OverStocksis. A Dangerous Infectious Disease

Manage Excess Inventory is the panacea for every Supply Chain professional.

According to McKinsey Global Survey of challenges ahead for supply chain; Reducing Operating costs and Inventory levels, are the main goals for Supply Chain Top Management.

For instance, Pharmaceutical industry is specially sensitive to suffer overstock. Despite using leading-edge technology -the increasing number of complexities and the exponential growth of demand– makes Inventory control one of the top priorities for Drug’s manufacturers.

What is Excess Inventory?

We all can figure out a definition for overstock. Nevertheles, I would like to take a helicopter view of any particular business and focus on the economic implications.

The damage caused by excessive stock impacts directly in Cash flow, which leads to loss of capital available for investing

In other words, let’s call Excess to all the surplus associated with loss of revenue owing to additional capital bound with the purchase or simply storage space taken.

As a result, Excessive stock could be a consequence of over delivery from a Supplier or from poor ordering and management of stock by a Buyer.

Levels of aggregation

Starting from your Suppliers, passing through the manufacturing process and finishing with your product arriving to Customers. Let’s take as an example a Drug Manufacturer

As stated previously, Excess could be allocated at any point of your Supply Chain. Imagine a metaphoric water tank:

Logically, the water in the Tank will represent the total Inventory, so we can expose the following statements:

  • The level of the top water tank is directly conditioned by the Supplier
  • The Top water tank has a direct effect on the below water tank
  • The level of the below water tank has a direct impact on Customer

This is what I call “Levels of aggregation“:

(1) Raw Materials at the Top water tank are hardly calculated at the product unit. Raw materials acquisition depend on economy of scale, they’re bought with a long time in advanced and considering factors such as Demand forecast, Discounts and Rebates …

(2) Finished Goods in the lower water tank will have more value added coming from the Manufacturing process. Then, the cost will be higuer and the Price will be conditioned by the Market regulations and conditions.

Metrics

Taking into account the diagram above, it is evident that Excess could appear in any of the water tanks.

Excess in the top (Manufacturing Sites) does not immediately impact to the bottom . But having excess in the bottom (Local or Central Warehouses) it blocks the normal flow of materials from the the top.

Therefore, metrics should be accountable for preventing a potential Over Stock in lower water tanks first and then into the top. The tap between both water tanks controls the water flow and is a critical point.

Nowadays, Metrics are tipically in charge of detecting current over levels of Stock such as, Days On Hand (DOH), Days Of Coverage (DOC), (%) SKUs below Safety Stock, RAGY dashboards and so on.

Prevention

As presented above, metrics are mostly focus on showing the current situation of the business. However, none of the above metrics predict the conditional Inventory future positions.

In a Make-To-Stock industry your future Inventory conditions will be strongly linked to your Forecast. Demand Fluctuations in your Forecast will become the key parameter to analyze in order to predict potential disruptions in your Manufacturing plan.

Additonally, by using the Forecast and estiamted capacity you should be able to create Forward Looking Metrics and predict future Inventory scenarios focus on the estimated demand disruptions.

Self-Analysis

Following the next steps is like a vaccine to avoid getting sick from OverStocksis …

Mapping your Strenghts and Weaknesses in a SWOT template and make sure that all your team understand the meaning of Excess …

Keep track of your Metrics in a brutally honest mode. Removes all the exceptions that are just there to make look your metrics ‘good’ …

Monitor everything what makes your Inventory metrics down. Write down all the Root Causes which keep you away from being on target …

Evaluate those Root Causes (post-mortem) and start drawing common patterns …

Decide corrective strategies and support your decision-making using looking-forward metrics

Let me know your experiences, I’ll be glad to learn from your stories!

Felipe

SC Certifications. A good idea to help you out filling the gaps


Passionate Supply Chainers all around the world are wondering whether studying a Certification makes sense or not. Allow me to say this is quite normal taking into account the huge number of them. Check out the Top 8 according to CIO magazine.

You could have arrived to the Operations department a long time ago. Perhaps you’re a New joiner

It really doesn’t matter. Because Supply Chain has evoluted so much in the last decades that nowadays it is extremely hard to recognise its boundaries in a hyperconnected world.  

Modern Supply Chain

For most of the part, breakthrough Technologies plus a tremendous pressure for reducing Costs -or shall I say, increasing Profits– have radically transformed Logistics into the modern Supply Chain.

And everything is happening too fast. While global consumers demand companies to have a Customer obsession, corporations are desperately looking for talent oasis where to find T-shape professionals.

This means Generalist who knows about Finance, Computer Science, Production, Purchasing an so on.

Indeed, experts who understand different areas across the organization, but at the same time, able to get very deep in the Supply Chain concepts.

Corporate Culture

It is evident that Supply Chain Certifications are helping experts who come from a wide spectrum of different backgrounds.

Certificates do the job that many companies cannot afford, simply because they haven’t created a strong Supply Chain Culture yet.

