Over a nine year period of rapid growth, Cipla Medpro found it increasingly difficult to maintain forecasting accuracy as its needs outpaced its systems. Joseph Ludorf, Executive Director Supply Chain, was initially apprehensive about investing in new planning software due to the ‘grief cycle’ he had experienced in the past with IT projects that came with long, expensive implementations and unmet expectations. But he was faced with a challenge he couldn’t ignore.
Cipla Medpro provides South Africans and the neighboring countries with superior-quality, yet affordable medicines that improve citizen’s health and lives. To do this, it must cut as much waste and inefficiency from its supply chain as possible while meeting service and compliance obligations. Long lead times for imported products, wild currency fluctuations and demand spikes caused by government contract tenders all conspire to make planning difficult.
“The cardinal sin in our business is running out of stock and not being able to fulfill an order,” says Ludorf. Most suppliers ‘insure’ against this by holding excessive levels of safety stocks, but this inevitably leads to waste and obsolescence and ultimately, higher costs. So striking the optimal balance is a difficult process, but one that can make a huge difference in the price and availability of medicines.
After considering several supply chain planning software solutions, Cipla Medpro turned to ToolsGroup to outsource its forecasting, inventory and replenishment planning.
Implementing ToolsGroup’s software was extremely easy and within 30 days Cipla was fully operational, with all of its data sets integrated. The new system provided some unique capabilities. “Before we could only forecast at the product level, today we can forecast right down to the customer level anytime, at the press of a button. That really opened a whole new world to us because now we forecast demand from our most important customers by product,” said Ludorf.
Having met initial objectives to ensure stock availability and no longer fearing stock-outs, Cipla has turned its attention to freeing up working capital by optimizing inventory levels. As Ludorf explains, “We now have a ‘recipe’ for success that we run through every week. After ticking off every ingredient on our list, the end result is a very lean, smooth supply chain. We now have a forecast model for 12 months in advance, which tells us what we’re going to order, when we’re going to order it and what our inventory will look like at any given point in the future.”
Before Cipla started with ToolsGroup, slightly more than three percent of its inventory was out of stock at any given time. Stock-outs lead to revenue losses that can never be recovered, which is especially severe when high-value items come into the equation. According to Ludorf, “Today stock-outs are less than one percent of our total inventory and this is purely due to situations beyond our control. Crucially, we now have the intelligence to proactively identify potential stock-outs up to four months in advance. This gives us enough time to respond, ensuring we supply customers where the needs are most urgent.”
Cipla is now approaching the holy grail of planning - what some industry watchers call ‘driverless supply chain planning’. The statistical forecast provided by SO99+ is consistently proving to be up to 20 percent higher than Cipla’s own market intelligence system. As Ludorf elaborates, “Thanks to the continuous improvement program with ToolsGroup, we’re now at the point where we can confidently switch off our own manual overrides and put complete trust in the forecasts.”
Cipla’s automated and reliable supply chain also frees up its small planning team to balance work with the most important things in life. Ludorf says, “About a year back, both of my senior planners went on maternity leave at the same time. I was concerned that I wouldn’t be able to cope. However because of SO99+ operating so autonomously and ToolsGroup’s knowledge of our business, we easily bridged that six-month period without any major problems. That was when I really knew we truly had a ‘worry-free’ supply chain.”
Joseph Ludorf’s account of his early days working with ToolsGroup to improve forecasting at Cipla Medpro, as told to Industry Week magazine, is available at: http://www.industryweek.com/planning-amp-forecasting/improve-your-supply-chain-forecasting