Stock Optimization  ‐ Central Stock

1 Introduction Escapo

Agenda

2 Project Scope

3 Introduction 4C Consulting

4 Stock Optimization

5 Results

6 Next Steps

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1 Introduction Escapo

Who is Escapo?

Farmaceutical wholesaler with a  chain of approx 100 affiliated Pharmacies and 52 affiliated Homecareshops

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LCM ARCOfin Customer Holdings

Escapo Cuyt

Limes

33 % 10 % 57%

82 %

33 %

10%5 %

Hmc91%

Annual Turnover 2009

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1. Others - Services 1.612 K €

2. Terumo3.630 K €

3. Medical Devices19.736 K €

4. Farmaceuticals101.220 K €

2.9%

80,2%

15,6%

1,3%

Strategical

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Financial Focus(shareholders )

External Focus(Customer )

Innovation - Learning(People – Upgrading) )

Internal Focus(Business Processes

Best Practices)

StrategicOptions4

1

2

3

How

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FINANCIAL CUSTOMER

Gross Margin Turnover reliability Perception

ROI Rotation Client NewCapital retention customers

Quality ShortenCoachint Lead times Reduce

Technical Sugestions to StocksKnowledge improve Avoid

process disturband ReduceEmpowerment costs

QualityPEOPLE INTERNAL

Inventory Management | SURPLUS Pharmacies –Some Figures

90.000 Products – 10.000 new SKU’s/Year

20.000 orderlines a day  ‐ 3: 60” peaks

45 Employed couriers 

2 to 3 orders a day – 40’ 

€ 8.1 Milj. Average stock value

100 Pharmacies – 52 Homecare Shops

Vianova – ViaCerta – Supply chain integration

96%  SLs 

Average waste is 90K / year

Average dead‐stock is 200K

Inventory Management |Optimization ‐ Solution Characteristics & Impact

Better product availability & customer satisfaction (improve SLs by 3..5%)

Lower Inventory Holding & Handling Cost (10% gain)

Reduce Dead Capital (25 %)

Better Negotiated Manufacturer Pricing

Less Obsolete Products & Dead Stock

More accurate demand forecasting

More pro‐active decision making

Dynamic multi‐echelon inventory management / optimization

Share knowledge / Awareness

2 Project Scope

Escapo Case: multi‐inventory stock optimization

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Suppliers

Central Warehouses

Pharmacy1

Pharmacy2

HomeCare3

CustomerCustomer

Phase 1

Phase 2

Finance versus Commercial Director

Balance between:

Stock too high: holding costs

Stock too low: out‐of‐stocks resulting in

● Lost sale(s)● Risk of losing customer(s)

Goal of the project:

Improve Service Levels

Minimize costs

Reduce ‘Guru’‐effect

Stock Optimization (process flow)

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3 Introduction 4C Consulting

4C Consulting  |  Our Mission

Ensure higher return on 

customer interactions 

through 

smarter solutions 

in marketing, sales & service

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4C Consulting | Our Playground

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4C Consulting | How do we do it ?

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Customer Interaction Management

Customer Insight Management

Marketing Excellence Sales Excellence Service Excellence

Consulting Outsourcing Interim Mgmt Staffing

4C Consulting |  Our Customers

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4 Stock Optimization

Using demand forecasting...

Blue = real values; green = model

• Slow movers versus fast movers

• Based on historical data

• Model evaluation through statistics

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... And policy optimization

0

100

200

300

400

500

600

700Inventory Level

• For Base-Stock policies

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• For Min-Max policies

... And policy optimization (2)

Stock Management Application

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Stock Management Application

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5 Results

Results

Stock Reduction

€‐ 15 % ≈ 1.200.000 € all SKU’s$

€ ‐ 27 % ≈ Top 100  in # ‐ 40 %  

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Results

Stock Reduction

€ ‐ 48 % ≈ magnificent 9              # ‐ 75% 

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Results

Stock Rotation

26 days 18 days coverage

0,5 % SKU’S             25% Turnover                9 days coverage

85 % SKU’s Intermittencie

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0

0,5

1

1,5

2

2,5

3

jan/10 feb/10 mrt/10 apr/10 mei/10 jun/10 jul/10 aug/10 sep/10 okt/10 nov/10 dec/10

Results

Service Level

From 96 %                  97,4 %

Despite of higher supplier unreliability

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%

Servicelevel Met en zonder Supplier Rating

Poly. (% excl OL) Poly. (% incl OL)

Results

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6 Next Steps

1. Set up BI environment

Screenshot oefening reporting voor TZW

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2. Stock optimization Pharmacies and TZW

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Suppliers

Central Warehouse

Pharmacy1

Pharmacy2

Pharmacy3

CustomerCustomer

Phase 1

Phase 2