local and
global demand at each DC
B
Common, tactical inventory
planning for raw materials at each
production facility:
Analytical raw materials solution with
optimized inventory for Kanban,
min/max, and base stack policies
C
Internal expertise for strategic
supply chain design:
Strategic modeling for initiatives
including sourcing strategy,
postponement, new product
introduction
A
B
C
Push
Raw Materials/Mfg
Pull
Assembly/Sterilization
Distribution
15
Inventory
Inventory Optimization
Optimization Solution
Solution Highlights
Highlights
Inventory Mix - Tier 1 Europe
DOS
60
50
40
Original Targets
Precise SKU-location
targets for high volume
SKUs offers capital
reduction opportunity
Optimized Targets
Precise SKU-location
targets for low volume
SKUs allows consistent
high service performance
30
20
10
M
...
M 40
...
M 80
...
M 20
...
M 20
...
M 20
...
4
M 0
...
M 20
...
M 10
...
M 20
...
M 60
...
M 40
...
M 20
...
2
M 0
...
M 60
...
M 90
...
M 60
...
M 20
...
M 40
...
4
M 0
...
M 30
...
M 40
...
M 60
...
M 40
...
M 40
...
M 30
…
90
0
• Multi-echelon inventory optimization considering all complex conditions including demand
uncertainty and supply variability
• 98-99% service performance with inventory planning fully integrated with SAP
• The right inventories at the right place with precise targets for every global SKU location
• Solution transparency—clear understanding for the drivers of efficiency and resulting
inventory policy, which is important for successful solution adoption
16
Boston Scientific
Building Lasting Change
Provide a common worldwide ERP Platform
• Process harmonization
• Initial visibility to transactional data
1998 – Implemented SAP R/3
Establish Baseline Planning Processes
• Introduced hybrid push/pull planning model
• Custom safety stock calculator/database
• Efficiency benefits ramped and began to plateau
1999 – Supply Chain Transformation
Define and Understand the Efficient Frontier
2003 – Optiant Proof of Concept
• 10-15% opportunity within distribution alone
• Inventory optimization coupled with strategic planning
• Demonstrated expertise and depth
Monthly Inventory Targets to all Franchises Worldwide
2004 – Organizational Adoption
• Proof of concept savings confirmed
• Integrated data model and targets uploaded directly to SAP
• Safety stock targets for 40,000 SKU-locations monthly
Near-term Opportunities with Low Investment
2005 – Optimized FG Parameters
• Daily vs. weekly planning
• Actual supply uncertainty calculated monthly
• Batch-size and periodic review considerations
Common Raw Material Planning Platform
2006 – Optimized RM Parameters
• Centralized planning for all SAP plants
• Significant production improvement expected
Target Franchise Opportunities
2006 – Strategic Modeling Institutionalized
• Building organizational competency
• Leveraging APO source data
17
Guiding Principles
The Benefits of 20/20 Hindsight
• Structured pursuit of Artificial Volatility
– Driven by the best of intentions, …with a splash of ignorance
– Begins with cross-functional attitudes
• Tactical foundation to enable Strategic modeling
– Organizational learning environment
– Aggressive continuous improvement,…bounded by intelligence
• Ready Æ Aim Æ Fire
• Managing the Inputs
– Users learn to appreciate the force of their levers across multiple nodes
– Reflective of a true management system that transcends individuals
18
Multi-Echelon Inventory Optimization
•
•
•
•
What is multi-echelon inventory optimization?
How did we get here?
What does it look like?
Best practices
– How do companies integrate inventory optimization into their business
processes?
– What organizational structure works best?
– How do companies gain value?
• Q&A
19
Multi-echelon Inventory Motivation
Three potential inventory policies for a simple serial supply chain
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
20
Multi-echelon Inventory Motivation
Outsourcing
production is
an option
Multiple
classes
of
demand
exist
Product can
be converted
21
These Chains Can Get Complicated…
Hundreds of
SKUs
Sharing tens
of
assemblies
That each
have their
own
common
components
22
Evolution of Inventory Optimization w/in the Enterprise
Supplier
Design to Build
Forecast to Plan
Order to Cash
Customer
Networked
Optimized
Supplier
Customer
Shipping
Manufacturing
Planning
Purchasing
Integrated
Traditional
23
Boston Scientific
Supply Chain Challenges
Manufacturing
Manufacturing
and
and Sterilization
Sterilization
Capacity
Capacity
Constraints
Constraints
High
High 98-99%
98-99%
Service
Service
Performance
Performance for
for
all
all SKUs
SKUs
Large
Large SKU
SKU
proliferation
proliferation
and
and
Consignment
Consignment
Mix
Mix of
of HighHigh- and
and
Low-volume,
Low-volume,
Intermittent
Intermittent
Demand
Demand
Individual
Individual Raw
Raw
Material
Material
Planning
Planning for
for
Each
Each Plant
Plant
Batching
Batching at
at
Each
Each Tier
Tier along
along
with
with Periodic
Periodic
Review
Review
Heterogeneous
Heterogeneous
SKU/location
SKU/location
targets
targets across
across 66
global
global business
business
units
units
Complex
Complex 3-tier
3-tier
Distribution
Distribution Net
Net
Hybrid
Hybrid Push-Pull
Push-Pull System
System with
with
Periodic
Review
Periodic Review between
between
Production
Production &
& Distribution
Distribution Boston Scientific Corporation Confidential
24
Process to Improve Supply Chain Performance
Configure supply chain and optimize inventory plan
Optimize inventory targets over time
100%
90%
80%
60%
39
37
U
U
SK
SK
31
35
U
29
33
U
SK
SK
25
27
U
U
SK
SK
21
23
U
U
SK
SK
17
19
U
U
SK
SK
9
15
U
U
U
U
SK
SK
SK
SK
7
5
11
U
U
SK
SK
1
3
U
U
U
U
SK
SK
SK
13
50%
Inventory
70%
SK
Strategic Inventory
Optimization
Time
Tactical Inventory
Optimization
Close loop for next product generation
25
Designing the Infrastructure for Inventory Optimization
26
How to Deliver Value Across the Enterprise
27
Q&A