Where Is the Pharmaceutical Industry on Supply Chain Maturity? What Can They Learn from Consumer...

Building the Data-Driven Healthcare Channel

Improve Profitability and Unlock Shareholder Value Lora Cecere, Founder of Supply Chain Insights

Disclaimer: I am a Skeptic

A Social Scientist of Sorts….

A Curmudgeon…

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A Fortune-teller of Sorts….

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I Write for the Supply Chain Leader

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9 out of 10 Supply Chains are Stuck

Progress Across Industries

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Industry Snapshots (2006-2013)Industry Year –over-Year

Revenue GrowthOperating

MarginInventory

TurnsCash-to-Cash

CycleRevenue per

Employee (K$)SG&A Ratio

Retail Apparel Industry

18%39%

0.3927%

0505%

6826%

32518%

27%05%

Apparel Manufacturing Industry

14%82%

0.1232%

0568%

15008%

400355%

27%63%

Mass Retail Industry

09%50%

0.0620%

0606%

03148%

35048%

23%6%

Beverage Industry

09%61%

0.1916%

0204%

5346%

512 NC

24% 16%

Pharmaceutical Industry

08%47%

0.2329%

0316%

15547%

57232%

27%08%

Chemical Industry

08%45%

0.1010%

0604%

8723%

55723%

14%27%

Medical Device Industry

06%38%

0.1432%

0213%

20616%

35112%

34%04%

Grocery Retail Industry

06%31%

0.0337%

1701%

1050%

40554%

14%06%

Consumer Packaged Goods

05%25%

0.1473%

08482%

7217%

33314%

26% 09%

Food Industry

05%55%

0.1019%

07 17%

4004%

53455%

20% 18%

Progress Across Industries

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Today’s Functional Organizational

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Today’s Functional Organizational

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Growing Demand Volatility

A Project-based Focus

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What We Expected

My Learning

A Supply Chain is a Complex System

with Complex Processes

with Increasing Complexity

The Supply Chain Effective Frontier

Correlation to Market Capitalization

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Orbit Chart: Wal-Mart(Inventory Turns and Operating Margin)

Orbit Chart: Apple (Inventory Turns and Operating Margin)

Orbit Charts: Dow Chemical Company

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014

-0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.604.0

5.0

6.0

7.0

8.0

9.0

10.0

2006

Eli Lilly and CompanyOperating Margin

2014

NVO0.31, 6.48

2014

2006

Best Scenario

LLY0.24, 8.30

Average (Operating Margin, Inventory Turns)

Inve

ntor

y Tu

rns

Novo Nordisk Making Progress

Measuring Improvement

Overall Ranking per Company

Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)Strength: Inventory Turns & Operating Margin Vector Trajectory (30% of score)Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙=

𝟏𝟑𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑 𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑 𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓

Defining Supply Chain Excellence

PerformanceBeats the industry

average for operating margin, inventory turns and ROIC for 2006-2014

and 2009-2014

ImprovementRanks above peer

group average on The Supply Chain Index for

2006-2014 or 2009-2014

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The Supply Chains to Admire

What Drives Improvement?

• Continuity of leadership• Supply chain talent development• Focus on a multi-year supply chain strategy• Clear governance to guide cross-functional decision-making

• Strength in horizontal processes• Excellence in supply chain planning, network design and inventory management

Building the Data-Driven Healthcare Channel

What Can we Learn from Other Industries?

Retail & Consumer Goods Collaboration

SHARED VISION + SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE

SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION

SHARED VISION + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY

SHARED VISION + SKILLS + INCENTIVE + RESOURCES + LEADERSHIP = FALSE STARTS

SHARED VISION + SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION

SHARED VISION + SKILLS + RESOURCES + PLAN + LEADERSHIP = GRADUAL

CHANGE

Looking Back….

Bar codes were first used at Marsh Supermarket in 1968

Vendor Managed Inventory

Retail Scorecards

The Result

Confluence of Technologies

Supply Chains Don’t Play by the Rules

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But, what if

they could?

Analytics Maturity

Having a New Dialogue

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Currently we Work in the Dark Blue Circle

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Today 9 out of 10 supply chains are stuck.We must learn from the past to adopt new approaches for the future.The focus needs to be on new outcomes for the patient and for health/wellness.

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Questions?

For Additional Reading

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WileyDecember 2012

Wiley December 2014

Self-publishedSeptember 2014

Self-publishedSeptember 2015

Founder: Lora Cecere

• Founder of Supply Chain Insights• “LinkedIn Influencer”• Guest blogger for Forbes• Author of 4 books: Bricks Matter (2012), Shaman’s Journal (2014)

and Supply Chain Metrics That Matter (December 2014), Shaman’s Journal (2014)• Partner at Altimeter Group (leader in open research)• 7 years of Management Experience leading Analyst Teams at Gartner

and AMR Research• 8 years Experience in Marketing and Selling Supply Chain Software at Descartes

Systems Group and Manugistics (now JDA)• 15 Years Leading teams in Manufacturing and Distribution operations for Clorox,

Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble.

Contact Information: • Email: lora.cecere@supplychaininsights.com• Blog: www.supplychainshaman.com (10,000 pageviews/month)• Forbes: http://www.forbes.com/search/?q=lora+cecere• Twitter: lcecere (6500 followers)• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (50,000 followers)

About Lora

Thank you

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888.362.0867 or 609.986.1520www.integrichain.com/blog

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