PowerPoint Template

Productivity Improvement through

Integrated Business Planning (IBP)

Rafiqul Islam,

Senior Director, Global Bioanalytical Services

Outline

 Background: Today’s bioanalytical lab

 Introduction of Integrated Business Planning

(IBP)

 Demand Planning

 Supply Planning

 Managing demand variabilities

 Implementation of IBP

 Summary

Today’s Bioanalytical Laboratories

 Bioanalytical labs face many unique challenges

 Highly variable and complex processes

 Highly volatile demand- fluctuation in demand is unpredictable

due to the inherent uncertainty in the drug development process.

Traditional supply chain processes that rely on historic orders

should be thrown out the window.

 High fixed cost- highly skilled employees and expensive

equipment

 Pricing pressure- More outsourcing is done by procurement

rather than bioanalytical scientists

 Capacity of the labs is also not well understood. Developing

capacity measures is challenging due to highly variable, complex

processes and highly volatile incoming workload.

Today’s Bioanalytical Laboratories

 A highly variable demand combined with highly complex

processes and a lack of understanding regarding

laboratory capacity makes it extremely difficult to control

and manage.

 Laboratory management is always drifting from crisis to

crisis and dealing with changing priorities to satisfy

clients.

 High stress diminishes customer service.

 Expediting becomes endemic and costs become difficult

to contain.

The ultimate result is poor productivity and significant

loss of profits

Today’s Bioanalytical Laboratories

 Over the last decade significant attempts have

been made to improve the productivity and

profitability of the bioanalytical labs.

 Most of the efforts have been focused on two

main areas:

 Technological innovation: automation, MS

technologies, UPLC systems, and electronic lab

notebooks

 Process improvement tools: Lean and Six Sigma

tools

Today’s Bioanalytical Laboratories

 However none of these solutions are able to predict upturn or

downturn in demand (volume/mix).

 Even worse, in most cases, these solutions are designed with

an assumption that demand (volume/mix) will be somewhat

predictable, level and constant which is far from reality.

 Bioanalytical labs have been unable to realize the full benefit

of investments in technological innovations and process

improvement tools due to a lack of understanding of demand

and its fluctuations.

 We lack the tools and processes to align supply effectively

and efficiently to meet changing demand.

Balancing demand and supply is critical to the success of a

bioanalytical business.

Integrated Business Planning (IBP)

 It is a decision making process that ensures that

tactical plans in all business functions are aligned

and support the business plan. This is also known

as Sales and Operational Planning (S&OP).

 The objective of IBP is to reach consensus on a

single operating plan that allocates the critical

resources of people, capacity, materials, time, and

money to most effectively meet the market demand

in a profitable way.

 IBP has emerged as an essential management tool

in this age of rapid changes, increasingly

demanding customers, and global complex supply

chains.

Integrated Business Planning (IBP)

Demand Plan: Developing Forecast

 The core of the S&OP process is the reliable demand

plan that will enable operations and logistics to

synchronize internal and external resources, and make

them available in a just in time (JIT) basis to execute

work in timely manner.

 Develop “ONE” forecast: It is important to develop one

set of consensus forecast, in both units and dollars, that

the sales organization can execute, the supply

organization can deliver, and finance can synchronize to

the business plan.

 Forecasting data should be presented in both aggregate

and in detail. Data should be presented in aggregate

format for long term planning and in detailed format

within Operation’s Planning Fence (OPF).

Demand Plan: Developing Forecast

Source: PCI Associates

Demand Plan: Forecast Accuracy

 One thing guaranteed about forecasting is that it will

change. It is difficult to measure the accuracy of

something that is designed to change constantly.

 However a certain level of accuracy is required in

forecasting to improve productivity and profitability.

 Forecast accuracy should be measured at different

aggregate levels at different time points.

 The focus should really be on measuring forecast

accuracy routinely and continue to revise assumptions

behind the forecasting to improve it.

 Within OPF, the target accuracy should be greater than

90% in order to achieve optimal resource utilization.

Forecast Accuracy

- Which one is more accurate?

- Which one is easy to manage?

- Which one is more desirable?

Supply Plan

 One of the key components of the IBP process is

the supply plan which determines the supply

capability to meet the demand. The goal is to

develop a plan that will include the total supply

chain’s ability to meet client deliverables and

maximizing resource utilizations while minimizing

inventory carrying time and overall cost of service.

 Rough Cut Capacity Planning (RCCP): the

process of translating the demand plan into

resource utilization. RCCP should only be done with

high impact resources as opposed to a master

scheduling which should be used for planning all

resources including high impact resources.

Supply Plan

 Rough Cut Material Planning (RCMP): This is a

very similar concept to RCCP. The purpose of

RCMP is to develop material resource planning for

high impact materials. For a bioanalytical lab that

will include reference materials, internal standards,

analytical columns, SPE plates and ELISA kits.

Similar to the RCCP, this should be performed in

aggregate. The detail material planning should be

integrated with the master schedule.

 Key Performance Indicators (KPIs) are

quantifiable measurements that indicate the

performance and/or progress of a specific function.

