- Supply Chain Manufacturing Review, January–February 2014
Companies that can accurately anticipate how trends will affect the various elements of their manufacturing strategy, such as the future need, location, and size of factories, can turn challenges into profitable opportunities.More
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The pharmaceutical industry can unlock $135 billion in value by learning from leading CPG firms.
The competitive landscape of the pharmaceutical industry is changing dramatically. Sales are slowing, innovation is losing its punch, and complexity is rising in markets and technologies. The old pharma paradigm of a pure focus on innovation and markets is changing; price, cost, and service are beginning to matter more. As a result, the economics of the industry are changing, and operations is becoming a differentiating factor in the competitive landscape. Leading Big Pharma companies understand the new rules of the game and have started investing heavily in improving capabilities and shifting paradigms in operations. They are seeking to be first in this race. Pharma companies that want to be on the winning end must follow suit.
Comparing pharma’s operations with that of the consumer goods industry shows significant opportunities for pharma to improve in all major operations areas, including service, inventory levels, efficiency, quality, and innovation speed. By taking a page from the operational practices of consumer goods firms, the pharmaceuticals industry can unlock billions of dollars in value. They can make a step change in performance without reinventing the wheel, while still continuing to support the pharma industry’s economics.
The value of this endeavor is enormous. Assuming an operational transformation that merely cuts the performance gap with the consumer goods industry by only half, a typical pharma company could increase its earnings margins by 7.5 percentage points and free up inventory worth roughly 11 percent of one year’s sales. A firm with about $24 billion in sales—the average sales for a top-20 company in 2012—could unlock roughly $1.8 billion in yearly earnings and $2.6 billion in cash from working capital reductions. Over the whole industry, this would equal $135 billion in additional cash.
There is no silver bullet that magically brings results. Reaching world-class performance in pharma requires a holistic transformation based around a four-pronged “battle plan”: operations strategy, planning and reporting, execution, and people management. Within each theme are the moves pharma executives can make to create an immediate impact on their results and build a growing, long-term advantage.Close
From the Industrial Revolution to the 1990s high-tech boom, manufacturing shifts with periodic waves of disruptive change.As the latest waves of change gather momentum, 21st-century manufacturers face decisions that could create opportunities or competitive challenges as significant as Eli Whitney’s idea of interchangeable parts or Toyota’s improvements on Henry Ford’s assembly line. Today, the potential impact of new technologies such as 3-D printing, the risks inherent in global supply chains, the exponential growth of data, and the changing socioeconomic demographics are just a few of the new disruptors.As a result, the future of manufacturing is again a hot topic in public debate and on boardroom agendas. Companies are looking for a unique competitive edge or ways to respond to the unexpected. Manufacturers that can accurately anticipate how these trends will affect their businesses can turn challenges into profitable opportunities.In this first in a series of papers on mastering disruptive change in manufacturing, and based on our work in six core areas and on insights gathered from our Global Excellence in Operations Factory of the Year competition, A.T. Kearney identifies the driving forces we expect to be among the most influential to manufacturers.Close
A.T. Kearney offers nine ways to interact with suppliers, identifying formulas that characterize true supplier relationship management.
We rely on suppliers for a wide range of products and services that allow us to succeed, yet we know surprisingly little about these relationships or how to fully harness them. Some believe these relationships are all about cutting costs. Others think they are the sum of every category management initiative ever tried. We have a different view. We believe that suppliers, and our relationships with them, are an area yet to be fully explored or exploited. At a recent A.T. Kearney Executive Roundtable, 50 chief procurement officers from major U.S. and global corporations conceded that managing suppliers effectively is one of their biggest challenges, and that they are not currently prepared to address it.
A team of A.T. Kearney partners is spearheading an initiative to fill this void. Called the True Supplier Relationship Management (TrueSRM) Project, and funded by leading high-tech players around the world, we have developed a comprehensive approach to managing supplier relationships—comprehensive because it works in all industries. This paper is about our initial findings, which will culminate in a book scheduled for release in 2014.Close
Five trends are reshaping this growing sector. The winning players will be those that anticipate the shifting landscape and adapt their supply chains accordingly.
Home delivery of large-format products—appliances, furniture, electronics—falls short of today's expectations. Isn’t it time to deliver all the goods?
The market for home delivery of large-format products such as appliances, furniture, and electronics is poised for growth but structural hurdles are blocking retailers and home delivery service (HDS) providers from capturing that growth. A nationwide HDS integrator could resolve these issues—while also unlocking sizable savings and improving customer service—but it hinges on the willingness of retailers, HDS providers, and investors to work together. Each side faces unique challenges: For retailers, these include disagreement on “role” in home delivery, near-term cost pressures, and no immediate HDS option; for HDS providers lack of size and density, operational issues, and investment muscle are the biggest hurdles.
