September 19, 2012

INTEGRATED BUSINESS PLANNING

PROCESS AT HOSPIRA

A MATTER OF LIFE & DEATH

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 2

21 October 2012

Supply Chain Council

Executive Summit
Indian Wells, CA
September 18th-20th, 2012

Hospiras Approach to Implementing

Next-Generation Sales & Operation
Planning Processes

Our company
Improving the safety, cost and productivity of patient care
Market leadership positions in:
Generic injectable pharmaceuticals globally
Biosimilars in Europe
Medication management systems globally
Pioneer in innovation and safety
70+ years experience;
public independent company since 2004
2011 annual revenues of $4.1B
15,000 employees
~15,000 employees, 13+ manufacturing facilities
Headquartered in Lake Forest, Ill., USA

Hospira product categories

2011 Net Sales

$4.1B
Specialty Injectable Pharmaceuticals (SIP)
Other
Pharma

Generic injectables
Proprietary drugs
Biosimilars

12%
Medication
Management
Systems

24%

Medication Management Systems

Specialty
Injectable
Pharmaceuticals
(SIP)

Infusion devices, dedicated administration sets, software

and services
Gravity administration sets

63%

Other Pharma
Large volume solutions
One2One contract manufacturing services

Expanding Geographic Footprint

The Americas

EMEA

APAC

7%
of 2010 sales

80%
of 2010 sales

13%
of 2010 sales
Regional presence denoted by colors
6

Objectives
1. Explain why IBP is important, urgent even, for

Pharmaceutical / Biologics companies today

2. Share the fundamentals of Integrated Business
Planning and how its been applied at Hospira
3. Describe the foundational capabilities developed
at Hospira to enable the IBP process

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 7

21 October 2012

An urgent matter:
The global drug shortage crisis
makes Integrated Business Planning
a critical imperative.

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 8

21 October 2012

The Drug Shortage Crisis

- Forbes, June 2012

According to the Food and Drug Administration,

the number of drug shortages has increased
nearly 300% since 2005. More than half of the
drugs on the shortage list are considered critical -meaning they have no alternative.
- CNN, July 2012

Dozens of common drugs are in such short supply in the NHS that the health of patients with
life-threatening conditions such as cancer is in peril, an inquiry into the problem has revealed.
About 80% of 60 health trusts in England and Wales are experiencing "unacceptable" delays in
obtaining drugs
- The Guardian, June 2012
One of the most serious problems in

American health care today is a

Seven U.S. anesthesiologists have reported
that drug shortages resulted in deaths of their
patients, according to a new survey from the
American Society of Anesthesiologists.
- ABC News Medical Unit, April 2012
2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 9

21 October 2012

catastrophic shortage of supply for

dozens of important generic drugs,
especially certain injectable medications
that form the backbone of modern cancer
treatment.
- Forbes, June 2012

FDA Advanced Drug Shortage Notification Makes IBP

Especially Relevant to the Pharmaceutical Industry

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 10

21 October 2012

Regulations surrounding Drug Shortage Notification Make

Planning Processes critical for todays leading
Pharmaceutical / Biologics companies
In keeping with the Agencys
guidance, Hospira is defining
exception management
protocols through IBP for:
Sole Supplier
Medically Necessary
Critical Support Products

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 11

21 October 2012

FDA Advanced Drug Shortage Notification Makes IBP

Especially Relevant to the Pharmaceutical Industry
This is a supply chain crisis
that has ties to almost every area
that is considered in IBP:

Demand Planning
Inventory Policy & Management
Master Scheduling
Capacity Planning
Third Party Manufacturing
Raw Material Planning
Product Lifecycle Management

When rumors surface of an impending shortage, some pharmacies rush to buy up more than they need,
likely leading to bigger shortages, analysts and other pharmacists said
Some distributors and manufacturers prevent hoarding by allocating drugs based on historical demand.
- Reuters, June 2012

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 12

21 October 2012

Integrated Business Planning:

What is it?
And what ever happened to S&OP?
What does IBP mean at Hospira?

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 13

21 October 2012

Integrated Business Planning

The next-generation of S&OP
Traditional sales and operations planning (S&OP) processes and supporting technologies are no
longer sufficient in todays high-pressured business environment. Sales and Operations Planning has
evolved to become Integrated Business Planning. It is a truly cross-functional, multidimensional process that includes all elements of demand, supply and financial analysis in relation
to the business goals and strategy.
- Technology Strategies for Integrated Business Planning, June 2006

The broader strategic mandate for S&OP is key to superior returns. S&OP leaders are aggressively
converting S&OP from an operations level demand-and-supply balancing process to the mechanism of
choice for integrated business planning and strategy deployment
- Next Generation S&OP: The Path to Bottom-Line Value, Stephen Hochman

IBP is the common and synchronized process for business

review and decision making, to optimize business performance
and drive business strategy through to execution.