Organizational culture is a key factor when implementing Supply Chain vision. For example, Unilever (Master SC according to Gartner) spent €34 bn in its SC and their Strategy is clearly defined on 6 steps. One of them is only dedicated to Talent & Capabilities (this is so cool!)

Pros & Cons

Sincerely, creating a list is quite personal. However, I think it could be useful if I enumarate those aspects that usually are less mentioned …

Pros:

  • Networking. Meeting professionals with the same interest than you will boost your list of contacts. Your new teammates will give you access to fresh information and potentially open your mind to new ideas.
  • Sources. Having new sources of information and access to exclusive contents will expand your alternatives to face Operational dilemmas. This will definitely increase your probabilities of success in the future.
  • Trends. Certifications normally work with lot of industries and you will learn from them. Additionally, discovering the latest business trends will prevent you from potential disruptions in your specific area.

Cons:

  • Specialization. Nothing bad. Lawyers are specialists and Doctors have specialities. But remember that the world is moving towards generalist.
    My advice? Try to attend learning events outside your area of specialization as well.
  • Competition. Do not try to compare yourself with others just because you have learnt a new knowledge. Everyone lives different realities.
    My advice? A certificate will not make you better than someone else without it, so please don’t publish it everywhere 😉

Thanks for reading and let me know your thoughts!

5 reasons why Artificial Intelligence won’t take your Job

Admit it! Everyone is talking about it and there are no doubts that AI is here to stay. So, what is gonna happen? First of all, calm down. AI is a great software achievement and at the same time, a massive opportunity.

Initially, let’s put aside all type of fantasies and science fiction. Overall, Artificial Intelligence is just code developed by people, yes humanoids! There are many cases where AI is making our lives much easier; self-driving cars, speech recognition, expert aviation systems, advanced healthcare decisions and so much more.

Apart from this, let’s focus on workforce. How will AI impact in future Supply Chain jobs? The following is a compilation of facts on why AI will not take your job …

▪ Time-saving does not mean work-saving

AI and Automation can amazingly optimize traditional Supply Chains. On the contrary, this does not mean less work. After all doing something faster it doesn’t implies to not have to do it, you’re just going to be time-efficient.

Additionally, an important part of Supply Chain workload is taken from ‘edge’ situations. Unexpected cases and scenarios which are hard to computarize and predict; even though if they were implemented, an expert decision-maker would be always needed.

▪ Supply Chain is not a standard business

Supply Chain is not a line of business. It’s a department or a dedicated section inside of an specific business. Compared with Aviation, Hi-tech and some others industries, Supply Chain standards are very poor. For instance, the way you measure Stockouts or Customer Service Level probably is not the same than your competitors, right?
This is a critical complexity. Supply Chains are well known for having thousand of different IT solutions in the market, but just a few of them (SAP, Oracle) use standard variables. Consequences? Harder implementations and almost impossible standarizations.

▪ Automation increase quality of time at work

Automation makes your life easier and it has a positive impact on jobs – who enjoys working on repititive and boring tasks? The average job tenure today is actually similar to how it was in 50s and 60s. Think about it. Evolution from Ford’s Mass production to the current Robo-assembly lines has incredibly maximize productivity! Nevertheless, thousands of workers and engineers are still needed.

2019 BMW 5 Series Production at BMW Plant Dingolfing

▪ Machine control is only the tip of the icerberg

To put it more simply, “garbage in, garbage out”. High-quality data is mission-critical. Give the wrong information to algorithms comes up with useless outcomes. Clearly Supply Chains have still a lot of work to do with data quality. The majority of the time is spent in ‘cleansing’ operations and consolidating data to feed a predictive system.

– check out this post to understand the importance of cleansing in Forecasting

Let’s take the model of stock markets; if algorithms where intelligent enough to predict the next momentum, for sure their owners will be rich.
However, the reality is quite different. Stock algorithms are owned by giant corporations (which are the only capable to afford the costs of maintaince), they are helpful to avoid losses and make pushes against the market by generating thousands of orders per second. But still algorithms can not predict next economic crisis.
Many of the information the use needs to be ‘filtered’ and cleansed by humans … don’t forget that in the end, the next big market decision is going to be taken by humanoids boards and CEOs.

▪ AI do not understand humans

Machines will never be able to fully understand us. And yes, you perfectly know the reason. Paradoxically, computers do not have feelings, however somehow they try to process them. AI will never logically accept why we trust one person more than other, because based in facts and data analysis we should not trust any other human.

“based in facts and data analysis we should not trust any other human …”


Just be sure that your AI is not in charge of your next Supplier selection or your next right-hand man. For sure, it will give you the most accurate ranking sort by hundreds of criterias, but the final decision should be yours.

Last but not least, I recommend you to have a look to the interesting Sascha Eder’s article about How Can We Eliminate Bias In Our Algorithms?


The Dark Side of the Forecast: How to Conquer it

Following China Chang’e-4 mission landing on the far side of the Moon, let’s talk about the role of Forecast in business and more specifically in the Supply Chain.

Everyone needs a Forecast. Because living in a hyperconnected world means infinite access to data. In the blink of an eye, trillions of algorithms are translating information into statistics and estimating outcomes.

