BMS Aims High Through Benchmarking

PharmaManufacturing.com

Bristol-Myers Squibb benchmarked against the leanest, most agile consumer goods companies to transform its supply chain management processes and culture.

By Agnes Shanley, Editor in Chief
ashanley@putman.net

When you decide to change the way a major pharmaceutical manufacturer manages its global supply chain, it helps to have the right benchmarks. For Bristol-Myers Squibb Co. (New York), those models were no less than GE, Wal-Mart, Gillette and the world’s leading electronics firms.

Vice president Cheryl Capps and a team led by Mike Evinski and Todd Smith, directors of supply chain optimization, saw the need to improve the company’s inventory management and forecasting ability, and to optimize the quality of data that would make that possible. Their goals were to reduce inventory, speed responsiveness and “lock in” lower costs for key materials.

“We didn’t compromise because BMS is a pharmaceutical company,” says Evinski. And they took a hard-nosed, statistical approach, using standardized metrics and calculating customer service levels with one algorithm.

Their work, which began in April 2000, is already paying off, and the improved supply chain management model is currently being used in 95% of the company’s facilities around the world. Customer backorders are down by 90%, ship-to-promise rates are up 25%, inventory levels are down by one-third, and central headquarters’ overhead is down by 40%, Capps says. Data quality levels, meanwhile, now exceed 4σ, up significantly from where they were four years ago.

These changes required vision and the ability to think outside of the pharma box, and key team members brought fresh perspectives with them. Capps, an engineer, has a green belt in Six Sigma and a degree in psychology, and had worked at GE before joining BMS. Smith had a background in consulting and had worked in the telecommunications field, while Evinski had experience both as a plant engineer and management consultant.

They all shared a clear picture of the ideal end state, and where a company, regardless of industry, should be in terms of inventory management and customer service. “Because pharmaceutical margins have been relatively healthy, many drug companies feel they don’t have to be the best in supply chain management,” says Evinski. So BMS looked outside of pharma. “We felt ‘why reinvent the wheel’ when industries with razor-thin margins had already done what we wanted to,” Evinski says.

They decided to take a cross-section of best practices from different industries. “Some practices adopted widely in other manufacturing sectors won’t work in pharma, where others will,” says Smith. “We found those that we thought would create the most benefit.”

This was not the first time BMS had undertaken an overhaul of its SCM system. This was the first time it had taken such a stringent quantitative approach; the team made it a priority to ensure that the quality of data was as good as it could be; data quality was an area where prior efforts had stumbled.

Bringing 'the big picture' to employees throughout an organization requires pharma firms to take a hard look at their 'functional silos' and change cultures in which a given silo optimizes itself at the expense of the whole company.

Seeing the big picture

Established practices and people issues have proven to be the primary challenges for the team so far. Bringing “the big picture” to employees throughout the organization required cultural change. “If you look at most pharmaceutical companies, they’re still set up with functional silos, each of which tends to optimize itself at the expense of the whole,” says Smith. Employees, at every level of the company, needed to see themselves and their operations as nodes in a much longer chain. “It’s not OK to make your sales targets in one country, but have a global shortage of product,” Capps says.

The team assigned a full-time change management professional, and built rewards and incentives for the right behavior into the company’s compensation programs. Four years later, the effort is changing the company’s supply chain management culture, and more employees are embracing the new approach.

In the “Business Capability Release” (BCR) concept that initially drove this project, the team worked backward from an ideal end state, systematically breaking a huge and ambitious project down into reasonable pieces. It set out to create a series of well-defined projects or BCRs, each lasting from six to nine months. Projects had to have clear goals, and had to be set up so that results would build on each other, says Evinski.

Making the business case

Data had to be transparent. “We needed to know inventory and demand figures continuously to be able to perform more complex tasks like advanced planning,” says Evinski. Disparate IT platforms initially made communicating this information difficult. When the project began, SAP handled about 80% of the company’s supply chain (on a dollar basis), but was used in only one-third of its manufacturing plants. BMS used 25 customized BPCS platforms, resulting in a combination of SAP, BPCS, and “one-offs” of MAPICs and Data 3. Since then the company has standardized on SAP and Manugistics, and is planning to implement MES gradually.