international pharmaceutical and fine chemicals company - zurich corporation: partnering background...

International Pharmaceutical and Fine Chemicals Company - Zurich Corporation:

Partnering

• Background• Business Process Redesign: Process, IT• Implications: Process, IT

- 2 -

XXXXX / Gemini Innovation Workshop

04/21/23 03:24

Zurich Corporation

Zurich Corporation Is a World Leader in Pharmaceuticals and Fine Chemicals

• Sales exceeded $11.5 billion in 1992– Subsidiary of Swiss parent corporation– Buy “best in industry” systems

• Vitamins and fine chemical sales were $2.8 billion in 1992– North America (N.A.) operations were $1.9 billion– Market leader in animal and human nutrition– Invested more than $10 million in Materials Management Systems– Received large amount of specialty chemicals from Switzerland

$11.5 B $2.3 B $1.9 B

Zurich Vitamin & Five N.A. Corporation Chemicals Division Operations

This case revolves around the North America Procurement processThis case revolves around the North America Procurement process

- 3 -


04/21/23 03:24

Zurich Corporation

N.A. Sought to Develop a “Best Practice Supplier Partnering Program”

• Build upon the “Vendor Certification Program”

• Develop partnering program to continually improve quality and reduce supply cost through North America’s entire supply chain.

• Ensure success through senior management commitment and performance measures

- 4 -


04/21/23 03:24

Zurich Corporation

Findings Illustrated That The Highest Dollar Purchases Were Either Commodities Or Zurich Agreements

Analysis Of Raw Material Purchases

By Type Of Product

15%

85%

Semi -Custom Industry Grade

By Type Of Contract

15%

15%

30%

40%

AnnualContracts

Multi YearContractsN.A.

SpotPurchasesN.A.

CorporateAgreements

By Type of Contract

By Type of Product

- 5 -


04/21/23 03:24

Zurich Corporation

“One Supplier” Zurich Provided Over 60% Of N.A.’s Raw Materials

Raw Material Supplied From Zurich

Su

pp

lies

In M

illio

ns

Of

Dol

lars

0

20

40

60

80

100

120

140

160

180

285 Suppliers One Supplier

$102 Million

$165 Million

Raw Materials Supplied By Other Suppliers

Raw Materials Supplied From Zurich

- 6 -


04/21/23 03:24

Zurich Corporation

Consequently, Zurich Was This Suppliers Most Critical Partnering Candidate

• The relationship is important enough that either company can influence the other’s practices, schedules, or resource deployment.

• Partners can be trusted to be honest, honorable, reasonable, and loyal.

• Partners give and welcome candid, complete, concise, timely, and relevant communications, for their common good (i.e.- cost, market analysis, processes, training, technology, complaints).

• Both parties must have the people, financial strength, processes, skills, knowledge, technology, and physical resources required to complement one another.

• Both senior and operational management must be committed to excellence in quality, customer satisfaction, responsible performance, elimination of waste, continuous improvement, employee growth, and profitability.

• Both companies must understand and agree on the roles and responsibilities, time-tables, objectives; and how risks, costs, and benefits will be shared. They must also agree to jointly resolve shared problems - rather than focus on blame.

Critical to success

Imperative

Necessary

Necessary

Critical to success

Critical to success

Highly unlikely

Need irrespective of partnering

Not necessary

Not necessary

Nice-not critical

Not necessary

Partnering Reason: “There is a long-term, strategic, business reason for the relationship which will result in improved, ongoing, mutual benefits”

Priorities

Trustworthiness

InformationSharing

Capabilities

ManagementCommitment

Agreement

Does N.A. / Zurich Match?.

Do Other Suppliers Match?DefinitionCriteria

- 7 -


04/21/23 03:24

Zurich Corporation

The Existing N.A. / Zurich Procurement Process Was Very Inefficient and Costly

Freight Penalties $4M

Estimated Purchasing Losses $12M

40% ForecastInaccuracy

Expediting 24%of Orders

IncompatibleSystems

12 People in Import/Export

“$165 MM Excess Inventory ”

Macintosh SE

“Mass confusion onwhat is important”

- 8 -


04/21/23 03:24

Zurich Corporation

N.A.’s New Approach to Procurement Required Changes in the Process

• Agreed on partnering objectives and assign responsibilities

• Defined Zurich’s performance standard (e.g. reliability and adherence to ISO 9000)

• Measured performance:– For Zurich– For North America itself

• Sought lowest cost through entire supply chain

• Reduced lead times:– For Zurich– For North America itself

• N.A. / Zurich demonstrate both buyer and supplier commitment to continuous improvement

- 9 -


04/21/23 03:24

Zurich Corporation

Procurement Process Redesign Included Several Critical Steps

Both N.A. & Zurich:

• Documented current and proposed process

• Standardized and define decision process for imports

• Identified organization roles and responsibilities

• Specified IT requirements for the “To-Be” forecasting process and material management

• Designed project plan for implementation

- 10 -


04/21/23 03:24

Zurich Corporation

Characteristics of N.A./Zurich New Approach to Partnering

• N.A. participation in the suppliers’ Annual Planning Process

– A high level of information sharing– Goals for cost, quality, performance– Approval of final forecast