No matter which is your sector or your expertise. Any enterprise is capable of having a Forecast. Now, the question is: Do you know how to generate it?

During the past century, predicting the future was a tough mission where only fully-dedicated people were able to produce a decent projection.
At the present time, just by using costless technology (R, Excel, Phyton …) almost everyone can create a Forecast from a bunch of time series (data collected in a period of time).

“Just by using costless technology almost everyone can create a Forecast from a bunch of time series”

In the following 3 steps I’ll describe you a path to conquer the hardest parts of creating a Forecast:

First. Use a Baseline Forecast

What does this exactly means in simple english? A definition of Baseline could be “looking to the past and using the same outcome at similar conditions”. Overall, this technique consists into see what’s going to happen in the future based on what happened in the past.

Baselines are really useful in many aspects of life and not only business.
For example, check out Dr. Phil’s explanation on how to create a Baseline in order to catch when somebody is lying to you …


Amazing, right? After all, Baseline are a very reliable tool at the time to predict anything …

In Supply Chain, Demand Planning uses the Baseline which is generated from the Historical Sales of a product. Similarly to the Sargent Major case, the first thing to do is to ‘cleanse’ all the information we believe should not be included into the production of the Baseline.

For a Demand Planner, the way to detect “Real or False truth reactions” like in Sargent’s case, will come from:

  • Outliers detected by the algorithm chosen to generate a Forecast.
  • All the additional information that could impact on Past Demand, such as: Events, Discounts, Competitor behaviour, New Launches, etc. Collected from, Commercial, Marketing, Finance and other departments.

Second. Add Expert Insights

As a rule, many industries have adopted as the best-in-class approach, to introduce experts Adjustments into the Baseline before releasing the final version. Nevertheless, this approach is far from being fully accepted.

Please don’t misunderstand me… Expert Insights are a fundamental part of the Forecast, however it needs to be done with total transparency and avoiding risks (this could be a nice topic for a future post).

In contrast, among many other scientists, the famous psychologists Daniel Kahneman (2002 Nobel Prize in Economic Sciences) and Amos Tversky believes on the Base rate fallacy (and some other psychological theories) which strongly impacts in the individual decision-making of estimating the future.

Copyright – Kahneman, D. (2011). Thinking, fast and slow. London: Macmillan.

Third. Evolve To Consensus Forecast

So, How could you avoid biased forecasts? There is no quick fix.
The explanation is always in your Forecasting process.

Adjusting Baseline predictions must be a formal method based on rigorous analysis of all the potential reasons that could impact on future Sales. In other words, you need to fully understand the sources of any particular rationale to change the Forecast (optimistic or pessimistic).

The mission of a Consensus Forecast is to control the tendency to change the estimation for ‘unknown’ reasons (Gut feeling, intuitions, smell-test, 50/50…) which are hardly measurable. Ideally, in order to add value, we should be able to see in a monthly basis the Forecast of the following areas, including their Max. and Min.

  • Commercial. Unconstrained Expected Demand.
  • Supply Chain. Expected Sales constrained by Plant’s capacity.
  • Financial Forecast. Expected Selling based on Economic conditions.

In conclusion, if you are looking for better projections; Have a look to your Forecasting processes (are they good enough? do you have a benchmark?) and the most important one: Pay attention on How you’re feeding your Baselines (follow the advises above).

“Keep in mind that improving Forecast is not only a technology thing; Most of your Projections are undermined by the quality of your inputs”

 Happy 2019!

5 Mind blowing books you might give to yourself this Christmas

We live in a world of words. Spending most of the time on meetings, calls and presentations –  When was the last time you contemplated the content of your desk and shelves?

Let’s see if this sounds familiar to you … When you smell a book there is a kind of ‘magic’ which send you away from the reality for a moment; and once you have finished it, it becomes a treasure that somehow and in some point of your future life, it will find you at the correct time; exactly when you most need it. 

(1) Leaders Eat Last

Simon Sinek 2014. On his second book, after the success on ‘Start with Why’, Simon makes an extraordinary detailed  X-ray of What Means to be a Leader. His words are absolutely inspiring and the way he explains complex topics is refreshing. Reading this book will not only empower your leadership skills also it will help you understand how real Leaders think.

(2) Harvard Business School Confidential: Secrets of Success

Emily Chan 2009. First time I read this book I was analyzing tons of data and preparing a deck to C-suite for the first time. Whoever works in Consultancy will discover that each of the pages of this book are priceless. Emily explains very clearly in plain english the concepts studied in the prestigious HBS. After reading the whole text I ensure you that there will be a sea change on your career and the way you conceive the business.

(3) The Decision Book: Fifty Models for Strategic Thinking

Mikael Krogerus 2008. This is a reference handbook and his main purpose is to help you in the transition of a change; no matter you are a teacher, a professor, or a top manager. You will be confronted by the questions: How do I take the right decision? How can I change things? How can I work more efficiently? and so on. The models presented will make you THINK and even more, after this manual you will successfully plan almost everything in your life.

