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Crossroads SC SLT Update

Crossroads SC SLT Update. August 29, 2011. TOC. What is Crossroads Why are we implementing Crossroads Current Roadmap How is the crossroads Program Organized What have you implemented so far What are the Challenges How much is this costing us Next Steps. What is Crossroads.

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Crossroads SC SLT Update

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  1. Crossroads SC SLT Update August 29, 2011

  2. TOC • What is Crossroads • Why are we implementing Crossroads • Current Roadmap • How is the crossroads Program Organized • What have you implemented so far • What are the Challenges • How much is this costing us • Next Steps

  3. What is Crossroads

  4. The Crossroads Vision Growth and competitive advantage enabled by operational excellence, simplicity, flexibility, leveragability and compliance in the MD&D Global Supply Chain Planning & Manufacturing Quality Management Globally Standardized Processes, Systems & Data Finance Procurement Inventory & Warehouse Management Master Data

  5. MD&D Supply Chain Strategy – Past and Future

  6. Scope and Approach • MD&D Franchises: CRD/BWI, DCF, DPY, EES/ASP, ETH, OCD, VIS • MD&D Regions: ASPAC, Canada, EMEA, LATAM, US • MD&D Global Supply Chain: Plan/Source/Make + CLS • Sponsorship – Plan & Supply Chain Systems LT Strategic Business Systems Roadmap

  7. Crossroads Process Scope

  8. The Crossroads Process Map (Top Level) Goods Issue To production Control & Report Production Operations 1 Support Product Costing Demand Plan Perform Demand Input & Supply Planning Perform Production Planning Schedule Production Execute Production Perform Overhead Accounting & Allocation Supply Area replenishment 5 Manage Line Replenishments 4 Goods Issue To sub-con 3 External operation 5 Manage Supplier Agreements Manage Subcontractor Manufacturing Procure Materials and Services Perform In-process Inspection 6 Create & Maintain Purchase Requisitions Manage Supplier Managed Inventory Final Inspection/Disposition Goods Issue To shipments 1 Receive Materials & Services Manage Lots/Batches 2 Receive Material - non suppliers 2 Miscellaneous Quality Processes Process Sales Order 3 Perform Receiving Inspection Receive and Put Away Product Calculate Order Price 1 Recurring Inspection Pick Order Discrepant Material Disposition 1 Manage Inventory, Storage & Movement 2 Pack Order 3 Purchased Material Disposition 4 Maintain Approved Suppliers Billing for Sales Order Item 6 Enable Payment Perform Transaction Processing Master Data Maintain New Product Code Registration Maintain Production Related Data Maintain Suppliers Related Data Maintain Customer Master Related Data Finance Inventory / Warehouse Mgt Quality Procurement Planning and Manufacturing

  9. Crossroads Portfolio View

  10. Why are we implementing Crossroads

  11. Why are we doing Crossroads? Current State of MD&D Supply Chain • Franchise-centric Manufacturing environment • 54 independent, disparate systems • Lack of standard processes leads to: • Increased risk and cost • Limited visibility to global data • Today, our manufacturing environment is: • Inflexible • Expensive • Incapable of fully leveraging people and processes across our franchises • Very difficult to leverage our assets and be ONE MD&D

  12. Wave 1 – Key Business Drivers Macro Timeline & Scope • Existing systems embed critical compliance and continuity risks • Out-of-support hardware and software • Operational support cost high, with significant attrition risk • Leveraged program saves $MM vs. independent implementations • Harmonized Business process design for Core Model Build provides foundation for entire MD&D sector DePuy CHESS (1990) PRMS (1988) SAP (1999) JDE (2) (2002) OCD SAP R/2 (1992) AMAPS (1981) Oracle (1999) JDE (1989) • Global business process template for: • Planning & MFG, IM/WM, APO, Finance, Quality Mgt, Procurement, PSM Master Data • Supporting Compliance, Security, Controls, Org Design etc. • Global SAP Footprint, infrastructure, integration arch, etc. Crossroads Global Program Simplified & Integrated Future State (evolutionary) Strategy Drives Key Benefits • Foundational to FutureScape Strategy & SC Transformation • Harmonized Global business processes, data and systems drive asset & skill leveragability • Repeatable implementation methodology • Global MD&D Supply Chain governance and ownership ensures ongoing harmonization, value of asset • Reduces MD&D Compliance risk & IT total cost of ownership • $216.5MM in benefits for D1 & D2

