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© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 2 | 21 October 2012
September 19, 2012
INTEGRATED BUSINESS PLANNING
PROCESS AT HOSPIRA
A MATTER OF LIFE & DEATH
Hospira’s Approach to Implementing Next-Generation Sales & Operation Planning Processes
Supply Chain Council Executive Summit Indian Wells, CA September 18th-20th, 2012
• Market leadership positions in: – Generic injectable pharmaceuticals globally – Biosimilars in Europe – Medication management systems globally
• Pioneer in innovation and safety • 70+ years experience;
– public independent company since 2004 • 2011 annual revenues of $4.1B • 15,000 employees • ~15,000 employees, 13+ manufacturing facilities • Headquartered in Lake Forest, Ill., USA
Our company
Improving the safety, cost and productivity of patient care
5
Hospira product categories
Medication Management
Systems
24%
Specialty Injectable
Pharmaceuticals (SIP)
63%
Other Pharma
12%
2011 Net Sales $4.1B
• Generic injectables • Proprietary drugs • Biosimilars
• Infusion devices, dedicated administration sets, software and services
• Gravity administration sets
• Large volume solutions • One2One™ contract manufacturing services
Specialty Injectable Pharmaceuticals (SIP)
Medication Management Systems
Other Pharma
Expanding Geographic Footprint
EMEA The Americas APAC
Regional presence denoted by colors
80% of 2010 sales
13% of 2010 sales
7% of 2010 sales
6
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 7 | 21 October 2012
Objectives
1. Explain why IBP is important, urgent even, for Pharmaceutical / Biologics companies today
2. Share the fundamentals of Integrated Business Planning and how it’s been applied at Hospira
3. Describe the foundational capabilities developed at Hospira to enable the IBP process
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 8 | 21 October 2012
An urgent matter: The global drug shortage crisis makes Integrated Business Planning a critical imperative.
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 9 | 21 October 2012
The Drug Shortage Crisis
“According to the Food and Drug Administration, the number of drug shortages has increased nearly 300% since 2005. More than half of the drugs on the shortage list are considered critical -- meaning they have no alternative.” - CNN, July 2012
“One of the most serious problems in American health care today is a
catastrophic shortage of supply for dozens of important generic drugs, especially certain injectable medications that form the backbone of modern cancer treatment.” - Forbes, June 2012
- For
bes,
Jun
e 20
12
“Seven U.S. anesthesiologists have reported
that drug shortages resulted in deaths of their
patients, according to a new survey from the
American Society of Anesthesiologists.”
- ABC News Medical Unit, April 2012
“Dozens of common drugs are in such short supply in the NHS that the health of patients with life-threatening conditions such as cancer is in peril, an inquiry into the problem has revealed. About 80% of 60 health trusts in England and Wales are experiencing "unacceptable" delays in obtaining drugs…” - The Guardian, June 2012
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 10 | 21 October 2012
FDA Advanced Drug Shortage Notification Makes IBP
Especially Relevant to the Pharmaceutical Industry
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 11 | 21 October 2012
In keeping with the Agency’s guidance, Hospira is defining exception management protocols through IBP for:
Sole Supplier Medically Necessary Critical Support Products
Regulations surrounding Drug Shortage Notification Make
Planning Processes critical for today’s leading Pharmaceutical / Biologics companies
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 12 | 21 October 2012
This is a supply chain crisis that has ties to almost every area that is considered in IBP:
• Demand Planning • Inventory Policy & Management • Master Scheduling • Capacity Planning • Third Party Manufacturing • Raw Material Planning • Product Lifecycle Management
FDA Advanced Drug Shortage Notification Makes IBP
Especially Relevant to the Pharmaceutical Industry
“When rumors surface of an impending shortage, some pharmacies rush to buy up more than they need, likely leading to bigger shortages, analysts and other pharmacists said… Some distributors and manufacturers prevent hoarding by allocating drugs based on historical demand.” - Reuters, June 2012
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 13 | 21 October 2012
Integrated Business Planning: What is it? And what ever happened to S&OP? What does IBP mean at Hospira?
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 14 | 21 October 2012
Integrated Business Planning…
The next-generation of S&OP
“IBP is the common and synchronized process for business review and decision making, to optimize business performance and drive business strategy through to execution.”