(4) Only the Paranoid Survive

Andrew S. Grove 1998. Written more than 20 years ago, his thesis still feels up-to-date. If there is a word to summarize Grove’s life as Intel CEO that would be ‘Inflection’. By following the business principle that everything will change, Andy teach us how to anticipate and to be prepared for any kind of disruption. It is a strong recommendation for everyone in management whether in high-tech or not.

(5) The Machine That Changed the World:
The Story of Lean Production

James P. Womack, Daniel T. Jones, Daniel Roos. 1990. “Machine” is probably one of the most fascinating cases of continuous Improvement in the modern capitalist history. From the groundbreaking Ford’s model of ‘Mass production’, the selective craftman production in Europe to finally the exemplary Efficient process of the Japanese company Toyota. Keep in mind that unlike other books, “Machine” is not a “how-to” manual, is the amazing consolidation of Facts and Stadistics on How Japanese production model revolutionized Automotive business Management.

Best wishes,

Top considerations for your Future SC Software Selection

Technology provides capabilities to optimize the operational planning processes of a company. Traditional Supply Chain (SC) software has been widely adopted for a long time, however companies’ No. 1 supply chain priority is to go a step forward on improving its planning capabilities

Given growing SC Complexity and Volatility, it is becoming nearly impossible to revise a complete supply chain without using the latest technology.

Benjamin Nitsche –  SC Volatility Management

Key Functional Capabilities

Let’s imagine that you have a bunch of softwares in scope but it seems impossible to start your comparison.

First of all, focus on how the tools solve complex challenges. Have a look to the following list of key functional capabilities:

  1. Collaboration. External collaboration both with customers and vendors is becoming more common.
  2. Performance Monitoring and Analytics. Includes performance management, business intelligence, alerting, and advanced analytics.
  3. OptimizationBased on a discrete snapshot of reality. Most often applied to inventory and supply planning problems.
  4. Simulation / Scenario Planning. Used to support long-term S&OP or IBP, risk management, SC design, and tactical demand and supply problems.
  5. Scheduling. Resource allocation and operational planning.
  6. Response Management. How quick it reacts to volatility in demand, supply, and product to improve delivery service and operation efficiency.

Choosing a SC Software Vendor

As a good rule, I will recommend you to look for a Suite provider, this means that your vendor must have multifunction product software and your future tool will cover at least four of the functional areas within Supply Chain Planning:

  • Sales & Operations Planning (S&OP)
  • Supply & Replenishment Planning
  • Demand Planning and Forecasting (DP)
  • Vendor Managed Inventory (VMI)
  • Inventory Planning
  • Available to Promise (ATP)
  • Production Planning and Scheduling
  • Distribution Network Planning

Software Evaluation Criteria

In particular for software evaluation you will based your decision-making on the following criteria: Functionality, Technology Alignment, Viability, and Services.

What is more, Total Cost of Ownership (TCO) should be also consider as an important criteria which is separately dealt with using cost benefit analysis.

Functionality

Responsive planning, Optimization, SC design features, S&OP process maturity, Scheduling , Scenario planning / simulation, Advanced analytics, Scalability and speed, Functional roadmap and User interface.

Don’t infuence your decision in marketing and promises, go to the facts. Make your own analysis and visit the professionals on those companies that are using the current solution (see the vendor credentials) and ask them for their feedback, this is going to give you a real approach.

Technology Alignment

Exception and constraints handling, Integration with ERP, other SCP and legacy systems and Compatibility with custom/legacy systems.

Probably the most critical criteria for your IT department because in the future they will have to create interfaces and adapt all the internal reports and documents that your company is using in order to visualize them in the new tool.

Viability

Financial health, Strategic alliances, Availability of support by geography, Total footprint and solution maturity, Market adoption, Vendor direction and Industry specific focus … Not everyone take into account this point but is a very important one.

Nowadays technology companies are involved in many M&A so don’t be surprised that the tool you bought 5 years ago is no longer available and your vendor is not giving you any support because the new company which adquires the rights is not interested at all into maintain it … 

Total Cost of Ownership (TCO)

Total Cost of Ownership considering yearly feeds for all users and Maintenance (very important for future software updates) and support cost.

Finally remember that the real cost of a tool is not going to be only the ammount of zeros that you will pay, always keep in mind future developments and how much are they going to cost you …


Conclusions

To sum up I may say that every project is different, and each client has unique requirements …

Write about your past software experiences and note if there is a bias towards one application over another.

Analyze your environment, especially if your company is focus on one specific software vendor. Establish key project checkpoints … and design a document template in order to do your evaluations of all the points explained before.

Good luck!

How to start investing on Biopharma stocks | Quick Guide

[This is Part 1 of a series of posts about Investing in Biopharma/BioTech companies]

You have already heard and read comments about it, however you don’t know exactly where to start … we all have had the same feeling.

