Supplier and raw material improvements using BioPhorum’s maturity assessment toolkit
Until we started using BioPhorum’s maturity assessment toolkit at Merck, we managed suppliers and raw materials at a site level as we had no global approach or standardized processes.
When we used the toolkit for the first time, the results showed that our processes were fragmented and our overall maturity as a network was quite low. Each of our sites operated independently of each other and the limited best practice sharing that was done was based on personal connections instead of structured processes. For example, a basic supply chain practice like forecasting our raw material requirements for a shared supplier was done at different frequencies, with varying granularity, and shared at different times of the year, if at all.
This situation developed naturally over the years because Merck sites have always had a high degree of autonomy and a small amount of overlap in the types of production and molecules they manage. As a result, the manufacturing sites were historically “self-sufficient” in the way they were organized and had support functions (e.g. supply chain, procurement, quality, etc.) based locally at their site. It was probably only in the last five years that the business started to globalize some of these support services, such as procurement. However, not all functions restructured so there were still some gaps in this global approach, which meant our interactions with suppliers sometimes remained decentralized and determined site-to-site.
This situation created lots of issues for us. The lack of forecasts or forecast sharing had an impact on our performance with our suppliers. Some sites didn’t have data because they weren’t tracking performance. Some had better relationships with suppliers than others, while others had more raw material issues that had to be escalated or addressed more frequently because they were disorganized.
We also didn’t have a central group that could receive these escalations, which acted as a drain on the functions that had to manage these problems. In extreme cases, although rare, it was clear that some suppliers would leverage conflicting information between sites to use to their advantage.
One of the tools that unlocked a path forward for us was the maturity assessment toolkit. It gave us an excellent baseline to highlight the differences between sites and show management that we had some issues and friction caused by our fragmented approach. It also contained a good categorization of topics, ways to prioritize issues and some best practice solutions that we used to define a path forward.
However, the toolkit isn’t aimed at building a plan of action, so we launched a project called “Supplier and Inbound Material Excellence (SIME)”. Comprised of 22+ different projects aimed at raising our maturity levels, SIME built on the maturity assessment baseline and included all sites and functions as we built a roadmap to raise our maturity over the next 2-3 years. In some of the maturity assessment categories, we aim to double our maturity as a global organization.
The projects included in SIME range from supply chain (e.g., forecasting and raw material risk assessments) to quality (e.g., change notifications) to digital systems (e.g., tools to centralize our supplier data). There are also ‘people’ projects that look at how we manage our teams and collaborations, how we segment our most important suppliers, etc. Many of these topics were in the Maturity Assessment, while others were identified and developed by us.
Although we’re still implementing many of these projects, some have been completed and are beginning to deliver benefits for our organization. For example, we have segmented our suppliers and are rolling out a ‘reverse account management’ model in which we have cross-functional, internal global account teams dedicated to managing our relationship with each Tier 1 supplier. We have also designed a forecasting tool that interfaces with our ERP system; this replaces our old manual approaches and follows one of the primary recommendations from BioPhorum’s Forecasting and Demand Planning 2 Workstream. The account teams will use this to share forecasts more frequently with our suppliers, the sites will use it for their operational planning cycles, and it will make our forecasts transparent between our internal functions.
Unfortunately, the supply shortages caused by Covid-19 have slowed our progress on some of our project implementations and negatively impacted our suppliers’ performance. However, we can see improvements in many areas. For example, we now have very open communication channels with one of our biggest suppliers (our Life Science sister company), which has given us some structure to identify problems, discuss performance and highlight why we need more attention on priority issues. This has allowed us to keep supply disruptions to a minimum and reduce any impacts on production.
We are also increasingly aware of internal material issues as we now know, at a high level, which sites are using which materials. This increased transparency between sites has allowed us to transfer stocks between sites when needed, which didn’t always happen in a timely fashion beforehand.
After the Covid-19-related supply chain issues are cleared, I expect the performance of our suppliers to improve as we’re communicating more around lead times, making sure they’re updated, sharing our forecasts, etc.
One area I can’t stress the importance of enough is the need for reliable and easily accessible data. We were aware that we had a complex IT system landscape, especially due to the legacy systems inherited as we grew. However, the stress on raw material availability during the pandemic, the maturity assessment and the baseline we did during SIME made it clear that we needed an IT system to act as the single source of truth for our supplier and inbound material information. Managing this information manually is not sustainable and makes even the best designed processes and collaborations harder to execute. With the support of IT and management, we’ve begun to develop a system that we expect to be deployed in a first phase over the next ~18 months.
If you have a baseline, like the one from the maturity assessment, it is easier to begin discussions, especially with management and the manufacturing sites. For example, it gives a starting point to show how global functions can support the sites and how sites can work in this network environment.
For me, the biggest wins have been the account relationships and the segmentation of suppliers. These things are all intimately linked and we now have a standard performance benchmark that’s used on all our suppliers. Once fully implemented, it will be a powerful tool at a global level that allows us to engage suppliers, bring them to the table and offer them some value. We’re still maturing our supplier relationships, but I hope these changes will start to pay dividends within the next year.
BioPhorum deliverables and guidance
At BioPhorum.com you can find a host of forecast and demand planning-related deliverables and guidance to support adoption of industry best practice including: