Like changing tires on a moving car. That's how Arun Balaramakrishnan describes the experience of implementing demand planning and advanced scheduling software at Allergan plc, the global pharmaceutical giant. But he might just as well have been talking about the company's internal transformation over the past decade. For all that time, it seems never to have stood still.
Take the corporate name. Up until June of this year, it was Actavis plc. Then it became Allergan, taking the name of the maker of Botox that it acquired earlier in the year for a reported $70.5bn. Prior acquisitions under the Actavis name included Warner Chilcott plc, Forest Laboratories and Durata Therapeutics. And in 2012, the original Actavis Group was itself purchased for approximately $5.5bn by Watson Pharmaceuticals, Inc., which proceeded to scrap its own name in favor of the Actavis identity. Today, the entity known as Allergan is a $23bn company with global headquarters in Dublin and U.S. administrative offices in Parsippany, N.J.
It was the Watson deal that triggered the need for a transformation of the company’s I.T. structure. According to Balaramakrishnan, who serves as executive director of global supply chain transformation and processes, what was then called Actavis found itself with a whopping 53 separate versions of enterprise resource planning applications around the globe.
The disjunction between systems, coupled with a lack of modern-day planning and scheduling tools, was having a serious impact on operations. There was no formal planning process or view into actual demand. Manufacturing sites were simply reacting to orders as they came in. The operation was run largely by spreadsheets.
Not surprisingly, customer service was “extremely poor,” with stockouts valued at more than $10m, says Balaramakrishnan. “It was really hurting the commercial business situation.”
In November 2012, Actavis launched its Supply Chain Transformation Program. Goals included improved agility and operational efficiency, rapid integration of internal supply-chain nodes, better company-wide collaboration between markets and sites, and improved planning and decision support, all with an eye toward balancing demand and supply.
Important as it was, the ERP consolidation could wait. “We didn’t pursue it at that time,” says Balaramakrishnan. “We didn’t want to be overwhelmed.”
The Immediate Target
What Actavis did go after was demand and replenishment planning, in partnership with software provider Infor. It began with two Infor modules, Demand Planning (including a sub-module for replenishment) and Advanced Scheduling. Drawing on the resources of Infor Consulting Services, a team of Actavis managers completed a global rollout of the systems in a little over two years.
Implementation occurred in stages by region, starting with Europe, then moving into the company’s operations in the Middle East, Africa, North America and Asia-Pacific. Europe was the starting point because “that’s where the complexity was,” Balaramakrishnan says.
Actavis tackled demand planning out of a need for a formal, automated forecasting process, says Natalie Regniers, Infor’s industry and solutions strategy director for supply chain management. In the U.S., the company’s priority was production scheduling, fueling the need for the Advanced Scheduling module.
The pharmaceuticals sector is characterized by volatile demand and a high level of customer expectations. A typical supply chain often will involve several points of production, with a lengthy path from raw materials to finished product. That makes it tough to match output with real-world purchasing patterns, Balaramakrishnan says.
As if that weren’t enough complexity to handle, Actavis presented Infor with a special challenge. While the vendor had worked with many big accounts over the years, “This is the very first company that is rolling out all of our solutions on planning globally,” says Regniers. Add to that a corporate environment that is in constant flux due to a seemingly endless string of acquisitions. “The playbook changes all the time,” she says.
With the adoption of any new system, proper training is essential. Infor consultants were on site throughout the multiple stages of implementation. Actavis also drew on the expertise of independent business consultants, who helped it to document work instructions, model the data and engage partners in every region of the world.
The People Perspective
Change management is often an issue with the purchase of major software applications. “Getting people to accept the new way of working was the biggest piece,” says Balaramakrishnan.
It wasn’t a matter of outright opposition to technology. “People welcomed the opportunity to get out of legacy spreadsheets and more into capabilities like this,” says Balaramakrishnan. “But others said, ‘My spreadsheet did this magic, and I’m expecting exactly the same result in the new system.”
The project included some entirely new roles, including regional demand managers who could interface with supply planners. At the same time, Actavis worked hard to align manufacturing and commercial operations with its global supply chain. It was further challenged by the need for obtaining clean data, then reconciling and migrating it to the right users.
Benefits of the implementation to date include a 10-percent reduction in penalties for failure to supply product as ordered, 22-percent reduction in working capital through lower inventories, and a drop in backorders from a high of $10m at the end of 2012 to less than $3m just two years later.
“We’ve recovered lost margin and lost sales, and are more responsive to customer demand,” says Balaramakrishnan. Regniers adds that the company has experienced better coordination of supply-chain activities between manufacturing and marketing.
The newly named Allergan continues to roll out the Infor supply-chain planning suite across all of its sites. The next step, says Balaramakrishnan, is acquiring new sales and operations planning (S&OP) capability. At the same time, the company is looking to standardize its global operation on one instance of ERP from SAP within three to four years.
“We’ve put some basic foundational maturity into place,” says Balaramakrishnan. “Now we’re moving to the next level.”
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