Biopharma and Biotech companies are not very accessible stocks to follow-up, in comparison with other huge industries which are everyday on the newspapers, such as: Consumer Goods (Nike, Unilever, P&G), Technology (Facebook, Google, Oracle) and so on. On the contrary, these stocks seem to be ‘hidden’ and only available to medical experts or the wall street guys.


Since that’s not true, here are some advises to speed up your searches and leverage your decision-making in order to get the most of your future Biopharma/Biotech investments.

Decide your Approach

First of all, take a view from 20,000 feet and choose your approach based on: (1) Time you’ll dedicate (2) Effort you’re able to commit, and (3) Level of knowledge. Whichever approach you choose, you’ll want to monitor your portfolio to ensure it’s on track with your goals.

Where to get information

As much as data you gather, the fastest you will start visualizing the type of disease and the profile of the pharma where you think it will worth to start investing.

I suggest you to make your own analysis – this part it will take the majority of the time, but believe me that is better than trust on ‘gurus’ and biased Analysts – so, take all the information available in the IR (Investor Relations) website and focus on the key events; News, Official announcements, Board changes… and real numbers, Financial and Incomes statements and Balance sheet.

“Don’t boil the ocean, once you have an idea of the company targets and vision, check the Pipeline and ongoing Clinical Trials, this is gonna be strongly linked to the future Earning Potential”


The most self-explanatory and concise information about the drug development process that I’ve ever seen is available in the Roche Youtube channel: 

Roche drug development process

Last but not least, there are some excellent online-tools where all this info has been collected and you can take advantage of it. A good example is Finviz where the data is shown in a quick and tidy manner.

Detail of Innovate Biopharmaceuticals, Inc. on Finviz.com

Start before you feel ready

 If you’re working on something important, then you’ll never feel ready. A side effect of doing challenging work is that you’re pulled by excitement and pushed by confusion at the same time

James Clear “Atomic habits” 

In order to demonstrate you can break with the above quotation, I recommend you to start right now researching about the following interesting pharma list of Nasdaq Penny Stocks:

 Innovate Biopharmaceuticals, Inc. (INNT), Arrowhead Pharmaceuticals, Inc. (ARWR), ArQule, Inc. (ARQL), Xenon Pharmaceuticals Inc. (XENE), Endocyte, Inc. (ECYT), Madrigal Pharmaceuticals, Inc. (MDGL), InVivo Therapeutics Holdings Corp. (NVIV), OHR Pharmaceutical, Inc. (OHRP), Edge Therapeutics, Inc. (EDGE), Aytu BioScience, Inc. (AYTU), Auris Medical Holding AG (EARS)

Stay Safe Stay Informed

In conclusion, stay tune and try to learn from the experience, below a bunch of useful websites that you will probably need.

Enjoy!

2018 CPhI worldwide at Madrid

About CPhI

CPhI is an international brand where UBM (PharmExec, LCGC)  organizes the largest Pharmaceutical performances in terms of manufacturers’ number and companies involved.

UBM is now a part of Informa, the leading B2B Information Services group. This is an important consideration that I could say, the potential of a company with such an immense intangible knowledge is tremendous … (2017 FY results).

The Event

As the world’s largest pharma event, with over 45,000 attendees and 150 countries represented, CPhI is an organization that you shouldn’t miss.

The allocation of the categories, six at the same time (CPhI, InnoPack, P-MEC, iCSE, FDF and bioLIVE) was smart and allowed to everyone the free movement around them, however if it is your first time at IFEMA Madrid (+10 buildings), the first challenge will be completing the tour without getting lost.

My first thought was: I don’t know any of these companies’ names …

CPhI worldwide focused its attention mostly on manufacturers and suppliers of API and excipients from all around the world. My first thought was: I don’t know any of this companies’ names – taking into account that I was surrounded by Chinese and Indian CMOs – nevertheless after walking around, I finally recognized some of them and even we got involved in very interesting conversations.

The most visually-attractive areas were InnoPack and P-MEC, where Manufacturers are proud of showing their best machines and latest technology trends. This territory was well dominated by European brands a few asian companies (Japanese, Korean or Chinese).

  

Experience

The bottom line is oriented to sell and maximize your connections in order to expand your strategic business alliances, so in case you are interested in educative-content, I strongly recommend you to join any of the Pharma Insights, which are presentations where an invited company and speaker briefly share a viewpoint or project with a particular industry interest: Emerging Markets, Biologic drug products, Consumer trends, Serialization, Biotech support, Supply Chain, etc.

 

Conclusions

Pharmaceutical Industry’s innovation is something that believe it or not, you can feel it coming as a Formula E speed car (electric Formula 1); quiet and in a Breakneck (fast) speed

In fact, there are now more products in development than at any other point in history!

Talented CDMOs, API manufacturers, formulation specialists, generics producers and most recently, Biomanufacturers (large molecules) are completely changing the rules of the game and forcing regulators to a complete update.

I’ve detected a trend on all kind of pharmaceutical companies to break with its internal barriers among departments, in order to ensure innovation and creating smoother and more transparent operations …

Finally, from the Supply Chain perspective, topics like Continuous Manufacturing, the growing Contract Manufacturing Industry, Biopharmaceutical operations and many others related, are just the cherry on the cake of creating a leanest and more efficient network across the industry.

