Designing a pull system for Pharmaceutical Manufacturing & Distribution
The pharmaceutical manufacturing site was coming under severe criticism from the distribution centres for long delivery times. As a consequence of this, sales personnel increased their order quantities, resulting in excess stock in the distribtion centres. Obsolescence costs were rising due to expired product.
The objective of this partnership between the Client and Lean Ireland was to develop a project plan for the implementation of a pull replenishment system in the client’s supply chain, that wold result in shorter commit times to the distribution centres, increased flexibility in product mix and a lower cost of operation.
- Data collection & analysis: The Lean Ireland consultant collected data on key features of the Client’s supply chain. This included supplier delivery performance, product throughput time, forecast accuracy, and inventory levels at various stages of the supply chain including distribution centres.
- Feasibility report: The feasibility study contained the conclusions from the data analysis including (i) estimated the benefits of pull system implementation (in terms of increased customer service, reduced inventory holding costs and reduced product obsolescence in the field) and (ii) a proposed model for the pull system. The model included planned performance parameters and levels, required bill of materials and ERP restructuring and and physical machine layout.
The supply chain feasibility study was presented by the consultant to the management team in manufacturing and distribution and approval to proceed with the plan was granted. The client subsequently appointed a full time internal project manager to oversee implementation of the plan.
(i) Customer satisfaction: a decrease in product commit/shipment cycle times from 40-60 days to less than 20 days
(ii) Inventory holding costs: a reduction in finished goods inventory holding in the field and associated carrying costs
(iii) Obsolescence: a reduction in write offs in the field to near zero, and
(iv) Cash flow: an increase in inventory turns and improvement in cash flow.
This was accomplished whilst increasing the level of customer service, and increasing the sales team’s confidence in the plant’s ability to deliver.