“Traditional sales and operations planning (S&OP) processes and supporting technologies are no longer sufficient in today’s high-pressured business environment. Sales and Operations Planning has evolved to become Integrated Business Planning. It is a truly cross-functional, multi-dimensional process that includes all elements of demand, supply and financial analysis in relation to the business goals and strategy.” - “Technology Strategies for Integrated Business Planning”, June 2006
“The broader strategic mandate for S&OP is key to superior returns. S&OP leaders are aggressively converting S&OP from an operations level demand-and-supply balancing process to the mechanism of choice for integrated business planning and strategy deployment” - “Next Generation S&OP: The Path to Bottom-Line Value, Stephen Hochman
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 15 | 21 October 2012
Integrated Business Planning develops the common
and synchronized plan for operations & commercial.
Demand Review Operations Review Business Review
Pre-S&OP / S&OP
ES&OP Consensus Demand Planning
Operations Planning
Business Planning
Key Customer(s): Commercial Stakeholders: Operations, Finance
Key Customer: Operations Stakeholders: Commercial, Finance
Key Customer: SLT Stakeholders: Regions
Inventory
Production
Warehouse & Transportation Channels
Geographies
Statistical Models
Portfolios
Latest Financial
Plans
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 16 | 21 October 2012
Issues Managed by Exception
IBP is a cycle of planning activities and reviews that
gives the business a regular & repeatable cadence
Consensus Demand Planning
Operations Planning
Business Planning
S&OP Pre-S&OP
Operations Review
Demand Review Demand Planning
Supply Planning
Demand Review Operations Review Business Review
The same time-tested Sales & Operations Planning steps are at the heart of IBP IBP is a cyclical process, with each cycle feeding assumptions and guidance to the next The process is driven by exception and focuses on decision making
Simple by design…
But process deals with complex integrations and
interactions
Consensus Demand Planning
Operations Planning
Business Planning
Demand Review Operations Review Business Review
Markets (Global)
Portfolios (US)
Regional Demand Review (US)
Regional Demand Review (CND/LA) Device
US Pharma Int’l Pharma
Third Party Supply Planning
Ops Reviews US
S&OP US
Pre-S&OP
CND/LA S&OP
CND/LA Pre-S&OP
EMEA S&OP
EMEA Pre-S&OP
APAC S&OP
APAC Pre-S&OP
India Pharma
ES&OP
Markets (Global)
Regional Demand Review (EMEA)
Markets (Global)
Regional Demand Review (APAC)
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 18 | 21 October 2012
Each IBP Sub-Process advances the plan from
Unconstrained Demand through to the completed “LBE”
Un-Constrained Demand Plan
Constrained Supply Plan
Constrained Sales Plan S&OP / LBE
Hospira’s Global Integrated Business Planning Process
Re
gio
na
lG
lob
al
S&
OP
Ou
tp
ut
Week TwoWeek One & Two Week Three Week OneWeek Four
Consensus Demand Planning
Demand Review
Supply Planning / RCCP
Product Supply Review
Un-Constrained
Demand Plan
Pre-S&OP S&OP
Constrained Supply Plan
Constrained Sales Plan
Integrated Business
Plan / LBE
Decisions Deployed to
Next IBP Cycle
Approved Regional Plan
ES&OP
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 19 | 21 October 2012
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June IBP Cycle for July LBE
Hospira Global Integrated Business Calendar
Global Product
Supply ReviewsPre-PS Reviews
Constrained
Supply Reviews
w/ Regions
Constrained
DRP Run (APO)
Regional
S&OP
Meetings
Regional
Demand
Review
Demand Pass
(SW >>APO)
Planning Batch
Jobs (APO)
Demand Forecasting
Post June Gross
Sales History to SW
Post June Net
Sales History to SW
Load SAS Plans
(SAS>SW>ISIS) Global
ES&OP
MeetingRegional & Global Finance Reviews
Deploy ES&OP Decisions
Final Feed to LBE
(SW>>ISIS)
Regional Pre-S&OP Reviews
July LBE
Deadline
Global Supply Planning
StatisticalModel Run (SW)
Preview LBE
(SW>>ISIS)
Cycle Roll (SW)
Business
Review (SLT)
Regional Consensus Demand Planning Reviews
Post May GrossSales Actuals to SW
Cycle Roll (SW)
Post May Net SalesHistory to SW
The IBP Process is Tightly Orchestrated
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 20 | 21 October 2012
Bottom Up Demand Forecast
Business goals/objectives should be deployed
through a defined data that is an integral part of IBP
Execution Tactical Strategic
Top Down Plans
Objective Assigned
0-3 months 4-12 months 12-18 months
Total Consensus Demand
Gap to Budget…
Risks Associated with LBE “Tasks” if they are not “operationalized” as part of the IBP process • Creates an alternate plan vs. the “one common set of numbers” • Results in service issues if added to the plan w/o evaluating supply capacity • Results in excess inventory if commercial plans are not fully evaluated / delivered
Execution-able plans only
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 21 | 21 October 2012
What is Integrated Business Planning?
And Why are Companies Implementing IBP?
It helps run the business more efficiently and effectively… • It is a consolidation process that brings together and aligns the various
business functions in developing one integrated set of plans. • It synchronizes business planning with operations planning cycles
as well as regional with global planning calendars. • It is a monthly re-planning process designed to make key business
decisions in the most efficient manner.
• It provides the basis - typically a rolling 18-24 month forecast- for planning resources, capital and financials.
• It is a vehicle for strategy deployment and connects planning & execution
And helps to deliver the business objectives… • Predict & shape future demand to give the most profitable sales plan • Formulate the most cost effective supply chain response • Provide the forum for alignment and decision making
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 22 | 21 October 2012
Most Profitable Sales Plan Most Cost Effective Supply Aligned Decision Making
IBP Data Structures , Analysis and Review Topics Should
Provide Insight and Feedback to Strategic Initiatives
Demand Review Operations Review Business Review
Innovation Strategy
Operations Strategy
Expansion Strategy
Channel Strategy
Procurement Strategy
Strategic Planning
Financial Planning & Analysis
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 23 | 21 October 2012
Connecting ES&OP with eS&OP…
Integration with “execution S&OP” Activities…
Consensus Demand Planning
Operations Planning
Business Planning
S&OP / ES&OP Pre-S&OP
Operations Review
Demand Review Demand Planning
Supply Planning
Week-to-Week “execution S&OP” activities
From Big ES&OP to little eS&OP… Effective Integrated Business Planning processes (monthly) connect to week-to-week planning processes so decisions are deployed in real-time and close-coupled with execution.
Decisions, direction, insights and information deployed in real-time
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 24 | 21 October 2012
Integrated Business Planning @ Hospira
It is the single process for forecasting the business
All products, all regions, all channels in a single, integrated system
It is both a volume and financial planning process
Pricing and cost assumptions are built in to provide a Rough-Cut P&L
It is hardwired to the LBE (Latest Best Estimate)
The IBP forecast directly feeds the LBE consolidation tool
It is responsible for supply chain resource planning
The single forecast directly feeds: • Demand & Supply Balancing • Capacity Planning
It is integrated into our planning execution systems for a closed loop planning process
Central planning feeds plant scheduling, the final forecast drives deployment & inventory planning
It sets the business cadence All markets,, regions and global planning processes follow a synchronized calendar
It is a decision making process design to drive alignment & coordinated execution
Exception based process that facilitates issue escalation and resolution
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 25 | 21 October 2012
How are we doing?
• Strengths › Ever improving collaboration between functions › Integration with finance and clear financial objectives › Strong engagement / involvement with the process › Completeness of the core S&OP process design › Global integration & synchronization › Collaboration tools assist data and workflow management
• Opportunities
› Longer term focus / continue driving strategic purpose › Consolidate other redundant processes into IBP › Improve supply modeling capabilities & systems integration
with execution (2012 focus) › Improve issue content / analysis (problem solving skillsets)
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 26 | 21 October 2012
IBP Development Model A construct for implementing IBP
Critical Competencies The core skills and knowledge
areas for S&OP / IBP practitioners and stakeholders.