 

Supply Chain is like PGA campaign ‘Live under par’. Always under pressure of delivering excellence every week

 

What Can A Newborn Teach You About Supply Chain?

After nine months of preparation, there you are, ready or not, she smiled at you and you smiled her back, then you know that everything is gonna be alright. Here is my compilation of learned lessons that my newborn has explained me about Babies Supply Chain.

Plan and Measure – Baby Dashboard

First of all, believe me that when you are in the middle of a crisis, the last thing you want to struggle with are spreadsheets or complex files. Therefore, it makes a lot of sense that any tool at Gemba (following Lean principles) should be clear and simple. In our case, my wife and I opted for using a whiteboard divided in two sections: Meals and Needs, so everyday we were writing down the hours and quantity of milk plus number of nappies used.

At the end of the week, it’s amazing the number of conclusions and decisions that you can make based on all the data collected

In conclusion, some of the first learnings were:
1. Forecast projection of number of nappies that we will need in the future months.
2. Correlation of sleep hours and regularity of naps against the quantity of feeds.
3. How external factors, such as: temperature (ºC), unwanted noise (dB) and unexpected events (relatives coming home); influenced in her cycles.

Balancing Supply & Demand – Nappies case

After doing a lot of research, the best approach for buying most of the Baby things is a economy of scale. In particular for nappies, there are several uncertainties that need to be taken into account. For example, Will X or Y brand irritate my baby’s butt? which size will she use? (weight of ultrasound is only an approximation), will X or Y brand be good enough? and so on and so on.

At the time of placing big orders, keep always in mind that you can mitigate potential damage in favor of potential gains

In principle, supermarkets and internet promotions are totally ‘unpredictable’ but don’t stress yourself, there is a certain pattern and seasonality (specially before summer) to get the best deals from each of them.

Maintaining a Safety Stock is crucial to cover the risks of Supply and Demand, and not as a level of inventory to be kept

Additionally, I excelled at the concept of Safety Stock, because maintaining a Nappy Safety Stock is crucial to cover the risks of Supply, i.e. your online order got late or promotions are not good enough to buy yet … and Demand risk, that happens when your forecast is inaccurate, which is very common when your baby suddenly starts pooping more often than before.

Just in time – Infant’s formula milk

In the case your baby needs infant’s milk, choosing the brand is a mission-critical decision. You are not going to change it unless there is a medical condition.

Here, your supplier sourcing selection should be very careful, in contrast than diapers, some formulas are not available in all the retailers and they are uniquely sold in specific drug stores.

As a result, you will have to identify very well the critical factors of your suppliers, some of the most important are as follows:

  • Capacity – Can I trust that online (Amazon) or local store (Carrefour) will have Stock enough?
  • Lead time – How long is going to take me to buy a new one since she/he finish the box?
  • Commitment to Quality – Very important when your baby starts eating solid food, then you will have to decide among Bio, Organic or Standard vegetables and fruits

As a rule, JIT strategy works very well with infant’s milk, essentially find out trusty Suppliers and do not keep big amounts of inventory – elimination of waste, because of the considerable costs and baby’s uncertainty

Last but not least, baby’s demand is a pull system and in many cases extremely difficult to predict, so if you don’t create any procedure to prevent you from getting out of formula (home-made Kanban) you will find yourself with no stock left to feed her – Is there any bigger pressure than that?

Conclusions

Having a baby is probably one of the biggest and hardest life’s experiences, so trying to stay positive is fundamental. Eventually I’ve been ironic in some of the experiences described before and most of the activities would have never been accomplished without my partner. Infinite thanks to my wife.

References:

  1. Lean systems: “The Machine that changed the world” James P Womack, Daniel T. Jones, Daniel Roos
  2. Dad university “What They Don’t Teach You In School”
  3. Economy of scale https://www.britannica.com/topic/economy-of-scale
  4. 10 Cs of Supplier Evaluation https://www.mindtools.com/pages/article/10-cs.htm
  5. JIT and Kanban systems https://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html

Why is Supply Chain the Rockstar of Consumer Pharma?

The obsession of drug makers to re-evaluate and minimize Operational costs is the New Black. Nowadays Consumer Health (over-the-counter or GSL drugs) has a profit formula quite similar than the Retail business, but unfortunately delivering safety and quality are simply not enough.

The decrease trend on sales of the biggest US drug retailers (WBA, MCK, CVS) is due to the consumers shift from traditional to online shopping “the Amazon effect”.

As a consequence, because of discounts and pricing pressures, the profit strategy is getting lower. Moreover fighting against Amazon is not a solution, it’s just like a patient who tries to cure himself using a Placebo.

So what?

Industry really needs a Turn the ship around, which implicates radically changing Supply Chain Strategy from Deliberate to a more Emergent one.

Indeed, the future is getting harder to read and winning strategies that used to work in the past are not effective anymore … this is the point that differentiates you from the rest.

