Demand

Driven Allergan

Tom Daunt
European Logistics & Planning Director, Dublin.
Content

1. Who are Allergan?

2. Why were we interested in Demand Driven?

3. Scope of our Demand Driven pilot

4. Our processes and performance before the pilot

5. Our new Demand Driven processes

6. What have been the results?

7. What have we learnt?

1. Going forward
 1. Who are Allergan?

Until 2014 Allergan were an independent, fast growing $7bn

turnover, US based global pharmaceutical company, focussed on
ophthalmology and medical aesthetics (botox and fillers). Our
European SCM activity is based in Dublin.
 1. Who are Allergan?

In 2014 we fought off an un-solicited take-over bid by Valeant and merged with Actavis
($66bn).

In 2015 it was announced that, in 2016, the old ‘generic pharma’ part of Actavis would be
acquired by Teva ($42bn) and Allergan would merge with Pfizer( $160bn)
 2. Why were we interested in Demand
Driven?

• In 2014 we had a ‘burning platform’ – whether we were successful in defeating Valeant

or not, cash generation and efficiency improvements were going to be needed so top
management were very interested in anything innovative, creditable and performance
enhancing

• I met Simon Eagle, a CDDP Trainer and consultant, at an SCM Conference in 2014 and
the Demand Driven approach, which was new to me, sounded very rigorous, sensible
and, given our situation, appealing.

• My boss immediately recognised Demand Driven as ‘enterprise wide’ Lean ‘pull’ and
was very supportive

• Our VP quickly approved a formal assessment and pilot implementation using DDI
accredited software from
2. Pilot key objectives

• Demonstrate Demand Driven capability in controlling the supply chain

• Deliver stability and management control

• Simplify planning process & demonstrate ability to scale, in size and geography

• Control stocks whilst maintaining service – reduction not a driver

 3. The scope our our Demand Driven pilot

• Product Lines – Filler products

sourced from the Pringy Production
site.

• Supply Chain – Inventory levels in

the Rhenus EMEA warehouse in
Strasbourg and In-country
warehouses.

• Processes – Inventory planning,

replenishment planning, S&OP and
replenishment order creation and
release to the Pringy site. Sales
forecasting was out of scope for the
pilot.
4. Our processes and performance before
the pilot

Previous Replenishment Process

4. Our processes and performance before
the pilot

Previous S&OP Process

 4. Our processes and performance before
the pilot
Current Pringy Manufacturing Process

Future&Buffer&? Future&Buffer?

PO GI Compunding Filling Steriisation Packing Ship&to&Rhenus

Week&1 Week&2 Week&3 Week&4 Week&5 Week&6 Week&7 Week&8
7&days 4&hours 30&minutes 4&hours 5&hours

Illustrates current manufacturing process and planning buckets demonstrating scope for lead time reduction and
possible planned buffer locations.
 4. Our processes and performance before
the pilot
Pringy Planning Workload
from current Supply - Bow wave created by under forecasts & time fence
Planning Process - Maybe some period end ‘sales push’ effect?
- Maybe some induced by customer credit terms?

Confirmed#workload

PO#workload

‘Demand Driven’ Benefits

1. Minimise week 9 spike & manage any remnants
via O8 traffic light prioritisation
2. Minimise schedule changes within 8 week time
fence
3. Reduce lead times
Month#1 Month#2 Wk#1 Wk#2 Wk#3 Wk#4
Month#3

With a time fence of eight weeks, the logic of MRP will push all ‘excess’ demand for products (ie. any above forecast) into new planned orders
that fall into week 9 & its this that generates the week 9 peak. Any capacity available from sku’s that sell below forecast gets ignored. THIS
DOESN’T HAPPEN UNDER ‘DEMAND DRIVEN’

With the ‘demand driven’ approach, the forecast contributes to buffer setting but only demand that is received triggers replenishment – no
‘excess’ demand is ‘pushed out’. The buffers are extremely resilient and because the week to week sku demands balance out, available capacity
is more than adequate to meet actual demand.
4. Our processes and performance before
the pilot
Previous Performance Metrics
• Ship on time ex factory – 92% (80s to 90s)
• Target Service Level – 97.5% (achieved)
• Stock Target – 90 days forecast, achieve 86days (EMEA Filler sock turn – 4.23 exc’ in
transit)
• Forecast accuracy – 76% with 2month offset
Critical Performance Improvement Metrics
• Maintain service levels
• Factory Stability*
• Inventory
o Understand drivers (lead time, variability, MOQs)
o Right size
o Reduce
*Factory Stability Measure – Improvement in ‘ship on time’
- Reduction in schedule changes due to service issues and order consolidation
- Ability to reduce lead times / free up capacity
5. Our new Demand Driven processes

New Replenishment Rule Setting Process

5. Our new Demand Driven processes

New Monthly Process – Conditioning* & IBP/S&OP

* Conditioning is the stock

target and rate management
process
5. Our new Demand Driven processes

New Weekly Process – Replenishment

6. What have been the results?

Rhenus Simulation: Expected inventory levels could be lower than

current by c. 27% while achieving planned service levels

Top Of Green Current

Calculated
Target On Hand
Actual On Hand
6. Actuals have delivered on expected benefits