Process Proficiencies The common threads that are
keys to success in each step of the S&OP / IBP process.
Foundational Capabilities The key capabilities that support and provide source systems for
the S&OP / IBP process.
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 27 | 21 October 2012
The Foundational Capabilities: …How are we enabling the process?
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 28 | 21 October 2012
Process & Project Overview: Collaborative Forecasting... The core infrastructure of IBP
Collaborative Forecasting
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 29 | 21 October 2012
Project Summary: Collaborative Forecasting
Objective/Scope Implement a consensus demand collaboration tool, an enabling technology, with product / channel / regional data structures, integrated volume and financials and statistical forecasting models.
From To Separate/disconnected S&OP and LBE forecasts Global, collaborative, integrated and
synchronized planning
Revenue, unit volume, pricing and cost in multiple systems
Central tool to develop and maintain the plan… “one source of truth”
No differentiation between unconstrained and constrained plan
One common plan for commercial and finance based on constraints
Aggregate forecasting Global LBE at the specific List #
All Type
TC_DC DC_DT List #
All
Channel
All
Region
Sub-Region
Country
Weekly process
Monthly process
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 30 | 21 October 2012
Process & Project Overview: Rough Cut Capacity Planning… Balancing demand & supply.
Collaborative Forecast
Rough Cut Capacity Planning
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 31 | 21 October 2012
Project Summary: Rough Cut Capacity Planning
Objective/Scope Gather detailed capacity data for each site, and for all products, configure APO capacity planning parameters and build capacity utilization requirements into the IBP process
From To Poor visibility to capacity constraints past the ~4-5 month horizon.
Provide early warnings signals of future demand / supply imbalances
Lack of understanding of the “ideal” capacity required to support the unconstrained demand
Provides visibility to the unconstrained supply requirement versus the current MPS
No monthly capacity check in the PS Review Time phased capacity utilization by critical resource for each site
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 32 | 21 October 2012
Process & Project Overview: Inventory Optimization… Right sizing our inventory.
Collaborative Forecasting
Rough Cut Capacity Planning
Inventory Optimization
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 33 | 21 October 2012
Project Summary: Finished Goods Inventory Optimization
Objective/Scope Statistically determine recommended safety stock levels based on demand & supply variability and implement exception based inventory management practices.
From To Qualitative methods used to determine safety stock levels
Statistically determined safety stock and replenishment quantities
Stocking levels unresponsive to business changes
Exception based processes used to identify and review recommended changes
Inventory parameters not adequately maintained in central planning systems
Parameters updated based on recommended settings and used for deployment planning
Investment Service
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 34 | 21 October 2012
Process & Project Overview: DRP Driven Master Scheduling… Bringing it all together.
Rough Cut Capacity Planning
DRP Driven MPS
Collaborative Forecast
Inventory Optimization
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 35 | 21 October 2012
Project Summary: DRP Driven Master Scheduling
Objective/Scope Re-engineer the APO planning system & processes to plan using a DRP-driven planning “signal” approach and to improve integration with Integrated Business Planning
From To Ad hoc capacity management over a limited planning horizon
Capacity modeling and load leveling capability over the full IBP horizon
MPS planning against aggregate inventory & demand totals.
DRP driven production signals based on net inventory & statistical safety stock targets at end shipping locations.
Planning limited to unconstrained demand Separate unconstrained planning vs. constrained plan execution
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 36 | 21 October 2012
Insights into Successful IBP Implementations
Some Keys to Success Apply simplifying concepts to the complexity
Ensure alignment/synchronization with master data
Incorporate cross-functional data structures and hierarchies
Integrate with finance to drive fastest adoption
Position the S&OP process as a decision making process
Link S&OP cycle to the established business review process
Establish well defined process facilitation / workflow steps
Inputs should be specific, tangible and actionable
Support the process with the right technology
Focus on change management
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 37 | 21 October 2012
Demand / Supply Planning Sales & Operations Planning Integrated Business Planning
Process Evaluation Technology Selection Business Process Design
Solution Architecture Process Facilitation Change Management
Integrated Business Planning Associates … the power of planning
Thank you!
IBP2 Contact: Bill Nienburg Executive Director +1-630-881-5002 [email protected]