2. A NOVEL APPROACH TO INVENTORY OPTIMIZATION AND PROCUREMENT IN A GLOBAL
SUPPLY CHAIN INFRASTRUCTURE - BECTON DICKINSON CASE STUDY
Supply Chain Solutions for a Dynamic World 2 OF 7
SA. UTi SDi provides collaborative working relationships and continuous improvement in the
supply chain network ensuring the Right inventory and Right quantity is available at the Right
time and at the Right location through inventory optimization at Batch and Expiry level.
BD South Africa’s Supply Chain
BD South Africa’s inventory is serviced by a modern and fully automated multimarket
distribution warehouse located in Temse, an industrial town in Belgium, Europe. BD’s supply
planning and demand planning and customer service are shared service functions, shared
between the Europe, Middle East and Africa countries. The supply and demand planners for
the BD South Africa direct supply chain operations are based in Pont d’ Claix, France and
Erembodegem, Belgium. The customer service team is based in Temse, Belgium.
In order to support BD South Africa’s business strategy to service South African customers
directly (as opposed to servicing them through distributors), BD had to decentralise stock
holding from the Belgium-located multimarket distribution warehouse to South Africa. BD
South Africa has since partnered with a third party logistics service provider, UTi Pharma in
this regard. UTi Pharma provides BD South Africa with warehousing and direct distribution
services to any customer address in South Africa.
Challenges
The decentralisation of stock to South Africa was met with many challenges. These challenges
included among other things, a surge in decentralised inventory levels, a drop in availability
levels; a lack of collaboration within the supply chain stakeholders (supply and demand
planners, business managers, customer services and UTi Pharma National Inventory Control)
and poor visibility of decentralised stock levels (both in transit stock and stock on hand).
The excessive inventory levels led to stock obsolescence and expiry which in turn resulted in
the cost of write-offs and in instances the cost of shipping stock back to Temse. Out of stocks
led to poor availability levels which resulted in lost sales and eroded customer satisfaction.
The complexity in the autonomy and silo modus operandi in which each commercial business
segment operated led to a lack of collaboration and consensus on forecast and inventory
management with the European based supply and demand teams.
Further, BD worldwide decided to move onto a new ERP platform; the new ERP platform
lacked a module that managed the planning and replenishment of stock decentralised from
the multimarket distribution warehouse. This limitation resulted in a lack of visibility of
decentralised stock and an inability to plan replenishment.
The gap in the new ERP system created an opportunity for BD South Africa to work with its
third party logistics partner to seek an alternative sustainable solution that would allow for the
optimisation of BD’s inventory replenishment into the UTi Pharma warehouse.
4. A NOVEL APPROACH TO INVENTORY OPTIMIZATION AND PROCUREMENT IN A GLOBAL
SUPPLY CHAIN INFRASTRUCTURE - BECTON DICKINSON CASE STUDY
Supply Chain Solutions for a Dynamic World 4 OF 7
Figure 2: Data Process Flow
Weekly process flow - BD Demand Planners generated a forecast plan and sent the
report along with the in-transit file to UTi SDi. UTi SDi specialists used the forecast in
conjunction with the set policies in order to calculate a weekly Replenishment Planning
Report. The report was sent to UTi Pharma on a weekly basis before the agreed,
specified time.
Weekly Viewer - UTi SDi generated a weekly monitor report to view and measure
deviations on the Replenishment Planning Report. BD’s captured orders were
measured against the system recommended orders. The deviations were investigated
and communicated back to BD. Business intelligence (BI) tools were built into the
system to visually illustrate weekly performance.
Collaboration: Transformation of client’s data into useful information was used to
facilitate both upstream and downstream collaboration. Interactive dashboards were
provided to BD via the web in order to monitor the performance of inventory right
down to SKU level. The BI software was also used to produce monthly scorecards
depicting the inventory profile. Full visibility of BD’s KPI measurement was reported
via the reporting tool. Regular feedback and quarterly policy review meetings were
held to develop further initiatives to improve BD’s service levels.
Implementation
The diagram below illustrates the sequential processes followed by UTi SDi during the
implementation phase.
5. A NOVEL APPROACH TO INVENTORY OPTIMIZATION AND PROCUREMENT IN A GLOBAL
SUPPLY CHAIN INFRASTRUCTURE - BECTON DICKINSON CASE STUDY
SAPICS – THE ASSOCIATION FOR OPERATIONS MANAGEMENT FOR SOUTHERN AFRICA 5 OF 7
Figure 3: Implementation
Value Add / Results
The successful implementation of an inventory optimization solution for BD has led to efficient
procurement replenishment planning within BD’s supply chain. Since the implementation of
the Procurement Replenishment solution, the following results have been achieved by BD:
Inventory levels decreased by 25%
Excess stock dropped by 10%
Availability levels improved from 69.5% to 86.5%
YTD sales growth of 12% has been achieved
The following graphs effectively demonstrate how optimization tools have supported BD to
maximize the performance within their supply chain.
