Organon acquires flexible production chain: leads to lower stock and more reliable delivery of medicines

Organon creates and markets prescription medicines that improve the health and quality of human life.

Organon is the largest Dutch research-based pharmaceutical company and a business unit of Akzo Nobel. Organon is ranked in the top 20 of world leading pharmaceutical companies and is one of the major players in each of its core therapeutic fields: reproductive medicine, psychiatry and anaesthesia. Its products are sold in over 100 countries and the company employs more than 12,000 people worldwide. 

Organon produces prescription medicines from raw material (or active material) provided by another Azko Nobels affiliate. The companys core business is developing the products and answering the specific local market needs. However, each country has its own constraints: For example, French regulatory affairs dictate that the information included on and in the package is written in French, while in other countries like Sweden, Norway or Denmark, other languages are required. Another geographical difference is branding. Its possible that the same drug has a different name per country because of cultural influences or simply because the name has a different meaning in the native language. In short, Organon has a large product range with variants of the product, packaging or dosage, which results in a flow of goods that can be difficult to manage. Another typical industry challenge that Organon faced was high stock levels. These were essential to ensure that 99.9 per cent of customer demands could be met; if not, customers would otherwise turn to competitive products. Finally, Organon has a decentralized organization, which adds to the supply chain complexity.  

Distributed production

There are eleven production sites distributed among four international manufacturing companies, some producing active ingredients, others producing bulk tablets, semi-finished goods (for example, blistered tablets) or packaged goods. Goods are shipped from one site to the other throughout the whole supply chain. Before the Infor implementation, each site ran as a stand-alone site which challenged their ability to optimize production. Organon needed a solution that would help reduce costs and improve service performance with more accurate forecasts, provide visibility across the supply chain and help optimize the supply chain across the various sites from active ingredient to finished product. Organon wanted to shift the risk from the semi-finished or finished goods level to the active ingredient level to gain agility, rather than lower stocks. Lowering our stock of end products and ensuring most of the stock was situated at the beginning of the supply chain, i.e. raw and bulk products, allowed for meeting demand easier and more efficiently, says John Koelink, responsible for the global supply chain management implementation at Organon.  

Software enables centralized planning

The company selected Infors Demand Planning and Advanced Planning software. Infors software is based on technology that had already been implemented successfully many times within the process industry. Organon was also impressed with Infors ability to let Organon plan centrally as well as locally. Infor was able to speak our language. They understood our business issues and showed us solutions that met our requirements, says Koelink. 

The Infor solution met Organons demand to support a decentralized organizational structure. Organons technical environment consisted of several different systems at each production site around the world. Between these systems and the supply chain solutions, an integration hub database was installed, which additionally functions as a translator during data exchange. The implementation of the Infor solution focused on the six largest countries lasted eight months and was managed by a combined team of Infor consultants and Organons own experts. 

Visible benefits

The new system provides Organon with many benefits. First, Organon can identify where raw materials and finished goods are located and in which form. This visibility throughout the supply chain was not available before. Secondly, the Infor solution helps calculate a more accurate forecast as well as the optimum way to fulfil this demand. Organon now completes the following planning cycle on a monthly basis. The sales offices deliver their sales numbers using the web functionality of Infor Demand Planning. The Infor solution then calculates the sales forecasts for the coming three years based on these numbers and statistical analysis of historical data. Then the sales people can adjust this predicted demand based upon their own experience and local knowledge. The adjusted demand together with factory data such as available capacity, standard production times and stocks, forms the input for Infor Advanced Planning. This solution then calculates the yearly master production schedule for each factory.  

However, at this level, only the critical products and materials are planned against finite capacity. Therefore, each factory needs to locally plan production using the Advanced Planning module, followed by a classic MRP run (Materials Requirements Plan) by the local MRP/ ERP system. The outputs from local production scheduling and the master planning feed each other, resulting in an optimal supply chain plan. Finally, Organon is now able to run what-if scenarios, which enable them to quickly find solutions when sudden changes in demand or supply occur. For example, like any other pharmaceutical company, Organon has to order its active ingredient supply 12 to 18 months before the start of production. Unfortunately, there can be some shortages of active material, resulting in Organon receiving only a percentage of the active ingredients required for production. Therefore Organon would not be able to produce the needed amount of medicines. The what-if scenarios can help identify which country or region can have a reduction in production, without risking a stock-out. Alternatively, if for example, demand for a specific product rises suddenly in France, by using simulations, Organon is now able to determine the best alternative between using overtime in the original plant or making use of temporary surplus production capacity in another. Consequently, the supply chain is now optimized on a worldwide basis. 

Significant boost to forecast accuracy

Thanks to the Infor Demand Planning and Advanced Planning solution, Organon has the right product at the right place at the right time. Forecast accuracy was improved by 20 to 30 per cent resulting in stock reductions at the manufacturing sites of approximately 10 to 15 per cent while maintaining the important 99.9 per cent delivery reliability. The sales affiliates participating in this programme were also able to reduce their stocks by approximately 20 per cent. Next to these improvements, our intangible benefits are so much bigger. We now are able to identify where our stocks are and were able to meet demand. The solution enables us to see the changes in the whole pipeline and the dependencies of all the production sites, concludes Koelink. At this stage we have the visibility to tweak the system and our organization as well to optimize the way we work with it. The software fully achieved the goals defined throughout the selection process.

The next stage for Organon is to integrate Diosynth to the same planning concept using the same Infor solutions. A smoother alignment will reduce working capital and will allow Organon to extend the already reached intangible benefits to the total supply chain from starting material to finished product at the different Organon sites. It will also provide the ability to react quicker to supply and demand fluctuations and improve forecast accuracy of third party sales.

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