  13. Benefits of Standardization Repeatable, reusable knowledge assets utilizing template approach

  14. Additional Benefits • Automation • Initiation of Quality Events based on Inspection results • Batch Management, Restriction & Release • Infrastructure that supports automated data - Bar-code, RFID, Equipment Integration • Increased and streamlined capability of shop floor information • Reduced scrap due to improved expiry management • Transaction Processing • RhoGAM Plasma receipts from Somerset Labs, saves 7+ hrs/receipt entry • ~90% improvement in overall systems interface time between CR ECC and USROTC MARC WMS - 15 minutes from 2.5 hrs • Audit Trail and history of changes • Shop Floor Operators access to product specific documents

  15. Additional Benefits • Improved Lean Support • Automated Kanbans • Inventory Visibility • Expiry Management • Supplier & Material Management Enablement • Supplier management scorecard • Supplier managed inventory (SMI) and supplier consignment • Management of commodities and suppliers across franchises

  16. D1/D2 CAR Benefits • Spending Reductions - $10.7MM, Annual Recurring • Inventory Carrying Costs • Systems Retirement • Effort/FTE/Space Savings • One-Time Inventory Reductions - $34.1MM • Cost Avoidance - $72MM • Enterprise Leverage Strategy NOTE: Benefits are phased. First benefits begin Go Live +6 Months.

  17. Crossroads benefits are being realized in D1 • Process & Compliance Benefits Recognized in Plants • Hard stop for non-conforming product & Automated CAPA linkage • Real time inventory visibility/controls • Enhanced batch status management • Bar Code/RFID enablement • Improved Shop Floor Integration • Scrap reduction • Decreased interface cycle time • Automated Audit trail/controls • Lean support (Kanbans etc.) • Supplier & Material Management Enablement (SMI, cross franchise visibility) • Accurate product costing • Financial benefits realization begins in 2012 • $10.7MM, Annual Recurring (Inventory, FTEs, etc.) • $34.1MM One-Time Inventory Reduction • Included in BP/Strat Plan

  18. Current Roadmap

  19. DRAFT Recommended MD&D Roadmap Wave 1 DRAFT Wave 2 Integrated approach drives standardization, addresses “orphans” and supports legacy ERP retirements Wave 3 Wave 4 MD&D-focused roadmap is a key input into Enterprise “Back to Basics” Enterprise Architecture & ERP strategy Wave 5? Deploy CR Deploy Other Plan/Design

  20. SC/CLS  Plan/Source/Make/Deliver Requires Holistic End-to-End Process & Data Design • Critical end-to-end processes currently sub-optimized in “4x1” strategy • Revenue Recognition, Ops Ledger, Mod Codes, Dual Distribution, Master Data, Batch Status Mgt, Postponement • USRegOTC/MARC WMS require lifecycle investments (upgrade, validation) to maintain asset • Standalone high-level OTC Sales Order/Rev Rec costs greater by ~$20MM+ based on high level estimates • Integrated design & deployment maximize capabilities and minimize complex throwaway interim states • Recommend investment in NA Mfg Sites/Campuses only if end-to-end approach adopted • Key integrated design options include consolidating instances or defining complete global template for simplified “4x1” strategy • Enable migration of integrated ERPs holistically into end state

