Pharmaceutical Industry: Reducing Inventory and Flexibility

Drivers for reducing inventory and increasing flexibility in the pharmaceutical industry
Case study
10/20/2014

Context and challenges

A leading pharmaceutical group was experiencing strong growth in the OTC (Over-The-Counter) market.
To support its growth, the group wished to develop its Supply Chain to identify areas for improvement in terms of its flexibility and ability to react to fluctuations in demand, and to help cut working capital by reducing inventory.

Approach and methodology

An initial phase was carried out to define the Supply Chain (flow, constraints and complexity factors), identify the intrinsic flexibility requirements of the market, and break down inventory by type across the chain: control inventory, safety inventory and cycle inventory.A study of processes was then undertaken to diagnose operational modes, in terms of impact on inventory, and to understand the methods for making trade-offs.

Six areas were covered and some 50 drivers were identified, along with their impact and feasibility.
The main drivers were selected and implemented:

1. Forecasts:​

  • Implementation of businesslinespecific and central forecast accuracy indicators

2. Inventory and distribution policy:

  • Resizing of safety inventory in business lines and in the plant
  • Setting of Distribution Resource Planning (DRP) deadlines
  • Reduction of dispatch awaiting orders

3. Production:

  • Reduction of production cycle times
  • Implementation of delayed differentiation
  • Increased responsiveness thanks to the implementation of a planning tool

4. Quality control and quality assurance:​

  • Redefinition of overestimated control times
  • Reduction of quality control cycle times
  • Delegation of quality control of the top 20 suppliers

5. Chemistry:​

  • Reduction of strategic inventory

6. Procurement:​

  • Reduction of batch sizes
  • Reduction of delivery times
  • Logistics partnership for packaging items
  • Development of strategic suppliers

These drivers were prioritized in order to define the action plan and to launch the deployment roadmap.
The stakeholders in each process were involved from the analysis phase and adopted the drivers.

Results

Inventory was reduced by approximately 30% and a gain in responsiveness of two weeks was made across the cycle.
This increased responsiveness led to additional sales.