Similar to UPS and FedEx in parcel delivery, an integrator would be a national service provider offering an end-to-end (line haul and last mile) network with leading capabilities and technology to sustain best-in-class performance. In addition to unlocking and passing on significant cost savings to retailers large HDS integrator networks would unlock breakthrough scale and density while reducing coordination complexity. The value created by integrating will increase the pie for both retailers and HDS companies.Close
- Supply Chain Management Review, July–August 2013
With a market poised for growth and retailers generally uncertain about the need to differentiate through home delivery, a nationwide home delivery service integrator could resolve these issues while also unlocking sizable saving and improving customer service.
What are the supply chain challenges in India and what is the best way to address them?
Greater and more intense competition and global value chains are leading to substantial shifts in what is expected of the supply chain function. It is no longer enough to simply connect supply and demand at optimal cost and service levels. Today’s business leaders are demanding more from their supply chains, including competitive advantage.
Coupled with India's unique operational challenges, such expectations make the role of a supply chain professional extremely complex. Yet there are examples of organizations across industries that have managed to move beyond the constraints in India to develop supply chains that lead to competitive advantage. How do they do it? What are the challenges, and how do they get beyond them? How do they define supply chain success?
To answer these questions, the Council of Supply Chain Management Professionals (CSCMP) in India and A.T. Kearney embarked on a first-of-its-kind joint study. Based on A.T. Kearney’s experience helping organizations in India and one-on-one conversations with C-level executives and senior-level supply chain professionals in the country, this paper highlights seven supply chain best practices—or themes—that successful organizations across India are using to gain competitive advantage.
Collaborate to integrate the value chain virtually. Collaboration can be at three levels: across functions, across the value chain, and beyond the value chain. For collaboration to work, it must be led by the dominant player, based on a win-win partnership with shared goals, and focused on the long term with clear markers for success.
Replace one-size-fits-all with a tailored approach. Organizations in India are more diverse than ever. So taking a one-size-fits-all supply chain approach does nothing more than compromise segment-specific needs.
Plan more frequently and across multiple horizons. Supply chain managers must be able to see the big picture while also focusing on the details. The key to doing both is in frequent and multi-horizon planning sessions: weekly reviews for short-term planning, and regular reviews for long-term planning.
Implement pull replenishment across the value chain. To deal with pressure on costs and services, leading supply chain organizations implement pull replenishment strategies across their entire value chains from customers to vendors.
Actively manage complexity. The best supply chain strategies integrate complexity management in all planning processes to prune that which is non-value added and capitalize on that which is value added.
Let business needs drive technology and automation choices. Technology and automation are integral to overcoming challenges in India. Leaders employ technology and automation thoughtfully and tailor it to their business needs.
Reconfigure the supply chain organization to include business management capabilities. The shift in supply chain expectations calls for a fundamental rethinking of the capabilities required of the supply chain. Today's organizations need to have a suite of business management skills in addition to their supply chain skills.Close
- CPG matters, March 2013
Learn how to better evaluate and prioritize value chain improvement in corporate decision-making and unlock benefits that support both growth and cost reduction.
Shared services will play a major role in the next chapter of India's growth story.
India has become a global hub for shared services, serving many global companies in search of lower costs, more efficient processes, and business transformation. Indian companies, however, have not emphasized shared services, preferring to focus primarily on top-line growth. This is changing, however, as Indian companies see shared services as an important step in enabling growth and innovation and driving efficiency.
The classic scope of services delivered by shared services will need to change as organizations increasingly demand a shared services model, even for core activities. This trend will require new business models, stronger provider-user relationships, and transformational contracts.
There will be a number of challenges in achieving this transformation in the role of shared services in India. This will require a greater collaborative effort by customers, service providers, and the government.
Within this context, the Confederation of Indian Industry (CII) and A.T. Kearney worked together to provide a perspective on the current state of shared services in India. This paper highlights the benefits, identifies drivers for growth, and pinpoints the imperatives for key stakeholders, including shared services users, providers, and government. We hope this paper encourages a deeper discussion about the role that shared services can play in the next chapter of India's growth story.Close
As emerging economies seek to influence global standards, Europe's role as a shaper becomes a priority.
Standards are the rules, guidelines, and definitions that describe repeatable ways of doing things. Standards are a crucial element in the EU's industrial strategy as Europe seeks to remain a shaper of global standards rather than a follower.
The European Round Table of Industrialists worked with A.T. Kearney to study the issue of developing and implementing standards. We found six recommendations for establishing standards in European industry:
- Establish performance targets to foster innovation. Standards spread collective knowledge, bringing together industry players in a working environment of sharing and collaboration. The use of standardized parts and business processes can reduce early investment costs and risks, and provide a platform from which industries can innovate.
- Consult with experts. Involving technical and industrial experts, even when standards are initiated by governments, can help build standards on solid foundations.
- Coordinate industry players. European standardization bodies can play a larger role in facilitating standard-setting along the value chain and across industries.
- Balance speed and consensus. Standards must be put in place quickly in the face of accelerating technological change and market competition, and they must be built on a foundation of consensus to broadly address the requirements of all players.
- Encourage a global approach. European companies that adopt and participate in setting global standards increase their market access to other countries.
- Encourage SME participation. Despite their importance to the European economy, few small and medium-sized enterprises (SMEs) are actively involved in setting standards.
Europe, Middle East, and Africa