In particular, if we analyze the evolution journey of Retail and FMCG to an Agile Supply Chain Management, we will obtain a present-day version of the 3 pillars of Organizational Transformation: People, Processes and Technology.

  • Companies like Walmart Unilever and P&G are hiring the best talents where market skills and in-depth technical knowledge are the priorities to ensure creativity coming from top-rated professionals.
  • Their excellence in processes goes from the latest up-to-date Lean methods (TOC, 6Sigma …) to the most innovative Customer Segmentation, Supply Chain Resiliency and Circular models. 
  • They invest in technology. Advanced Analytics such as: machine-learning and AI enhances and even automate, decision making by reinventing operational models.

… and this is just the beginning.

Supply Chainers who are able to adapt its company value chain, make good products even better and at the same time improving Profit Margin, will ensure that the company model will not be disrupted in the future.

References:

  1. Bezos Starts the online drug war https://chiefexecutive.net/bezos-starts-the-online-drug-war/
  2. Gartner Top 25 Supply Chain list http://www.argentus.com/gartner-global-executive-partner-speaks-about-2017s-top-25-supply-chains-list/
  3. Deliberate versus emergent strategy https://hbswk.hbs.edu/item/the-business-of-life
  4. 2018 Trends to disrupt pharma supply chains https://www.pharmalogisticsiq.com/regulations/news/2018-trends-to-disrupt-pharma-supply-chains
  5. Beyond Supply Chains Empowering Responsible Value Chains http://www3.weforum.org/docs/WEFUSA_BeyondSupplyChains_Report2015.pdf

What role will Analytics and Artificial Intelligence play

The 2018 SAS Health and Life Sciences Executive Forum is an event in which global leaders across the health care ecosystem are coming to discuss key issues and opportunities around next-generation analytics.

The main target of 2018 session held at Madrid was to get a deeper understanding of new analytical technology applications in pharma and health care and their potential benefit to pharmaceutical companies, healthcare providers, and patients and communities worldwide.

For more information visit the SAS Executive forum agenda.

Tearing Up the Rulebook: How Millennials are Changing Concepts of Forecasting

… In the past, software was not powerful enough to provide a reliable forecast, but now we have tools and resources that provide insight like never before.

The question is, are you getting the most out of them?

Everyone knows that the present and future is changeable, so why then are we still using the same forecasting structures and assumptions? Why don’t we leverage technology to model different scenarios and build adaptive forecasts?

During my session, I stressed the importance of avoiding complacency when it comes to our forecasting capabilities, and how we should never regard our strategy as the “right” strategy.

We should never regard our strategy as the “right” strategy …

If you’re achieving forecast accuracy now, then you temporarily have a good strategy that must evolve with changing market conditions.

In my session at the Amsterdam IBF convention, I invited everyone to start thinking about how we can plan for all eventualities and base our analysis and conclusions on Forecast Accuracy Simulation, specifically in terms of what-if scenarios, hierarchy, and product segmentation.

What’s more, we discussed how to set up a separate business unit for Disruptive Innovation to develop the resources and processes needed to deliver improvements in forecast accuracy and greater operational efficiency.

Some of the Key Takeaways were:

  • The importance of leveraging software to build adaptive forecasts and develop a continually evolving approach
  • How to start adding real value to your forecast through demand driven models
  • How to organize for innovation and embrace different perspectives on forecasting

My deepest gratituted to all the IBF institute team.

The Institute of Business Forecasting & Planning (IBF) is a membership organization recognized worldwide as the premier full-service provider of demand planning, forecasting, business analytics and S&OP education. Having some of the world’s most well-known global companies as its members, the IBF is constantly finding and disseminating better ways to manage demand, improve organizational efficiency, and company performance. It has been said that no other organization on the globe has as much depth in its educational content for Demand Planning & Forecasting as the IBF. 

La Matriz Portfolio de Proyectos

 

¿Cómo mantener el orden de tus proyectos?

¿Tienes problemas a la hora de trabajar en varios proyectos a la vez? Es posible que te estés convirtiendo en un ‘slasher’ … del inglés ‘slash’ que significa barra alta. El termino fue acuñado por una famosa escritora del New York Times, el cual describe al creciente número de personas que somos incapaces (me incluyo…) de responder en una frase a la pregunta ¿Cómo te ganas la vida?

Imagina que eres un Ingeniero/Musico/Consultor/Escritor. Algo muy común hoy en día, pero ¿cómo coordinas todos esos trabajos durante tu día a día? Y aún más importante, ¿cómo controlas tus ingresos/gastos regulares durante el mes/año?

Lo fundamental es tener una vista de pájaro en la cual puedas clasificar todos tus proyectos, ya sea de trabajo o tu vida personal con la ayuda de una Matriz de Portfolio de Proyectos de acuerdo al Tiempo y el Coste invertido en ellos.