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 14

21 October 2012

Integrated Business Planning develops the common

and synchronized plan for operations & commercial.
Demand Review
Key Customer(s): Commercial
Stakeholders: Operations, Finance

Operations Review

Business Review

Key Customer: Operations

Stakeholders: Commercial, Finance

Key Customer: SLT

Stakeholders: Regions

Business Planning

Operations Planning
Consensus Demand Planning

ES&OP

Statistical Models
Production
Inventory

Latest
Financial
Plans

Geographies
Channels
2010 Supply Chain Council. ALL RIGHTS RESERVED. |

Warehouse &
Transportation

Portfolios
< filename >

Slide 15

21 October 2012

Pre-S&OP /
S&OP

IBP is a cycle of planning activities and reviews that

gives the business a regular & repeatable cadence
Demand Review

Operations Review

Business Review

Business Planning
Operations Planning
Supply
Planning

Consensus Demand Planning

Demand Planning

Demand
Review

Pre-S&OP

S&OP

Operations
Review

Issues Managed by Exception

The same time-tested Sales & Operations Planning steps are at the heart of IBP
IBP is a cyclical process, with each cycle feeding assumptions and guidance to the next
The process is driven by exception and focuses on decision making

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 16

21 October 2012

Simple by design
But process deals with complex integrations and
interactions
Demand Review

Operations Review

Business Review

Business Planning
Operations Planning
Consensus Demand Planning
ES&OP
Portfolios
(US)

Regional Demand
Review (US)

Ops Reviews
Markets
(Global)

Regional Demand
Review (CND/LA)

Markets
(Global)

Regional Demand
Review (EMEA)

Markets
(Global)

Regional Demand
Review (APAC)

Device

Supply
Planning

Third Party

US
Pre-S&OP

US
S&OP

CND/LA
Pre-S&OP

CND/LA
S&OP

EMEA
Pre-S&OP

EMEA
S&OP

APAC
Pre-S&OP

APAC
S&OP

US Pharma
Intl Pharma
India Pharma

Each IBP Sub-Process advances the plan from

Unconstrained Demand through to the completed LBE
Hospiras Global Integrated Business Planning Process

UnConstrained
Demand Plan

Regional

Global

S&OP Output

Week One & Two

Week Three

Constrained
Supply Plan

Constrained
Sales Plan

Un-Constrained
Demand Plan

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

PreS&OP

Constrained
Supply Plan

Slide 18

Approved
Regional Plan

Constrained
Sales Plan

Week Two

Integrated
Business
Plan / LBE

ES&OP

Demand
Review

< filename >

Week One

Product
Supply
Review

Supply Planning /
RCCP

Consensus Demand
Planning

Week Four

21 October 2012

S&OP

S&OP / LBE

Decisions
Deployed to
Next IBP
Cycle

The IBP Process is Tightly Orchestrated

Hospira Global Integrated Business Calendar
June IBP Cycle for July LBE
Sunday

Monday

Tuesday

May 29

Wednesday

30

31
Note: Job descriptions with
gray/italicized text are design
placeholders and will be in
effect post-June 20th go-live.

Cycle Roll (SW)

Thursday

Friday

Saturday

June 1
June
1

WD1

WD2

Statistical
WD3
Model Run (SW)

Post May Gross

Sales Actuals to SW

Post May Net Sales

History to SW

10

WD4

WD5

WD6

WD7

WD8

11

Demand Forecasting
12

13

14

15

16

WD9

WD10

WD11

WD12
Regional
Demand
Review

Regional Consensus Demand Planning Reviews

19

17
Demand Pass
(SW >>APO)

WD13

20

21

22

23

24

WD14

WD15

WD16

WD17

WD18

26

Global Product
Supply Reviews

Pre-PS Reviews

Global Supply Planning

27

28
28

29

30

WD19
Constrained
Supply Reviews
w/ Regions

WD20
WD20

WD21

WD22

HOLIDAY (US)

WD2

Regional
S&OP
Meetings

Regional Pre-S&OP Reviews

5
Preview LBE
(SW>>ISIS)

WD3

Post June Net

Sales History to SW
10

Load SAS Plans

(SAS>SW>ISIS)

