A dramatic deterioration in delivery performance (OTIF) had led a contract manufacturer (CMO) in the pharmaceutical industry into crisis. The company was at risk of losing its most important customer. As a result, the Director Supply Chain Management and the Managing Director of the site had to leave the company at short notice. The interim manager was tasked with improving the supply chain with the existing resources and initiating the transformation until the vacancy was filled.
Strict requirements for GMP/GDP-compliant processes in supply chain management
The company is part of a globally active pharmaceutical company that produces medicines for its own brand and other pharmaceutical companies as a contract manufacturer (CMO) at the site. The suppliers and customers are located on all continents. The site handles the import of all medicines into the EU for the group, which originates from outside the EU, and is therefore subject to very special monitoring by the National Agency for Social Services (LASD). In addition, the site is a customs-approved consignor, which is important for global deliveries. Both require compliance with particularly strict GMP/GDP-compliant processes in supply chain management.
Restoring customer trust through intensive proactive communication
In order not to lose the contract manufacturer's most important customer, the interim manager sought an exchange right from the start of the mandate. In a two-day workshop, he worked with the client to develop, among other things, improved communication with escalation rules. He also kept the client up to date on the progress of the improvement measures. The improved communication alone made a significant contribution to restoring customer confidence.
DMAIC analysis of the supply chain processes reveals significant weaknesses
After the interim manager had gained an overview, he began a dedicated DMAIC analysis (6 σ) of the end-to-end (E2E) supply chain processes as well as the internal and external customer-supplier relationships. In a report, he summarized the main tasks for an optimized E2E process in supply chain management. The interim manager identified inadequate coordination of production planning and procurement as well as an incorrect understanding of KPIs in management as the most important areas for action.
Building an integrated materials management system from planning to procurement
In order to better align production planning with the operational procurement of production materials, the interim manager bundled specialist knowledge and processing capacities in a new Planning & Procurement division under the umbrella of a likewise newly created Materials Management division, which also includes warehouse logistics for production materials. Through his proactive communication, the interim manager played a key role in ensuring that the works council agreed to the restructuring.
The reorganization meant that several units could be merged. The integrated materials management system meant that two department heads could be saved. This led to resistance - including in Purchasing. However, as the reorganization quickly showed results and delivery reliability improved, a new level of satisfaction and a new team spirit developed.
KPI dashboard developed and reporting improved
Another important measure taken by the interim manager was to convince the management (nine department heads) of the need for new key performance indicators. Previously, the management had measured the company's success by the production rate. In a management workshop, the interim manager succeeded in convincing the management in an intensive discussion that delivery reliability (OTIF) was the more relevant KPI for a CMO. The interim manager then developed a KPI dashboard with OTIF as the top KPI, which was then cascaded to all functional areas.
Integrated materials management promotes significantly better delivery reliability
After six and a half months, the interim manager was able to successfully complete the mandate. Delivery reliability was already at 90 percent at this point. The new CEO and the new supply chain director now have an integrated materials management system and efficient end-to-end processes. The interim manager has initiated the development of a tailor-made SCM controlling system. Once the relevant positions have been filled, the KPI dashboards developed by the interim manager will be fully implemented.