  21. CLS OTC Scope Critical to MD&D Strategy Evaluate and implement one of the following options: • Merge USRegOTC with Crossroads design and physical/logical instances • Define and implement single global approach, data standards and integration standards for OTC/MFG integration • Foundation for NA Enterprise OTC (if called for by BtB) Evaluate FG WMS component (WMS implementation not funded in proposed Wave 2 CAR) Address NA Revenue Recognition gap Address Mod Code/Product variant gap Improve key capabilities (integrated financials, master data, batch mgt, etc.) Avoid need for OTC revalidation Upgrade to USRegOTC SAP ECC 6.0 Implement cohesive end-to-end Plan/Source/Make/Deliver MD&D business solution

  22. SC/CLS  Plan/Source/Make/Deliver Requires Holistic End-to-End Process & Data Design – Detail 1

  23. SC/CLS  Plan/Source/Make/Deliver Requires Holistic End-to-End Process & Data Design – Detail 2

  24. How is the crossroads Program Organized

  25. Crossroads Global PMO Structure GOC Advisory Board Enterprise Governance Bodies MD&D Supply Chain Leadership Team Steering Comm. D2 Site VPs Make, QC Steering Comm. APO Plan LT Steering Committee Strategy , Ops, Prod Support SCLT Others: Back to Basics Synthes Global PMO Methods Supply Chain Strategy Leadership Team (Strategy, Design Governance, Production Governance and Dept. Mgt) Deployment Projects Leadership Team Global Design Authority D2 Project Team APO Project Team ERP Readiness Project Team Production Support Project Team Interim Releases Project Team Engagement Planning Project Teams (EMEA, ASPAC, End to End) DMO DMO Project Leader Project Leader Project Leader Project Leader Process Teams Project Support Cross-Function Teams NOTES: 1. Small projects may not have a separate DMO, Leadership Team or Steering Committee, but these responsibilities will be assigned within the overall structure. 2. Project Support may include (1) Reporting and Financial tracking, (2) Issue Resolution & Risk Mitigation, (3) Resource / Demand planning, or other common PM/PMO activities

  26. Global PMO Structure Roles & Responsibilities – Summary • Monitoring and control of all projects and programs within the portfolio • Determine strategy and prioritization among programs and initiatives • Program and project initiation and approvals • Risk & Issue monitoring, resolution, escalation • Schedule, budget, and resource monitoring and authorization • Change management & communications management Global PMO • Provide design governance for all programs / projects • Maintain Global Process templates & MD&D SC strategy • Drives Crossroads global supply chain business and configured design • Determine the Crossroads implementation roadmap in conjunction with Global PMO • Lead additions of strategic capabilities • Review/Approve template change requests submitted by deployment process teams GDA SCS Leadership Team • Provide oversight and guidance for project(s) or program(s) • Monitor progress and status of project(s) or program within LT’s scope • Support DMO in removing roadblocks • Resolve project/program issues and identify issues for escalation • Support Global PMO in project and resource prioritization efforts Deployment Projects Leadership Team • Manage day-to-day execution of the project or program • Workstream initiation and approval • Schedule, budget, resource and change management • Risk and issue management, resolution, and escalation • Status reporting for project / program and for Global PMO views • Coordinate with Global PMO for cross-program issues DMO (or Project Leader) NOTE: Small projects may not have a separate DMO, Leadership Team or Steering Committee, but these responsibilities will be assigned within the overall structure.

  27. What has Crossroads accomplished so far

  28. Executive Summary • D1 highly successful, stabilized and in base operations mode • Hypercare complete; low ticket volume/severity; governance in place • DePuy backorder spike of $12MM resolved within 8 weeks • Benefits realization underway • D2 Rochester/Mitek can be delivered at full quality in June • Complexity of Rochester plant drove increased scope • Recommend driving to May 28 date • Request November Stage Gate to assess and manage risk MD&D Systems Next Wave Strategy will be developed by Q4 in collaboration with Enterprise IT & Supply Chain BA