July 1
Cycle Roll (SW)

WD4

WD5

WWD6

12

13

14

15

WD9

WD10

WD11

16

July LBE
Deadline

18

19

20

21

22

WD12

WD13

WD14

WD15

WD16

Business
Review (SLT)

< filename >

Global
ES&OP
Meeting

Regional & Global Finance Reviews

WD8

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

Post June Gross

Sales History to SW

11

17

25
Constrained
DRP Run (APO)

WD1

Final Feed to LBE WD7

(SW>>ISIS)
Deploy ES&OP Decisions

18
Planning Batch
Jobs (APO)

Slide 19

21 October 2012

23

Business goals/objectives should be deployed

through a defined data that is an integral part of IBP
Risks Associated with LBE Tasks if they are not operationalized as part of the IBP process
Creates an alternate plan vs. the one common set of numbers
Results in service issues if added to the plan w/o evaluating supply capacity
Results in excess inventory if commercial plans are not fully evaluated / delivered

Gap to Budget

Objective Assigned
Top Down Plans

Execution-able
plans only

Total
Consensus
Demand

Bottom Up Demand Forecast

Execution
0-3 months
2010 Supply Chain Council. ALL RIGHTS RESERVED. |

Tactical
4-12 months
< filename >

Slide 20

21 October 2012

Strategic
12-18 months

What is Integrated Business Planning?

And Why are Companies Implementing IBP?
It helps run the business more efficiently and effectively

It is a consolidation process that brings together and aligns the various

business functions in developing one integrated set of plans.

It synchronizes business planning with operations planning cycles

as well as regional with global planning calendars.

It is a monthly re-planning process designed to make key business

decisions in the most efficient manner.

It provides the basis - typically a rolling 18-24 month forecast- for

planning resources, capital and financials.

It is a vehicle for strategy deployment and connects planning &

execution

And helps to deliver the business objectives

Predict & shape future demand to give the most profitable sales plan
Formulate the most cost effective supply chain response
Provide the forum for alignment and decision making

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 21

21 October 2012

IBP Data Structures , Analysis and Review Topics Should

Provide Insight and Feedback to Strategic Initiatives

Financial Planning & Analysis

Demand Review
Most Profitable Sales Plan

Innovation
Strategy

Operations Review
Most Cost Effective Supply

Expansion
Strategy

Channel
Strategy

Strategic Planning

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 22

21 October 2012

Business Review
Aligned Decision Making

Procurement
Strategy

Operations
Strategy

Connecting ES&OP with eS&OP

Integration with execution S&OP Activities
From Big ES&OP to little eS&OP
Effective Integrated Business Planning processes (monthly)
connect to week-to-week planning processes so decisions
are deployed in real-time and close-coupled with execution.
Operations Planning
Supply
Planning

Consensus Demand Planning

Demand Planning

Business Planning
Pre-S&OP

Operations
Review

Demand
Review

Decisions, direction, insights and information deployed in real-time

Week-to-Week execution S&OP activities

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 23

21 October 2012

S&OP /
ES&OP

Integrated Business Planning @ Hospira

It is the single process for
forecasting the business

All products, all regions, all channels in a

single, integrated system

It is both a volume and financial

planning process

Pricing and cost assumptions are built in to

provide a Rough-Cut P&L

It is hardwired to the LBE (Latest

Best Estimate)

The IBP forecast directly feeds the LBE

consolidation tool

It is responsible for supply chain

resource planning

The single forecast directly feeds:

Demand & Supply Balancing
Capacity Planning

It is integrated into our planning

execution systems for a closed
loop planning process

Central planning feeds plant scheduling,

the final forecast drives deployment &
inventory planning

It sets the business cadence

All markets,, regions and global planning

processes follow a synchronized calendar

It is a decision making process

design to drive alignment &
coordinated execution

Exception based process that facilitates

issue escalation and resolution

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 24

21 October 2012

How are we doing?

Strengths

Ever improving collaboration between functions

Integration with finance and clear financial objectives
Strong engagement / involvement with the process
Completeness of the core S&OP process design
Global integration & synchronization
Collaboration tools assist data and workflow management

Opportunities
Longer term focus / continue driving strategic purpose
Consolidate other redundant processes into IBP
Improve supply modeling capabilities & systems integration

with execution (2012 focus)

Improve issue content / analysis (problem solving skillsets)

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 25

21 October 2012

IBP Development Model

A construct for implementing IBP
Process Proficiencies
The common threads that are
keys to success in each step of
the S&OP / IBP process.
Critical Competencies
The core skills and knowledge
areas for S&OP / IBP
practitioners and stakeholders.
Foundational Capabilities
The key capabilities that support
and provide source systems for
the S&OP / IBP process.