• Inventory has stabilised and has aligned to the

O8 projected levels
– Total inventory (Rhenus and other locations) had
been erratic between Dec ‘14 and April ‘15
– O8 implemented in March 2015 with the first
factory orders planned for receipt into Rhenus May
2015
– Inventory levels before May ‘15 unaffected by O8
– Inventory profile shows increased stability from
May ‘15 onwards
– Rhenus inventory shows a reducing trend
– Other locations’ inventory is more variable to
buffer demand fluctuations in the location closer
to the point of consumption
– Rebalancing of inventory has increased stock
holding in variable markets (e.g. Russia) whilst
reducing others (e.g. UK)
– Forward simulation using current data and settings
suggests total inventory will average 30% less than
starting position over the next 12 months
6. Actual on hand at SKU level is stabilising to
expected levels
6. Order changes due to market demand have
been eliminated but push based planning in
factory still drives supply chain noise
• A new report has been developed to track
the order changes
• Still seeing a high level of order changes
• The changes in the confirmation period (1st
week after order creation) are now being
ignored
• All changes from Sep ’15 onwards have
been initiated by Pringy, according to
allocated Reason Codes

ORDER REVIEW Mar to JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
Work-to Report Orders 26 17 15 39 20 12 20 20 11 21
Manual Orders 2 2 2 0 0 0 0 0
NEW ORDERS CREATED 26 19 15 41 22 12 20 20 11 21
PRINGY CHANGES
Date Changes 11 19 30 35 24 34 18 3 18 14
QTY Changes 41 24 20 31 20 38 28 21 25 21
DUBLIN CHANGES
Date Changes 2 1 3 0 0 0 0 0 0 0
QTY Changes 1 1 3 0 0 0 0 0 0 0
No. OF CHANGES MADE 55 45 56 66 44 72 46 24 43 35
No. OF ORDERS CHANGED 29 17 17 25 18 24 21 14 28 28
CHANGES BY MONTH ORDERED
Current Month 1 1
Month -1 36 19 13 9 14 8 5 1
Month -2 18 22 56 38 35 35 35 16 21 34
Month -3 3 15 23 8 16
6. Lead times have been tracked and
amended to actuals
 6. System & p

Comments from Deirdre O’Shea, Planner, 16th April 2015

• “I’ve been planning for the past 20 years using various planning systems. Hands down, O8 is the
most user-friendly system I’ve used to date”.

• “For day to day use, it’s very visual, easy to navigate as a right click will more often get you to
where you need to go”.

• The daily alert screen means that any issues are highlighted instantly, alerting the issues very
clearly - this leads to expediting or conversations with demand planners regarding sales spikes,
promotions etc. which can resolve the issue. (Often to get this same information would have
meant running a separate system, download to excel, pivot the data and start the analysis.)

• “While I’m still learning various tasks such as the ‘events’ and various simulations, the user guide
notes are super and the backup from O8 has been fantastic”
7. What have we learnt?

• The Demand Driven process delivers what is promised – service achievement, inventory,
lead-time/capacity reduction, Planner efficiency/satisfaction
• We expect additional benefits when we are able able to introduce DD into the factory
• We haven’t been able to maximise DD’s full benefit re inventory because we weren’t ready
to turn down production as required – this has also led us to pull forward a certain amount
of ‘un-necessary’ production
• We need to address factory metrics and move them towards ‘flow centric’ instead of ‘cost
centric’ (ie. right sizing of capacity and responding only to demand)
• SAP’s forecast driven factory ‘planned orders’ are slightly different to those of Orchestr8’s
forward simulation which has caused a little confusion, we should have interfaced O8’s
through SAP from the beginning
• Apart from the ‘planned orders’ we built a robust data migration interface between SAP
and O8 from day 1 which has meant we have been able to focus purely upon process
matters without data difficulties
• Having our factory driven by Demand Driven in Europe and ‘forecast push’ elsewhere hasn’t
been ideal so we are keen to expand DD into the US etc asap
7. Going forward

• Despite our change in ownership, our new management in the enlarged company
have been very supportive of our Demand Driven pilot – they allowed us to extend
the pilot and budgeted for its 2016 extension into the non-European markets
which will allow 100% of Pringy’s demand to be ‘demand driven’.
• We look forward to sharing our successful Demand Driven pilot with Pfizer when
we merge with them later this year

• Message from Tom…………

“Sorry I cannot be with you today.

Demand Driven, to me, is about configuring and allowing the SC to respond to demand
which is real, instead of forecasts that are wrong. For us it has almost been too
successful because it threatened to slow down our factory too much and we’re having
to manage the inventory reduction very carefully.

If anyone would like to talk with me about our experience with Demand Driven I would
be very happy to have a chat – mergers and integration permitting”