Depicted in figure 3 is the interplay between excess inventory and availability and in Figure 4 is a
depiction of interplay between safety stock, model stock, actual stock on hand and sales. Note
the gap between safety stock, model stock and actual inventory on hand between Jan 2011 and
July 2011, this gap signals excess stock concerns. Further, note how an attempt to reduce stock
levels resulted in a reduction in availability levels between July 2011 and November 2011.
With the introduction of SDi’s proposed solution, excess inventory levels increase in the short
term (April 2012 to July 2012). This was achieved by focusing on the forecast and inventory
parameters of stock that had out of stock issues first. This was done in order secure a
sustainable turnaround in the availability trend curve and to ensure a continued sales growth,
restore customer confidence and re-assure business’ buy-in for the proposed solution.
When the availability trend curve showed a consistently improving trend, the approach was
then to reduce excess inventories simultaneously as availability improved. Note the inventory
reduction between October 2012 and March 2013. The reduction in excess inventories was
attained by establishing first the lower limit and upper limit inventory parameters i.e. model
stock and safety stock. The lower and upper limits were defined as a function of inventory
variables such as lead-times, forecast, safety stock days etc. The stock is considered to be
optimised when it oscillates between the upper and lower limits. The optimised stock levels
were achieved while maintaining sales growth and with less noise and panic from business
managers and supply chain stakeholders.
DataInput 24 Months
Sales History
Inventory Supply
Purchase
Order
Inventory
Policies
MasterData
Modelling DataImport
Workflow
Design
Policy Setting
Item
Classification
Forecasting
Linear
Programming
Output Inventory
Statistics
ServiceLevels
Supply
Analysis
Demand
Planning
Performance
Measures
Reporting
6. A NOVEL APPROACH TO INVENTORY OPTIMIZATION AND PROCUREMENT IN A GLOBAL
SUPPLY CHAIN INFRASTRUCTURE - BECTON DICKINSON CASE STUDY
Supply Chain Solutions for a Dynamic World 6 OF 7
Through the sales and operations planning process and collaboration, decisions between the
business and supply chain stakeholders were made to adjust forecast, write off stock, improve
marketing and sales efforts. This led to inventory levels being optimised to expectations.
Figure 4: Availability and Excess Inventory
Figure 5: Inventory Statistics
Conclusion
As supply chains expand, complexity continues to increase; this can have a significant impact
on inventory management and procurement planning. Companies therefore need to continue
rationalizing inventory control, where the use of effective procurement planning is utilized to
assure adequate inventory levels.
The benefits associated with implementing end to end finished goods inventory optimization
throughout BD`s Supply Chain infrastructure provided BD with an opportunity to manage
uncertainties in the market, minimize stock outs, free up working capital, stay within the
budget without compromising customer demand and ensure that the products reach the
market at the required time.
7. A NOVEL APPROACH TO INVENTORY OPTIMIZATION AND PROCUREMENT IN A GLOBAL
SUPPLY CHAIN INFRASTRUCTURE - BECTON DICKINSON CASE STUDY
SAPICS – THE ASSOCIATION FOR OPERATIONS MANAGEMENT FOR SOUTHERN AFRICA 7 OF 7
As a result, having the right People, Technology, Processes and promoting Collaboration
between all the relevant stake holders assisted Becton Dickenson in achieving their business
goals as well as executing their business strategy.
About Setota K Ramoshebi, CSCP and Nomusa Makhubela
Setota K RSetota Ramoshebi, CSCP, is Supply Chain Manager for Becton
Dickinson looking after the Sub-Saharan Africa operations. As a
Supply Chain Professional he has to date worked for blue chip and
global companies that include Becton Dickinson (BD),
GlaxoSmithKline (GSK), Kimberly-Clark (K-C), South African
Breweries (SAB), Edcon and Woolworths. He has a collaborative and
commercial approach to leading supply chains. He believes that
supply chains play a critical role in a firm’s ability to win and gain
competitive advantage in the markets in which it operates. He has
extensive experience in end to end (E2E) supply chain planning and
management. He is a specialist in Sales and Operations Planning (S&OP) and Collaborative
Planning Forecasting, Replenishment (CPFR) and Demand Management.
Nomusa Makhubela is an Inventory Optimization Manager at UTi
SDi Africa. Nomusa has worked in the Pharmaceutical industry for
over fourteen years assuming different roles and responsibilities.
Her experience covers a wide range of skills: from customer
service, managing the debtor’s book, warehouse operations,
distribution, inventory control, business analyst and inventory
optimization. In her business analyst role Nomusa worked closely
with major pharmaceutical manufacturers, managing client
accounts, identifying business opportunities and threats within
their organisation and providing solutions.
Nomusa holds a Diploma in Warehouse Management, Diploma in
Business Management and Post Basic Pharmacist Assistant qualification.
