Phibro Animal Health Corporation is a diversified global developer, manufacturer and marketer of a broad range of animal health and mineral nutrition products to the poultry, swine, cattle and dairy markets with annual revenues that exceed $650m. Phibro employs two company-owned and 14 third-party manufacturing, formulation and warehousing locations in the U.S., Canada and Brazil to serve its customers. The products are sold direct through a network of company-owned operations around the globe and distributed in other markets through third parties.
Not only is its supply chain complex, it is also driven by considerations of quality control, lot expiry, lot traceability, labeling, and regulatory product quarantines that must be addressed throughout the product lifecycle, especially before sale and delivery.
J.D. Edwards is Phibro's core ERP system. The company also utilizes various warehousing and transportation systems and a business intelligence/data warehouse system called Insight. Its many fulfillment and warehouse partners all use different systems and many refresh via Insight periodically.
Historically, Phibro has extensively employed Excel spreadsheets in creating and maintaining its production plan each month. Workarounds were in place creating handshakes among the systems for recognizing orders, recording shipping and tracking availability. This monthly process was a time-consuming, two-to-three week exercise. Managers identified potential future supply chain bottlenecks via an almost entirely manual process.
Phibro's “pain points” included: a long monthly planning cycle (2 -3 weeks), lack of inventory visibility (multiple instances of JDE as well as internal and external inventories not in JDE), difficulty giving solid promise dates to customers, and maintaining high levels of safety stock to avoid missed sales – not to mention the inevitable missed sales due to lack of fast, firm delivery promises and significant “firefighting” time that consumed key staff resources.
“Our greatest challenge was that as the company evolved over time, the number of products grew, and we found that we just didn't have the bandwidth or the tools to manage the supply chain because we were trying to manage everything through spreadsheets,” says Gary Fling, chief information officer at the Teaneck, N.J.-based company.
The Business Opportunity
Yet, Phibro’s key strategy is to maintain a profitable product portfolio delivered to customers with very high service levels – typically more than 98 percent in the core products. In addition, management sees tremendous growth opportunities. While the use of spreadsheets was untenable, senior management was reluctant to reduce excess safety stock inventory. So, either the company could build and/or buy more production capacity, including associated additional inventory, or it could better manage inventory.
Phibro turned to Vecco International to achieve four goals: improve current operations and achieve efficiencies; enhance the efficacy of the ERP and other internal systems; support better customer service; and improve agility and perfect order fulfillment. That would require providing planning data and process insight regarding current and future capacity requirements and visibility into projected inventory and the various components that impact availability. That included lot information and current status, production plans, purchase orders, in-transits, shipment plans, inventory transfers, sales orders, forecast and inventory targets across all North American locations.
Senior staff required an easy-to-use solution to automate these multi-tier calculations across their entire internal supply chain, and across several tiers of owned and outsourced sites. Management desired alerting tools to enable rapid management response to sudden changes in demand and/or supply. Side by side, real-time visibility of inventory and demand would enable management to proactively streamline production and purchasing schedules, while maintaining Phibro’s regulatory compliance, quality standards, and very high customer service fill rates.
Vecco configured a SaaS solution, using its Value Chain Resource & Response Planning (VCRP) platform, with its integrated visibility, planning, execution and analytics. This solution, which the team named the Phibro Global Inventory and Production Management system (GIPM), was designed to rapidly meet the four goals and provide a platform for future management of Phibro’s many international fulfillment locations, a platform for collaboration with its key material vendors, and also for demand collaboration with its top global customers. It synchronizes the procurement, production and movement of inventory through the Phibro supply chain to maximize utilization of constrained resources/products. The solution also enhances visibility and control of product lots for regulatory and quality concerns.
The VCRP work began in February 2013 and went live that July. Phibro operated in parallel from then until the end of September 2013. The entire implementation only required 40 man-days of Phibro staff time. Based on success to that date, Phibro eliminated its spreadsheet-based process after the October 2013 planning cycle.
Accuracy Vastly Improves
The project has implemented all of its targeted features and capabilities.
“Primary plans are now developed in 10 minutes to an hour each instead of taking two weeks,” says Fling. Planning staff then performs two to three days of exception/opportunity analysis which “frees up” 14 to 20 man-days of time per month to spend on improving the processes and optimizing inventory and production processes. Clerical and analytical firefighting are drastically reduced, while accuracy is substantially improved. Response time for action among contract manufacturers, Phibro and suppliers is cut by 75 percent, from three weeks to less than one week. ATP/CTP also provides high service promise accuracy with reduced safety stock requirements.
“We thank the Vecco team for the fine job in understanding our business and configuring the solvers/models to reflect our requirements. Vecco did a great job in quickly understanding the requirements and modeling them while using their hands-on experience to train and guide,” said Ed Knightly, Phibro's director of Global Supply Chain Operations.
Based on the success of the GIPM phase one deployment, Phibro engaged Vecco for a Phase 2 initiative to roll out the Phase 1 capabilities to cover the company's remaining 17 international operations, says Jonathan Kall, Vecco International chief executive officer. Phibro has also identified a Phase 3, which would implement demand management capabilities, including real-time links to major customers, key vendors and logistics partners. These could include resale and international material and logistics vendors. Further, Phibro may also take advantage of Vecco’s provision which addresses compliance with the Drug Supply Chain Security Act, providing lot level track-and-trace capabilities.
“There were a lot of complexities in our business to get to where we needed to be, but Vecco got us there,” Fling says.
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