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The central supply chain management group makes business decisions as well as manufacturing decisions. For example, it may make sense from a manufacturing standpoint to discontinue an old, off-patent drug that takes up valuable capacity that could be better used for a more profitable product. From a business standpoint, though, the legacy drug may be an integral part of a product portfolio for a therapeutic need that patients rely on. Some products are more valuable than the bottom line indicates. Gaining this degree of insight means looking beyond the manufacturing function. During the late 1990s, Lilly set up an organizational structure of global product teams to enhance speed-to-market capabilities. Product teams are cross-functional teams of development, medical, clinical, marketing, and regulatory staff who focus on a single product. The team creA supply chain ates a global, integrated plan for the product steward acts as a over its entire life cycle, including new indications, line extensions, and marketing proliaison between the grams. A supply chain steward, acting as a product team and liaison between the product team and the supply chain, interprets and translates that plan the supply chain. into supply chain tactics and targets. In this way, widely dispersed manufacturing units around the world are provided with very clear objectives that align precisely with the global marketing strategy for every product. Lilly is also making the transition to running the manufacturing organization globally instead of regionally or locally. Until recently, the company created short-term materials requirements planning (MRP) plans at each site and attempted to reconcile the plans using supply chain models designed for single products. After experiencing a number of challenges for which this approach was clearly insufficient, Lilly realized that the only way to resolve them was to optimize networks of sites instead of
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ELI LILLY PROFILE: Supporting Product Lifecycles with Supply Chain Management
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individual sites and to optimize families of products instead of single products. To this end, the company created a global sales and operations planning (GS&OP) process and model that create one long-term plan per manufacturing network. Once approved, the plan provides input to the site GS&OP process. Each site reconciles the long-term global network view with shortterm local demand and supply signals. The goal is to optimize capacity and inventory across the network of plant sites and the supply chains while ensuring an uninterrupted supply of medicine. Lilly believes that the only way to do this is with a GS&OP process. Of course, managing complex global operations is easier with integrated information systems. In the 1980s and 1990s, Lilly had a wide range of computer systems throughout its local and regional branches. Today, the company is in the midst of a global ERP rollout to all manufacturing sites and most of the major sales offices as well. This will allow managers to see production plans, sales forecasts, inventory levels, and capacity utilization across the enterprise. Until the rollout is complete, however, pulling together the performance data needed for global supply chain management is a major undertaking. If the past is any indication, Lilly will continue to improve its supply chain management organization and capabilities in response to changing market conditions. The company s supply chain management structure has gone through three different organizational forms in the last four years, a continuous evolution to better align the structure with business needs. The company believes that this ongoing alignment is the key to supply chain management in the pharmaceutical industry.
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Core Discipline 1: View Your Supply Chain as a Strategic Asset
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If you re like many companies, you only think about changing your supply chain when something s broken inventory levels are too high, customers are complaining about poor service, or a supplier is late with a critical shipment. Or maybe a benchmarking analysis shows that your supply chain performance is subpar relative to others in your industry. If you only think about changing your supply chain when there s a problem, chances are that you don t see it as a valuable asset that can give your company a competitive advantage. And if this is the case, you risk being blindsided by companies that use their supply chain as a strategic weapon. Companies such as Dell, Amazon, Shell Chemical, and Airbus are rewriting the rules of competition in their industries and forcing the laggards to play catch-up. Market leaders such as Wal-Mart and Dell understand that the supply chain can be a strategic differentiator. They constantly search for new ways to add value and push the boundaries of performance. And they keep refining their supply chains so they stay one step ahead of the competition. They know that today s competitive edge is tomorrow s price of entry. Michael Dell is widely viewed as a pioneer in the personal computer (PC) business. He transformed Dell from struggling PC maker to market leader by introducing supply chain innovations such as direct-to-consumer
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