Client case – How our pharma client used dynamic lot sizing

Our client is a leading pharmaceutical company, specializing in Fertility, Cancer, Neurology, and Immunity, changing the life of millions of patients around the world.

Their head of Supply Operations was convinced of the value of GenLots and ready to apply dynamic lot sizing to solve some of their existing challenges.

The challenge

The challenges in the heavily regulated environment of pharmaceuticals are manifold but the corresponding opportunities are large. To name a few:

• Quality control costs occur at each batch and each delivery. They can vary considerably from material to material, going from EUR 300/ delivery to EUR 50’000 / delivery
• The planners had no view on those costs
• Shelf life and expiry was difficult to manage in the current system (SAP R/3). Although expiry dates of batches were known, they were not shown in the current system, which meant that redressing situations where inventory had to be scrapped with the long lead times of up to 18 months created a lot of pressure on the planners and had to be done manually
• Fluctuation within the planning team was relatively high. Forming new planners on the complexities of the customers supply planning took not only time, but was also the cause of many costly errors

The approach

Together with the client we decided on the following approach:

1. Conduct a proof of value, which showed a large savings potential
2. Sit together with IT to define which fields have to be imported into GenLots. We used existing middleware at the client to create an API for GenLots.
3. Integrate the logic of shelf life and batch expiry into our algorithm
4. Include the end users in workshops to a) teach GenLots on the finer points of their complex supply planning needs and b) give feedback on the planned implementation
5. Put into place short weekly meetings to keep current with the planners and a quarterly financial review to check the savings with the supply operations director
6. One of the most challenging parts of the project, was to find out the costs of quality control for each material, as this was not broken down in this level of granularity at the time. So we first used a broad definition by material category and refined it once the quality department had done its analysis

Results

• Our client has saved 5% on inventory, reduced deliveries by over 50% (!!!) and realized discounts on their product. The resulting savings were validated by financial controlling pay the GenLots license several times over each year.
• Planners love that we predict and visualize Our algorithm was flexible enough to accommodate those new parameters
• Despite many team members having changed, including the department head, the customer renewed GenLots and is in his 3^rd consecutive year of use
• We expanded over time to many more use cases. GenLots became the main contact point for innovations in supply planning. Among others we were asked to:
  • reduce CO2 in planning
  • tackle the complexities of packaging materials
  • visualize what the overall inventories of the company were going to be to prevent going over storage capacity
  • integrate with data coming from a separate data source (JDA/Blue Yonder)
  • adapt the GenLots interface to the switch to a more modern ERP (S/4 HANA)

For some time now being active on one site only, our project caught the attention of the global management. We are now in discussions to expand to almost 20 sites and become the de facto standard for supply planning worldwide.