Supply Chain Planning Blog

Pharma/Chemical Industry: Tie-in Supply Chain Planning And Financials

Posted by Bill Green on Thu, Jul 23, 2009

Pharma Supply Chain PlanningPharma and Chemical industries have to worry about managing increasingly complex multi-stage manufacturing networks that span the globe in order to stay cost competitive.  The supply chain decisions in these networks have become more difficult and intertwined.  There is pressure to turn to multiple production sites; while some are low cost producers, others are needed to hedge against product quality and production issues, or other risks.  These challenges are driving these industries to need more sophisticated capabilities in managing their supply chains, especially when it comes to protecting their margins.

In order to squeeze more profit from a tough market, Pharma and Chemical companies need the ability to manage their supply chain network based on the financial impact of every decision.  The Sales, Operations, and Financial plans need to be monitored, in order to see if actual sales and operations numbers are coming in according to  the plan, so that corrections can be made quickly.   Any time a new plan is created, the financial impact of the changes must be highlighted and compared to the budgeted plan. If done effectively, a company will be able to quickly and accurately determine what the market is ready to buy, and effectively align the whole company to meet market demand at the lowest cost.

Having the above mentioned capability requires a company to be able to link the areas of Demand Planning, Inventory Planning, Operations Planning (i.e. Network Optimization), Performance Management (i.e. visibility), combined with the ability to do Financial Analysis.  Some key points to look for in each of these areas are as follows.  

The Demand Planning systems need to be able to consolidate the expected demand from the many business units that sell product all over the world.  Chemical and Pharma companies sell to many types of businesses, but the resources required to build these products are shared.  This means the Demand Planning system needs to be collaborative, scaled on a world wide basis, with ability to predict not just demand, but expected revenue.

The Inventory Planning systems need to be able to set buffer inventory in multi-stage supply chains, and determine the necessary inventory required to meet the sales plan.  The ability to predict inventory levels into the future is critical along with the capability to measure the value of the expected inventory over time. 

The Operations Planning systems need to be able to take into account, capacity, key material constraints, production costs and transportation costs and required dual sourcing for contingency management when optimizing the network.  The operations planning system should be able to differentiate the cost of running the same product on different resources, in order to accurately predict future expected operations costs. 

The Performance Management system needs to be able to extract key measures from the Demand Plans, Inventory Plans, and Operations plans in order to be able to monitor Key Performance Indicators and create dashboards to manage the enterprise.  The system has to understand the financial goals of the Budget Plan created at the beginning of the year, and monitor the plan against actuals and update to the plan during the S&OP process.

Want to talk more about what best in class companies are doing in these areas, or discuss some thoughts on the subject.  Drop me a line.    

For information about the author please click on Bill Green, VP of Solutions, at Adexa.  Or email him at wgreen@adexa.com. Or visit http://www.adexa.com/.

 

Topics: Supply Chain Planning, Demand Planning, Supply Chain Performance Management, Chemical Planning, Pharmaceutical Planning