Supply Plan: Key Performance Indicators

Demand KPIs

Supply KPIs

Forecast vs Budget target vs Actual- ($)Aggregate

Utilization rate- High impact resources

Forecast vs. Actual; for current year vs. previous

year- ($)Service Line

Cost of goods for generating revenue (COGR)

Forecast vs. Actual; for current year vs. previous

year – (Units)Service Line

Inventory days on hand or equivalent

Forecast accuracy – (Units) Service Line

% On time delivery

Weighted Forecast accuracy – (Units) Aggregate

Quality metrics: Assay pass rate, re-work rate,

Number of deviations, Out of specifications,

Incurred sample reanalysis (ISR) failures etc.

All metrics should be accompanied with assumptions, any changes to assumptions,

explanation of major deviations, risks and opportunities to facilitate decision making.

Supply Plan: Key performance Indicators

 The KPIs should be detailed enough to uncover valuable

trends.

On-time delivery= 86%

Dealing with demand variability

 Despite best efforts, it is a reality in the bioanalytical

business for the demand forecast to vary significantly

due to inaccurate assumptions, clinical schedule

uncertainties and changes in client priorities.

 Demand variabilities can be managed using “chase

demand” or by “level capacity.”

 Level capacity requires keeping the capacity of the lab

constant and influencing demand to match capacity

through an effective sales and marketing plan. These

marketing strategies have very little impact on

bioanalysis demand and usually not effective. This

leaves bioanalytical operations managers to only “chase

demand” effectively.

Chasing Demand

 There are several strategies that can be used to

chase demand. The following strategies are relevant

to bioanalytical lab operations.

 Flexible Resource Allocation Strategy: An

effective flexible resource allocation strategy

requires an investment in an employee cross-

training plan and a culture where employees get

rewarded for broadening their skill sets.

 When done correctly this can be a win-win solution

for the employee and employer. The employer

gets more freedom to strategically utilize the

workforce and the employee benefits from

increasing their skill sets.

Fast tracking system

 It is important for a lab to have a clearly defined fast tracking

system to expedite requests. Process improvement tools like

Lean or Six Sigma methodologies should be utilized to

develop a robust fast tracking system.

 In order to make the fast tracking system work effectively, only

a small portion of work (10%-20%) should be designated for

the fast tracking system at any time.

 The most common reason of failure of fast tracking system is

the system overload.

 A better demand management strategy or process re-

engineering is required to improve overall turnaround time

instead of routinely assigning large volume of samples to fast

tracking system.

Proactively chase demand using “What-if”

Scenarios

 In a bioanalytical lab, sometimes there is a significant amount

of unscheduled or “on hold” work due to various reasons (e.g.

uncertainties about clinical trials, studies on hold or there is

not enough information from client to schedule the work)

 The supply team can use “what if” scenarios to simulate the

impact of a study to coming off hold at various time point and

evaluate its impact on capacity, utilization of high impact

resources and materials planning. This will allow the supply

team to respond to the client requests promptly and

effectively. The simulations may also allow the lab to

approach the client with financial incentives to perform

analysis during a timeframe that is advantageous (i.e.

maximize resource utilization) for the lab.

Proactively chase demand using “What-if”

Scenarios

 It is important to note that for successful “what if’

scenario simulations, it requires a collaborative work

environment where all team members can discuss all the

possible scenarios, even conflicting ones, openly.

 In the end, all the pros and cons should be discussed

systematically, key opportunities and risks should be

identified, and the decision should be made with a

primary focus on maximum resource utilization and

margin.

 Bioanalytical labs that use “what-if” scenarios as part of

their IBP process are better equipped to handle

unexpected events and last minute requests from a

client.

Implementation Challenge

Integrated Business Planning is not a difficult concept to understand

Real Implementation Challenge

Behavior Change

changing the way we do our jobs

Discipline

Accountability

Teamwork

Conflict resolution

Technology to enable implementation

 78% of companies say that technology is either

critical or very important for their IBP process.

 Technologies are essential to support IBP due to

complex data requirement from multiple

sources, multi-dimensional goals and views,

dynamic business processes, more decision

parameters etc.

 Examples: Sharepoint, Spotfire, Electronic lab

notebook, Electronic real-time dashboard etc.

Source: Aberdeen group

Summary

 In today’s global economy, the client demand for

speed, competition and pricing pressure is only

going to increase.

 Only the companies that have a better

understanding of a client’s demand and can align

their supply to match the demand will survive.

 An effective IBP process can lead to a better

understanding of the relevant marketplace, improve

resource utilization, decrease inventory levels,

decrease the cost of generating revenue and

improve profitability.

Summary

 Understanding customer demand better allows labs

to meet the demand more frequently resulting in

increased customer satisfaction and improved

relationship with clients.

 Greater employee satisfaction comes from improved

communications, greater opportunity to learn new

skills and better predictability of work load.

 The IBP process combined with technological and

process improvement tools can give any lab

significant competitive advantage.

 In today’s global economy, the IBP process is

ultimately the strategy for survival.