  29. D1 Stabilization & Operations on Track • Hypercare Formally Closed for OCD & DePuy • Manufacturing ramp-ups per plan • OCD closed in 6 weeks: no negative customer impact • DePuy closed by August 5 • DPY Backorder spike impacted surgery schedules. Product flow from OUS to US resulted from disabled backorder report, data setup, affiliate learning curve • Business IT Governance fully effective • Global Services IT, Supply Chain Systems and SC Line/FOD roles in place • 3,040 tickets processed (as of 8/25). Very High <1% & High Priority <8% • 2,761 out of 3,040 (91%) of tickets resolved to date. Remaining 9% are Med or Low Priority • 175 changes implemented in controlled releases per plan. No rework • On target for successful Sep and Oct releases. • Key Lessons Learned Incorporated into D2 • Improve partnership with Int’l Affiliates • Risk assessment/inventory build to support both Mfg & Distribution • Ensure higher master data accuracy and improve maintenance processes • Additional business simulation testing

  30. What are the Challenges

  31. Global Template Approach with Localization

  32. Global Process Design Using Standard SAP

  33. Key Lessons Learned Drive Confidence

  34. How much is this costing us

  35. Recommended MD&D Roadmap – Medium Pace by 2019 BP $33M Wave 1 DRAFT BP $2M; Total $2M; 0 Hct Wave 2 BP $15M; Total $30M; 7 Hct BP $47.4M; Total $154.2M; 21 Hct (CLS & SC) Wave 3 Wave 4 Wave 5? Deploy CR Deploy Other Plan/Design

  36. Next Steps

  37. Next Steps • Continue to align with other initiatives • Continue with 2012 BP • …

  38. Appendix

  39. Process Integration Overview – Plng & Mfg MPS/DRP MRP Planning Processes Perform Demand Input and Supply Planning Perform Production Planning X External Systems Replenishment Plan, Customer Orders Supply Plan Production Plan • Procurement • Intercompany • Interplant • Contract Manufacturing • Procurement • External Procurement • External Processing Manufacturing Processes Materials Staged Perform Factory Scheduling Execute Production Manage Line Replenishment X Production Plan Production Schedule Released Production Orders In-house Mfg • Inventory Management • Goods Issue / Backflushing • Good Receipt • Quality Management • In-process QA • Final QA Release • Finance • Product Costing • Inventory Management • Goods Issue • KANBAN - 39 -

  40. Plng/Mfg Future Developments and Possibilities D1 D2 • Future Developments • Safety Stock Calculation • Lean/Pull • Dept of DefensePlanning • SNP Shelf Life Planning Core SAP Interfaces Enhancements Core SAP Interfaces Enhancements Supply Planning SNP Kanban with MRP Increase use of KANBAN functionality Machine Interfaces Formulation USROTC MRP with Shelf-Life/Use-by-Date Mortgage Planning Slit Interfaces Imperfection Tracking Production Planning PRMS Forecast Consumption within Fiscal Month Spare Parts Planning EMEA Plan for Therakos Slit Bolt-on WWL Factory Scheduling Rough Cut Capacity Report CTS Planning System Environ Tracking (SPIDER) Execute Production Machine (BioVue) Schedule Attainment Report Machine (GelLine) Manage Line Replenish Production Plan Summary Report Codman Repository Electronic Work Instructions

  41. Inv Mgmt Process Integration Overview • Procurement: • Purchase Order from procurement • Stock transfer orders Receive Materials and Services Receive and Putaway Product Manage Inventory Storage and Movement X Material is Stored in the warehouse • Quality: • Creation of Inspection Lot • Release of Materials after inspection • SNP, MRP: • Inventory levels for Planning • Environmental Systems: • Interface with SPIDER to control materials with Time out of Temperature requirements • Planning and Manufacturing • Picking for Production Order Sales Order Creation Delivery process Post Goods Issue X • Distribution Centers and Affiliates • Integration with USROTC • Integration with Affiliates • SNP • Replenishment process