Contact
eMail setota_ramoshebi@europe.bd.com
Telephone +27 11 603 2666
Cellphone +27 82 552 0409
eMail nmakhubela@go2uti.com
Website www.go2uti.com
Telephone +27 11 456 7440
Cellphone +27 72 264 9645
8. Setota Ramoshebi - Becton Dickinson
Nomusa Makhubela - UTi - SDi Africa
A Novel Approach to Inventory Optimization and Procurement in a
Global Supply Chain Infrastructure - Becton Dickinson (BD) Case
Study
9. Agenda
Section - A
• BD executive summary- Who? What? How?
• BD Challenges
• Value Delivered
Section - B
• UTi Engagement With BD
• UTi Challenges
• The Solution
• Implementation Process
• The Solution Impact and Benefits
• Learning Outcomes
1
10. Founded In 1897 Franklin
Lakes, New Jersey
30,000 Employees in 50
countries
1995 established JHB
office with 70 associates
3 Business segments
BD Medical
BD Diagnostics
BD Biosciences
Distribution Warehouse in
Temse, Belgium, Supply and
Demand planners based in
France and Erembodegem
The products are
imported from Belgium to
UTi Pharma SA
The Company - Becton Dickinson
11. The Company - Becton Dickinson
3
BD Medical
• Needles and Syringes
• Intravenous catheters
• Auto disable devices
• Safety devices
BD Diagnostics
• Blood collection product and system
• Liquid base cytology system
• Rapid diagnosis Assay
BD Biosciences
• Fluorescence activate cell sorters and analyzers
• Reagent systems for science research
• Laboratory products for tissue culture and fluid
handling
BD Business Segments
Market Segments
• Hospitals and Clinics
• Laboratories
• Blood banks
• Physicians
• Retail Pharmacies
• Healthcare Institutions
• Academic and
government institutions
12. BD Geographic Flow
4
BD SA UTi Pharma
UTi Freight Forwarding
Demand Planning
Demand Planning
and Manufacturing
UTi SDi
Material Flow
Information Flow
14. What were BD’s Challenges?
SCM
• Lack of Collaboration
• Lack of Visibility
• Tracking of in transit
Inventory
Management
• Decentralized stock
levels
• Excess stock
• Logistics cost
• Cost of Write offs
• Obsolescence stock
• Replenishment
inadequacy
• Availability levels
• Lost Sales
Customer
Service
• Service levels
• Back orders
• OTIF
15. Value Delivered/Results
7
Excess Stock dropped by 10%
Availability levels increased from
69% to 87%
Inventory Levels dropped by 25%
YTD Sales growth 12%
R1 Reduction
in inventory =
R1 moving to
cash =
R1 Free Cash
Flow
16. UTi Engagement with BD
8
Manufacturing
•Raw material
•Scheduling
•Equipment
Procurement
Replenishment
•Buy or make
•Sourcing
•Supplier
Relationship
Freight
Forwarding
• Ocean
freight
• Air freight
• Lead time
Warehouse and
Distribution
• Receiving
• Inventory
storage
• Replenish
• Distribution
Customers
• Service
levels
• OTIF
Where to Start ? Why ? What are the benefits?
End to End Finished Goods Inventory Optimization
Inventory
Optimization
at Batch and
Expiry
Inventory
Optimization
at Batch and
Expiry
Inventory
Optimization
at Batch and
Expiry
17. UTi Challenges
9
Change management
Data accuracy
Commitment
Information flow
Collaboration
Inventory Profile
Knowledge sharing
Transition process
Dashboard
SDi
DP - France
South Africa
Manufacturing
- Belgium
DP - Belgium
Pharma
Material flow
Material Flow
20. How the Solution was Derived
Technology
Utilized APS with linear programming and Rule
based functionality
Business Intelligence
System set up to upload data
Software customization and configured to be in
line with BD requirements
Inventory Policy settings
Collaboration:
Up stream and downstream collaboration
Relationship with clients
Information flow
Meetings / Workshops
Full visibility interactive dashboards were
provided to BD
21. The Implementation
1. Data Input 2. Modelling 3. Output
• 24 Month Sale History
• Inventory
• Supplier Orders
• Purchase Orders
• Inventory Policy
• Master Data
• Data Input
• Workflow Design
• Policy Setting
• Item Classification
• Forecasting
• Linear Programming
• Inventory Statistics
• Service Levels
• Supply Analysis
• Demand Planning
• Performance Measures
• Reporting
22. • Reduced
o Trucking
o Carbon emissions
o Stock destruction
• Batch and Expiry
Optimization
solution
• Training and
sharing of expertise
• Better dated stock
• Increase
availability of stock
• Reduce customer
queries
• Continued sales
growth
• Free up working
capital
• Reduced
o Excess stock
o Write offs
The Solution Impact and Benefits
Organisation Customers
Environment
Healthcare
Technology
23. The importance of partnering with
the client in order to configure
desired solutions
The supply chain organisation
perceived as a consulting partner in
decision making
Importance of Knowledge sharing
Commitment and collaboration is
the key to the success of the project
Learning Outcomes Gained From The Solution
24. Conclusion
16
UTi SDi works closely
with clients to ensure
optimal cost configuration
for each contributing
factor