Para ello piensa en el coste no sólo como el dinero invertido también debes añadir todos los recursos implicados como amigos, tecnología, energía, nivel de stress, etc.
Ahora bien, Tiempo y Coste son sólo un par de ejemplos, pero puedes utilizar cualquier tipo de parámetros que consideres relevante a tu situación, además el número de cuadrantes también es optativo (2, 4, 6 …).

En los casos de debajo verás algunas de las matrices más conocidas y utilizadas en el mundo empresarial, las cuales son configuradas después de analizar millones de resultados en complejas bases de datos y que nos permiten de esta manera presentar de una forma sencilla y rápida nuestros principales proyectos.

Veamos algunos ejemplos:

Figura 1. La Matriz BCG (Boston Consulting) es la más famosa y ayuda a las empresas a manejar su Portfolio.

  1. Estrellas: Productos atractivos con alta popularidad en mercados en crecimiento.
  2. Incógnitas: Productos en mercados en crecimiento, pero sin una alta popularidad.
  3. Perros: Bajo crecimiento o baja popularidad.
  4. Vacas de Dinero: Productos muy populares, pero en mercados sin mucho crecimiento.

Figura 2. Matriz de Proyectos de Investigación y Desarrollo (R&D) que clasifica los proyectos en:

  1. Pan y Mantequilla: Excelente potencial de éxito y buen beneficio en caso de éxito (mejoras evolutivas).
  2. Perlas: Los mayores productores de éxito y beneficio. Idealmente querremos tener solamente Perlas.
  3. Ostras: Proyectos recientes con la habilidad de conseguir ventajas estratégicas para la compañía.
  4. Elefantes Blancos: Grandes consumidores de recursos y tiempo, pero no generan grandes beneficios.

Figura 3. Matriz GE (Análisis Multifactorial) de McKinsey para el análisis cualitativo de productos/proyectos.

La matriz se divide fundamentalmente en las siguientes cuatro secciones:

  1. Invest & Growth: Requieren enfocar la mayor inversión posible para alcanzar un rápido crecimiento.
  2. Selective growth: Se recomienda mantener la inversión aunque dependen de un crecimiento muy selectivo.
  3. Selectivity: Merece la pena invertir, aunque de manera muy selectiva.
  4. Harvest / divest: Débiles y en mercados menos rentables, se recomienda vender o desinversiones progresivas 

 Figura 4. Otra versión de la Matriz de Mckinsey (fuente: Wikipedia en español)

 

Nota: Originalmente las matrices representan el eje X de mayor a menor, en lugar de menor a mayor …  Esto se debe a la tendencia de Negocio de ver siempre lo más positivo en el primer cuadrante (Superior-Izquierdo), no obstante, siempre podremos encontrar una versión modificada donde el segundo cuadrante (Superior-Derecho) representa el óptimo.

Big Data and 21st century Supply Chains

Data is everywhere and manufacturing companies today are collecting increasingly massive amounts of data with the help of digital technologies.

New strategies, improved skills and more powerful tools are needed to make sense of that data and crunch the numbers, and find useful insights that are buried in the data. This situation is elevating the importance of Big Data analytics as a critical business capability.

To share few statistics about the amount of data:

  • More than 90% of data in the world today has been created in the last two years, with 80% of it being unstructured, such as images, audio, video, social media, web pages and emails.
  • 1.8 trillion gigabytes of new data were created in 2011.
  • Data is expanding at a rate that doubles every two years.
  • By 2020, the digital universe will be 40 trillion gigabytes.
  • Most U.S. companies have at least 100 terabytes stored.
All companies understand the importance of big data and acknowledge that data analytics of the huge digitized data can help their supply chain process, but the challenge is how to implement it. However, the increased understanding of big data analytics is leading to action, and is becoming a reality.

The trend to implement analytics is on its way and companies have serious plans to incorporate role of analytics in their supply chains.

Optimized supply chain– i.e. delivering the right amount of product to meet market demand while minimizing production, inventory and transportation costs–is a smoothly functioning, comprehensive proposition sought after by all companies. Advances in data analytics, combined with proliferation of data acquisition mechanisms and huge volume of data points, is generating a plethora of possibilities for improving efficiencies in this integrated view of the supply chain.

Earlier, most of the companies sought methods to centralize data to help run their businesses via ERP systems. Now, the concentration is shifting to analytics in to effective decisions with respect to predict customer demand, supplier availability, inventory management, delivery route, etc.

Big Data extends the ability to respond, to predict and, in some cases, even recommend subsequent action, based on insights retrieved from these sources. This takes companies a step ahead in increasing -efficiency in the supply chain. Consequently, the focus is evolving from “supply to replenish” through “supply to forecast” to “supply to prediction based on dynamic pattern analysis”.

Big Data analytics capabilities even have the capacity to reduce supply-side disruptions. For instance, process industries have plant control systems that capture thousands of data points a second. With Big Data techniques, it is possible to proactively adjust parameters in order to improve yield and reduce waste. By identifying potential bottlenecks ahead of time, planners now can account for alternative scenarios and maximize payoff. Moreover, this capability can be used to predict, prevent, or even adapt to equipment failures in transportation, logistics, and warehousing.

References: