Piramal Healthcare Keeps Supply Chain Flexible With Collaboration29th Nov 2010
There's rarely been a more important time for enterprises to move forward in sync. Companies whose multiple departments and interests advance the most in step are those that will make the most of the dynamic opportunities of the upturn.
It isn't rocket science. More collaboration means less friction, which means you move faster. One of the places collaboration can really make a difference is in the complex and multi-stakeholder arena of the supply chain. A finely-tuned supply chain can lower inventory and production costs, improve demand forecasts, quicken turnaround, and make an enterprise dexterous.
This is especially true for a pharmaceutical company. In an era of innumerable new product launches, keeping a pharma company's supply chain flexible and able to meet the needs of a dynamic market is crucial. For Piramal Healthcare, an inflexible supply chain resulted in a loss of sale and market share, high logistics costs, and the risk of unfulfilled customer expectations. That's until its VP of IT, A. Balaji, and its general manager of supply chain, Ranjan Deshpande, decided to collaborate and fix the problem. They called it Project Alignment. They share how they went through the five stages of collaboration.
- Take initiative. True leaders don’t wait for others to fix a problem everyone can see.
- Share the burden of responsibility with your partner. This includes change management across the organization.
- Call in the troops as early. The faster they understand the entire scope of the project, the higher your chances of success.
Stage 1: Identify the pain area.
Ranjan Deshpande, GM, supply chain: We were running the entire supply chain manually. It was chaos. It consisted of disparate systems which had no way of talking to each other. Factory production, inventory management and procurement, logistics, everything ran in silos. We needed to improve data accuracy and completeness in an increasingly complex supply chain system, which was only getting more complicated by the day due to the company's rapid growth.
Balaji and I first figured out what could be done about it and then presented the idea to the board. Backed by Balaji's support, I promised ROI to the management. I'm glad we did it together.
A. Balaji, VP, IT: When I was approached, I identified the problem because I had experience with I-Tool, which took care of Piramal's factory planning. I realized that we needed a system that ensured end-to-end visibility from production into the customer phase. We needed tools to help us handle geographical expansion, product diversification, new product launches, and ongoing cost pressures. Ranjan, who was co-ordinating the project from the supply-chain side, gave me inputs and I went looking for something that would fulfill all his needs. The project was taken to management together. A CIO should not wait for business heads to come with a problem. If they want to transform from a support function to business enablers, they have to take the lead.
Collaboration takeaway: Make sure you and your business partner take an equal amount of ownership.
Stage 2: Get the troops involved.
Deshpande: Balaji and I wanted to make sure that everyone involved in the project was on the same page at every stage of the project. We made sure that the initial meetings were held with members of different teams including the supply chain, logistics, and IT. Everyone in the room realized that the project was mission critical and we took care that all the stakeholders had visibility and clarity on the project's bottom-line. We ensured that management updated through every stage pre-, during and post-implementation. That gave us a certain comfort level and created less pressure on the team.
Balaji: I wanted my team members to have a thorough understanding of how the entire mechanism works. The members needed to know not only the technical details that they would need to work around but also the business processes they were trying to improve through the project. That's why project heads need to communicate, upfront, the overall objective, practicality, and operational procedures to the team. This ensures that everyone has enough time to size up and understand the procedure.
Because the project was meant to improve a specific business process and I handpicked a team of about fifteen people who had reasonably good experience in handling critical projects coupled with an understanding of the business process. One of them had spent a stint in supply chain and another member had worked on shop floor for 12 years before moving to IT.
Collaboration takeaway: Don't tell people what to do. Explain to them why and how they should be doing it.
Case Study Highlights
- 46% of CIO'c say that collaboration and influence are the most important leadership skills that their organizations will need in the coming year.
Stage 3: Plan for the best but be prepared for the worst.
Deshpande: The Piramal factory planner traditionally worked on a push demand basis: We made stock based on demand forecasts and production was not based on actual demand. Production cycles were about 30 days long and at the warehouse inventory was managed accordingly. With the new system we wanted to switch to a pull demand format in which we would make to order with demand forecasts based on real-time data and CRP (continuous replenishment program).
But creating this change in the minds of multiple stakeholders was initially a Herculean task. The heads of the factory were concerned that with shrinking production cycles, their operating costs would escalate. The procurement team was apprehensive about being able to supply raw materials with shorter lead times. In addition, there were a lot of changes to be made on the shop floor and we faced resistance from major stakeholders.
Balaji: I remember that we were two against an army of people convinced that our plan wouldn't work. Making the entire production, procurement and supply chain mechanism based on forecasts and analysis of real time information was complex and many were not ready to accept the change.
After a lot of research and product evaluation, I chose to go with SAP Advanced Planning & Optimization (SAP APO). Prior to that we used SAP R3 and SAP was chosen to ensure seamless integration. Before SAP APO came into the picture, updating master and transaction data took time. From an IT standpoint, the company faced numerous process challenges. But taking what we learnt from stage one and stage two, we created a number of presentations, training and workshop programs to help various players understand the objectives and the impact of the implementation.
The entire re-engineering phase took three long, rigorous months during which Deshpande and his team worked closely around all aspects of the supply-chain and production scenario. We made sure that every presentation and workshop included the factory heads and sales and procurement teams. Collaborating with so many business processes was one of the toughest challenges.
Collaboration takeaway: Weave your strategy around the people whom the project will impact most. Help the head of other business processes explain new technology to their team members with a business outlook.
Stage 4: Look for all the different benefits of collaboration.
Deshpande: Once the project was on track, we realized how it had revolutionized our supply chain processes. We eliminated manual planning and our old dependency on spreadsheets. This allowed us to accelerate planning cycles, and cut our response times. More real-time data inputs from the sales team and decreasing manual error margins resulted in improved data accuracy, and better demand forecast and product analysis.
We are now more agile and more able to meet increasing customer demands. Raw material inventory has reduced by 15-20 percent resulting in less wastage. Our inventory of finished goods reduced by almost 15 percent which means that our demand and supply estimates had fewer gaps. We devised a very strong framework of KPIs that included a mix of lead and lag indicators which are both qualitative and quantitative. Now we have real-time data traction of all the departments involved from production to logistic and the management can take quicker decisions.
Balaji: From an IT viewpoint the project was like a whiff of fresh air. We managed to eliminate old legacy systems and by simplifying the IT landscape, we increased the IT team's productivity. The alignment between business and IT gave the IT team an enhanced feeling of ownership. In addition to measurable KPIs such as customer service levels, raw material and finished goods inventory, the organization enjoys enhanced visibility of its supply chain from one end to the other. This enables it to react more quickly to demand. We now use a KPI diagnostic tree to conduct root cause analysis to eliminate inefficiencies and ensure continuous improvement.
Collaboration takeaway: Collaboration creates many more win-win scenarios than you expect. For the best chances of success track, record and keep collaborating.
Stage 5: Keep collaborating and improving new aspects.
Deshpande: Taking the learnings from stage 4 forward, we are still in the collaboration and revision mode. The IT team sits with the sales and supply chain team on a regular basis to figure out redundancies in the system. We initiated collaboration with the heads of other teams (procurement, logistics, etcetera) to keep tracking the entire process even after the project's implementation. I am continuously improving on back-end support and the sales team is just not capturing real-time demand but also generating realistic forecasts based on the IT-enabled analytics tools.
Balaji: The IT team is still improving the system. With the KPI's and tools for better collection and analysis of data, we are now able to figure out lags and who is responsible for them. We can now also successfully monitor truck-load timings and help logistics work better.
Collaboration takeaway: The best businesses work like clockwork. Get all the components in sync and watch how times turn in your favor.
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