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How the Global Supply Chain Organization is Managing the Transition at Eli Lilly & Company
September 2009
Ronald Bohl
“… 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
Eli Lilly and CompanyPage 3
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
Eli Lilly and CompanyPage 4
•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
ly R
esea
rch
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
Eli Lilly and CompanyPage 5
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
Eli Lilly and CompanyPage 6
• 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
Eli Lilly and CompanyPage 7
What is Global Supply Chain Doing?
• Maintain excellence in operating the Supply Chain Processes
Operating Standards for Supply Chain Excellence
• Assure Sales & Operations Planning (S&OP) processes are maintained
May 2009Ron Bohl
Eli Lilly and CompanyPage 8
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
Eli Lilly and CompanyPage 9
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
What is Global Supply Chain Doing?
• Maintain excellence in operating the Supply Chain Processes
Operating Standards for Supply Chain Excellence
• Assure S&OP processes are maintained
• Streamline the processes - (Lean Six Sigma)
May 2009Ron Bohl
Eli Lilly and CompanyPage 10
What is Global Supply Chain Doing?
• Maintain excellence in operating the Supply Chain Processes
Operating Standards for Supply Chain Excellence
• Assure S&OP processes are maintained
• Streamline the processes (Lean Six Sigma)
May 2009Ron Bohl
Eli Lilly and CompanyPage 12
• 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
June 19, 2009 R Bohl GSC
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
June 19, 2009 R Bohl GSC
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
June 19, 2009 R Bohl GSC
Volume: 65,000,000
# orders – 5000
A replenishments – 10
B replenishments – 6
C replenishments - 3
Set up time – 2.5 hours
Set up hours – 11,960
Direct labor hours – 116,700
Indirect to direct hdct – 3/1
Lead time – 34 days
Cycle time – 13 days
Remaining shelf life – 84%
Set up hours – 11,500
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
June 19, 2009 R Bohl GSC
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.
What is Global Supply Chain Doing?
• Maintain excellence in operating the Supply Chain Processes
Operating Standards for Supply Chain Excellence
• Assure S&OP processes are maintained
• Streamline the processes (Lean Six Sigma)
May 2009Ron Bohl
Eli Lilly and CompanyPage 19
• Reduce complexity
– Synchronized Lean
– 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
Eli Lilly and CompanyPage 20
• 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
Eli Lilly and CompanyPage 23
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
What is Global Supply Chain Doing?
• Maintain excellence in operating the Supply Chain Processes
Operating Standards for Supply Chain Excellence
• Assure S&OP processes are maintained
• Streamline the processes (Lean Six Sigma)
May 2009Ron Bohl
Eli Lilly and CompanyPage 24
• Reduce complexity
– Synchronized Lean
– 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
Eli Lilly and CompanyPage 25
Center - Finishing
Base Site Molecule Mfg
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
Base Site Molecule Mfg
Send me
AH Postponement / Distribution Strategy
Keeping Inventory Where it is Most Flexible
May 2009Ron Bohl
Eli Lilly and CompanyPage 26
Send me
more
Monesin