• Monthly telecommunications for planning

• Single point for specific issues in N.A./Zurich– Assigned annual planning teams– Assigned on-going planning communication

PlanningPlanning

- 11 -


04/21/23 03:24

Zurich Corporation

• Redesigned process to eliminated import/export in the procurement process

• Established process and procedures for changing forecast and purchasing

• High level of information technology utilization and re-implementation (materials management and forecasting)

People and OrganizationPeople and Organization

ProcessProcess

• Reorganized to establish planner in both N.A. and Zurich in product alignments

• Established import/export limited to freight/duties

• Established performance goals for all organizations

Characteristics of N.A./Zurich New Approach to Partnering (cont’d)

- 12 -


04/21/23 03:24

Zurich Corporation

Annual Long-Range Planning Strategy

• Product managers N.A. and other affiliates

– Integrated product strategy

– N.A. plans

N.A. Material Availability Teams Zurich Supply Planning Teams • Information examples:

- Inventory opportunities

- Mfg. capacity issues

- Site objectives- Global issues

• Information examples:- Inventory opportunities- Mfg. capacity issues- Site objectives

• Staff & Support:- Analytic support- Information

development- Global information

support

• Planner • Product

manager• Manufacturing

site

“Communication”“Communication”

“Communication”

• Zurich business units:- Integrated product

strategy- Global plan strategy- Long range plans

- 13 -


04/21/23 03:24

Zurich Corporation

Model of Tactical Supply Chain Planning

· Zurich business units:- integrated product

strategy- Global plan strategy- Long range plans• Business units N.A. and other

affiliates- Integrated product strategy- N.A. plans- On-going issues

N.A. Material Availability Teams Zurich Supply Planning Teams

• Planner/Planner:- Monthly process- Monthly meetings

• Staff and Support:- Performance

monitoring- Process development- Analytic support- Information

development

• Planner • Business unit• Manufacturing

site

Import/export process

“Communication”“Communication”

“Communication”

- 14 -


04/21/23 03:24

Zurich Corporation

Planners with “Import Responsibility” Model

ZurichPlants ??

Sales ??

Zurich Plants

Others ??

Exporting Function:

Routing

Vessel tracking

Traffic function

Import Functionalities:

• Routing

• Vessel tracking

• Traffic function

Marketing ??

“Policies/Procedures”

“Plans/Forecast/Relationship”

PlannerPlanner

North America

- 15 -


04/21/23 03:24

Zurich Corporation

The Redesign Provided Both Process And Major IT Improvements

Forecast

• AMAPS

• Purchasing

• Imports

• AMAPS

• Purchasing

• Exports

• Daily data

• Order status

• Shipment status

Before

2262

After

1100

Systems

ForecastingSchedulingImport/exportPurchasing

North America

Switzerland

- 16 -


04/21/23 03:24

Zurich Corporation

New

The New Procurement Process Is a Whole New Way of Doing Business

• Single system for forecasting and materials planning

• Two primary organizations in the new process

• Single system with part number cross-referencing for both sales and forecasting

• Team process and both annual and monthly planning process-decision-making responsibility at the lowest possible level

• Pro-active scheduling allows for allocation changes, and alternate material options

Old

• 12 Systems for forecasting, scheduling, import/export, and purchasing

• Six organizations with involved with the planning and procurement process

• Common information in multiple systems- no part number compliance- difference forecast logic

• One-way communication with Zurich

• Planning reactive to missed schedules- Material options never considered

- 17 -


04/21/23 03:24

Zurich Corporation

N.A./Zurich Procurement Process Suggests Several Best Practices

• Gain agreement on partnering goals and responsibilities

• Establish performance measures for both parties

• Be actively involved in the planning process

• Have pro-active programs to allow changes

OperatingProcurementPhilosophy

OperatingProcurementPhilosophy

PartneringProcess

PartneringProcess

• Determine “who should be your partnering candidate”

• Evaluate the entire supply chain cost

• Gain executive commitment on the program

InformationManagement

InformationManagement

• Effectively use current systems if capability exits

• Ensure systems designs have transferable compatibility

• Use the software suppliers for assistance

• Force systems use as oppose to off-line capabilities

- 18 -


04/21/23 03:24

Zurich Corporation

Zurich Corporation Saved Over 30 Million Dollars Plus Tremendous Qualitative Benefits

• Reduced inventories by $45 million

• Reduced ocean freight and air by $6 million

• Established supplier improvement program in place, saving over $22 million

• Exceeded training, cross-training, communications, and teamwork expectations

– Mutual trust between Swiss and Americans– Cooperation to make system work

• Monthly video communications spurred improvements, proactively eliminating problems

- 19 -


04/21/23 03:24

Zurich Corporation

Key Lessons Learned

• Communicate at the levels of vested interests

• If you buy good systems—use them

• Management has to commit the resources

international pharmaceutical and fine chemicals company - zurich corporation: partnering background...

Documents