  42. Inv Mgmt Future Developments and Possibilities D1 D2 • Future Developments • Lean/Pull enabling designs utilizing core SAP • Interfaces to other OTC’s • Back shipment process improvement (DC to Mfg) • Support consignment process for USROTC Core SAP Interfaces Enhancements Core SAP Interfaces Enhancements Global visibility of inventory levels in the manufacturing sites SNP Trailer Utilization Report Direct replenishment to DC from subcontractor Customer driven intelligent Batch assignment USROTC Expiration Report Goods movements integrated with Finance for accounting postings GS1 PRMS In-transit inventory Reconciliation Report WWL Increase use of KANBAN functionality Physical Cycle counting RF Functionality SPIDER Mortgage inventory processes Automatic batch determination CODMAN Repository Automatic Expiration date control Shipping of non-Finished goods to affiliate Batch assignment for DePuy Manufactured Products Shipping of Finished goods to DC Warehouse Labels Vendor Consignment

  43. QM High Level Process Integration Diagram • Procurement: • - Purchase Orders • Subcontracting • Inventory: • - Goods movement Recurring Inspection Intervals Batch Expiry Vendor Block / Un-Block First Article Inspection Nonconformance Purchase Orders / Incoming Batch NC’s impacting Batches & Vendors Material Settings Recurring Inspection: Lot Expiring/ed Materials Batches Restricted Vendor Block/Un-Blocked First Article Inspection established / dropped Retained Sample Management Perform Receiving Inspection Miscellaneous Quality Processes In-Process Inspection of Material Batch Discrepant Material Disposition Plant, Material, and Vendor Controls • Manufacturing: • - Work Orders • Order Status • Inventory: • - Goods movement X Perform In-Process Inspection Final Inspection Disposition X Y Raw Material / Component available for production Semi-finished materials available for production Finished Product Batches available for Disposition Y X Manufacturing: WIP QA Release for Production / Process Order Incoming: QA Disposition of material Manufacturing: Final QA Release for Production / Process Order Inventory: Update batch status

  44. QM Future Developments and Possibilities • Objectives: • Increase use of core SAP • Lessen reliance on RICEFs • Improve Quality & Compliance profile • Deploy improved E2E tools for quality: • Metrics • Management Dashboards/Cockpits • Simplified, more intuitive management & oversight • Alignment with Enterprise Data & Process Standards • Provide more timely/real-time information

  45. HardStop Quality Management (QM) HardStop Process Description At the time of the a system update (e.g.; batch release, batch status, stock status) releasing material into inventory for further processing or shipment, the QM HardStop enhancement will perform a more thorough system check over what is performed by standard SAP to provide added assurance of batch readiness. • Inputs • Accept Type Usage Decision (UD) • Batch Status • Stock Status • Outputs • Successful UD • HardStop Error Message • Override for MAR/SUQ HardStop • Checks: • Batch Status • Inspection Results – complete & passed • Component issuance complete • Nonconformance System Status • NC/QN Status • Other Inspection Lot Status • Production/Process Order Status • Default/Missing Expiry Date • WebMethods to NC System Status • Batch Genealogy • Inputs • ASUQ/MAR Type Usage Decision (UD) • Batch Status HardStop • Checks: • Batch Status • Inputs • Reject Type Usage Decision (UD) HardStop • Checks: • None - 45 - - 45 - - 45 -

  46. Procurement Process Integration Overview OTC Vendors / Affiliates Third Party Sales Orders EDI ATP Email, EDI Auto fax SNP (APO) SNC Purchase Reqs. for Finished Goods Purchased Finished Goods ATP ECC MRP / Work Order Purchase Requisitions Convert Requisitions to PO’s Transmit PO Process Confirmations (OA,ASNs) Post Goods Receipt AP2OLLO Purchase Orders Goods Receipt Create Invoice Process Payment - 46 -

