O8 SUPPLY PLANNING DOWNLOAD

SUPPLY PLANNING MANAGED

How O8 manages supply planning for a leading health, beauty, and pharmaceutical manufacturer.

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Situation Overview

Based in Nottingham in central England, Boots Contract Manufacturing (BCM) is a leading manufacturing of health, beauty care, and specialty pharmaceutical products. They have been manufacturing health and beauty care products sold around the world for more than 80 years. While this longevity brings a great deal of experience and leadership, the organization has worked hard to make the changes needed to fulfill customers’ ever-changing needs and to compete with lower-cost manufacturing centers around the world.

All told, BCM manufactures more than 75,000 different products at their three separate manufacturing plants in three different countries—not to mention contending with additional manufacturing sites due to joint ventures and partnerships.

Goals and Challenges

Within the health and beauty care side of their business, they must facilitate the introduction of many new products each year, including managing the raw materials needed for the latest products. Additionally, products and their accompanying raw materials are phased out each year due to the fashionable nature of this side of their business. All told, BCM must manage a 35% annual product churn rate.

Many of the products under their health and beauty umbrella are either regulated or highly regulated, further adding to the complexity.

As if these challenges weren’t enough, BCM Specials manufactures, for patients with specialized needs, personalized prescription medications that are not available in a pharmacy. They process approximately 4,000 orders each week, supplying pharmacies, hospitals, and veterinarians across the UK. With 70,000 product formulations on file and a target 24-hour turnaround for these products, it is easy to see the supply chain madness that can easily result.

Managing Supply Planning Nightmares

Like all manufacturers, BCM strives to keep service levels high and working capital levels low.  To add further to the challenges, customers are increasingly demanding more flexibility like smaller batch sizes and shorter lead times.  This creates planning nightmares.

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More than 75,000 products

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Many different types of products with diverse raw material and ingredient needs

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35% annual product churn

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Fast turnarounds

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Regulatory complexity

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Three manufacturing sites

How Orchestr8 Helped BCM Manage Supply Chain Complexity

Orchestr8 was founded by recognizing that traditional forecasting produces consistently incorrect conclusions resulting in tremendous variability in production execution, high stock levels requiring unacceptably high levels of capital, poor service levels, and too often, all of the above. The BCM and Orchestr8 partnership began to achieve BCM’s goals of high levels of customer service, decreased production variability, and reduced capital requirements.

Supply Planning Improved

BCM knew that high service levels and production efficiency are not a result of high stock levels. They had plenty of experience with forecast-driven production plans that drive up costly stock levels and result in continual rework. The Orchestr8 DDMRPII platform offered another solution—a construct that allows production to follow customer demand and inventory to flex in a manner that buffers variability.

First, Orchestr8’s DDMRPII technology allowed BCM to formalize that different types of products need to be managed differently. Volume variability analysis allowed the team to select the right replenishment rules and stock levels for each SKU.

For example, Boots Pharmacy, BCM’s largest customer, runs ongoing promotions for its health and beauty care products over the course of the year. Percentage off, buy one get one free, endcap, and other types of promotions run constantly providing the illusion of demand variability.

However, the Orchestr8 analysis removed the noise in the data and revealed that most of the year, demand for most products was quite consistent. While weekly promotional volatility causes peaks and valleys in customer demand, overall demand was quite steady. By understanding the true picture of overall customer demand, BCM was able to discontinue its ineffective forecasting process for the majority of its SKUs. Instead, they were able to allow their stocks to remain at levels that can absorb normal variability allowing the stock to manage the variability, not expensive production facilities.

While customer demand was in reality quite consistent, there are two periods each year—a large summer makeup promotion and Christmas—where customer demand does actually increase and production must reflect this upward demand. Additionally, there is also true demand variability for seasonal products like sunscreen. However, segmenting SKUs allowed demand-altering promotional periods and seasonality to be managed with the increased attention they require while allowing the system to take care of everything else.

In short, Orchestr8 allows BCM to identify the select areas of their business that are truly exceptions, freeing up the needed bandwidth to manage those exceptions and removing the volatility and incorrect forecasts from the remainder of the business.

BCM Specials is a low-volume, high volatility business that was determined to be best managed by a make-to-order construct. However, Orchest8 helped to bring more predictability to raw material supply management.

Ready to Transform Your Supply Planning Operations?

O8 is the best-kept secret in supply chain planning. While others make empty promises, O8 delivers transformational results for global brands across five continents.

And we’ve done it in process, discreet, MTO, ETO, distribution, spares planning, and rate-based (flow) production environments.

O8 Supply Chain = Supply Planning Results

  • BCM moved from a highly volatile “push” approach to a “pull” approach based on an accurate analysis of true customer demand
  • They reduced the number of exception messages that drive non-value added activity
  • The predictable was made predictable allowing the business to focus on high value-add processes and decision making
  • They minimized their reliance on inaccurate forecasts
  • Their supply chain became able to cope with uncertainty
  • Customer service levels increased
  • Unnecessary costly stock levels decreased