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 26

21 October 2012

The Foundational Capabilities:

How are we enabling the process?

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 27

21 October 2012

Process & Project Overview:

Collaborative Forecasting...
The core infrastructure of IBP

Collaborative
Forecasting

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 28

21 October 2012

Project Summary: Collaborative Forecasting

Objective/Scope
Implement a consensus demand collaboration tool, an enabling technology, with product / channel /
regional data structures, integrated volume and financials and statistical forecasting models.
All

All

All

Type

Region

TC_DC
DC_DT

Sub-Region

Channel

Country

List #

Weekly process
Monthly process
From

To

Separate/disconnected S&OP and LBE forecasts

Global, collaborative, integrated and

synchronized planning

Revenue, unit volume, pricing and cost in multiple

systems

Central tool to develop and maintain the plan

one source of truth

No differentiation between unconstrained and

constrained plan

One common plan for commercial and finance

based on constraints

Aggregate forecasting

Global LBE at the specific List #

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 29

21 October 2012

Process & Project Overview:

Rough Cut Capacity Planning
Balancing demand & supply.

Collaborative
Forecast

Rough Cut
Capacity
Planning

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 30

21 October 2012

Project Summary: Rough Cut Capacity Planning

Objective/Scope
Gather detailed capacity data for each site, and for all products, configure APO capacity planning
parameters and build capacity utilization requirements into the IBP process

From

To

Poor visibility to capacity constraints past the ~4-5

month horizon.

Provide early warnings signals of future demand /

supply imbalances

Lack of understanding of the ideal capacity

required to support the unconstrained demand

Provides visibility to the unconstrained supply

requirement versus the current MPS

No monthly capacity check in the PS Review

Time phased capacity utilization by critical

resource for each site

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 31

21 October 2012

Process & Project Overview:

Inventory Optimization
Right sizing our inventory.

Collaborative Inventory
Forecasting Optimization

Rough Cut
Capacity
Planning

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 32

21 October 2012

Project Summary: Finished Goods Inventory Optimization

Objective/Scope
Statistically determine recommended safety stock levels based on demand & supply variability and
implement exception based inventory management practices.

Service

Investment

From

To

Qualitative methods used to determine safety

stock levels

Statistically determined safety stock and

replenishment quantities

Stocking levels unresponsive to business

changes

Exception based processes used to identify and

review recommended changes

Inventory parameters not adequately maintained

in central planning systems

Parameters updated based on recommended

settings and used for deployment planning

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 33

21 October 2012

Process & Project Overview:

DRP Driven Master Scheduling
Bringing it all together.

Collaborative Inventory
Forecast Optimization

DRP
Driven
MPS

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

Rough Cut
Capacity
Planning

< filename >

Slide 34

21 October 2012

Project Summary: DRP Driven Master Scheduling

Objective/Scope
Re-engineer the APO planning system & processes to plan using a DRP-driven planning signal
approach and to improve integration with Integrated Business Planning

From

To

Ad hoc capacity management over a limited planning

horizon

Capacity modeling and load leveling capability over the full

IBP horizon

MPS planning against aggregate inventory & demand

totals.

DRP driven production signals based on net inventory &

statistical safety stock targets at end shipping locations.

Planning limited to unconstrained demand

Separate unconstrained planning vs. constrained plan

execution

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 35

21 October 2012

Insights into Successful IBP Implementations

Some Keys to Success

Apply simplifying concepts to the complexity
Ensure alignment/synchronization with master data
Incorporate cross-functional data structures and hierarchies

Integrate with finance to drive fastest adoption

Position the S&OP process as a decision making process
Link S&OP cycle to the established business review process

Establish well defined process facilitation / workflow steps

Inputs should be specific, tangible and actionable
Support the process with the right technology
Focus on change management

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

Slide 36

21 October 2012

Thank you!

Integrated Business Planning Associates

the power of planning

Demand / Supply Planning

Sales & Operations Planning
Integrated Business Planning

Process Evaluation
Technology Selection
Business Process Design

Solution Architecture
Process Facilitation
Change Management

2010 Supply Chain Council. ALL RIGHTS RESERVED. |

< filename >

IBP2 Contact:
Bill Nienburg
Executive Director

+1-630-881-5002
bill.nienburg@ibp2.com

Slide 37

21 October 2012