  47. Procurement Future Developments and Possibilities D1 Dx Core SAP Interfaces Enhancements Core SAP Interfaces Enhancements Finished Goods Consignment Update Planned Receipts in ECC (SMI) Work Flow for P.O. Approvals Contracts, Scheduling Agreements PO and Goods Receipt to Apollo Operation Confirmation for Ext. Proc. Source List, Purchasing Info Records Vendor Master Vendor Master Sync (ARAVO) Overhead in Purchased FG pricing Simplify Forms for Ext. Processing Material Spec/DrawingSync with Spec system Finished Goods Consignment Requisition processing, approvals EDI: PO, Confirmation, ASN Intercompany Pricing Improve Consignment Consumption Form APOLLO:: Standardize core interfaces (GR, PO) External Processing w/ Affiliates • Notes • Evaluating the use of the Consumer/Pharma shared SNC instance (GOLD) • Alignment with MD&D Source/EM process roadmap (R. Wilson) • Alignment of supplier data with ADAPTIVE (i.e. ASL) • Alignment with BtB and Enterprise wide procurement system initiatives (i.e. Supplier Interface/portal) Purchase Order, ConfirmationsASN SNC: PO, Confirmation, ASN Lot Pricing – support Ariba PO Enhance Scheduling Agreement Conversion program SNC: Use of Pharma/ Consumer’s SNC Vendor Evaluation (On-time delivery) PO to LabPas Copy Spec & Drawing no. to PO text Development of a Supplier Portal SMI, PO forecast (SNC)

  48. Raritan Product Lines RhoGAM BioVue Antisera Donor Screening Red Blood Cells Product Purpose Parenteral to cure Hemolytic Disease in Rh-Negative Mothers Products designed to test blood donations for the exposure of viruses and diseases Red Cell Reagents used with blood typing and antibody screening products Blood typing & antibody screening reagents supported by automated solutions Traditional Reagents used for Blood typing and antibody screening Customers Hospitals, Physician Offices, Clinics Donor Centers (i.e. ARC) and Plasma Centers Hospitals, Reference and Private Labs, Donor Ctrs. Hospitals, Reference and Private Labs, Donor Ctrs. Hospitals, Reference and Private Labs, Donor Ctrs. Outputs 900M syringes per year of RhoGAM and MicRhoGAM Seven Assays, 47MM tests/yr (T. cruzi, HBc, HCV, HCV 3.0 SAVe, HCV Core, HTLV I-II) 250MM RBC tests/yr (Affirmagen, Selectogen, Surgiscreen, Coombs Control, Diego, Ortho Pooled Screening, Ficin, Resolve Panels) 62 MM BioVue cassettes/yr (16 cassette configs: ABO, D, Reverse, Rh Phenotype, Kell, Direct & Indirect Antiglobulin – Poly & IgG, & Neutral 152MM tests/yr (ABO & Rh Reagents, Antiglobulin & Enhancement Reagents, Rare Antisera, Second Line Monoclonals & MicroplateAntisera) Primary Processes Pool, Fractionate, Viresolve, Formulate, Fill (OBI), Label, Pack Formulate, Plate Coat, Pouch, Fill, Label, Test, Kit Pack Unit Assignment, Process, Fill, Test, Label, Pack Bulk Formulation, Filtrate, Fill, Label, Pack, Test Formulate, Filtrate, Fill, Test, Label, Pack Primary Inputs Human Plasma, Chemicals, Syringes, Pkgs, Stoppers, Shields Plates, Antigens, Fetal Bovine Serum, Chemicals, Pkg Blood Products, Chemicals, Pkgs, Vials, Caps, Droppers Cassettes, Beads, Antibodies, Foil, Chemicals, Pkg Antibodies, Chemicals, Pkg, Vials, Caps, Droppers 48

  49. Hospitals, Reference and Private Labs, Donor Ctrs. OCD Raritan RhoGAM VS RRBC VS 28 MM IDMTS Cards/yr Anti IgG, ABD, Ab Screens 19,500 Liters Anti-D Plasma 1000 Units Red Blood Cells Bulk Formulation, Filtrate, Fill, Label, Pack, Test Plasma Aphaeresis Red Blood Cell Unit draws Cards, Gel, Antibodies, Foil, Chemicals, Pkg Donors, Consumables Pompano Product Supply Buffalo Blood typing & antibody screening reagents supported by automated solutions Anti-D Source Plasma for further manufacturing into RhoGAM product Product Purpose Product Purpose Customers Customers Outputs Outputs Primary Processes Primary Processes Primary Inputs Primary Inputs 49

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