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In recent years, the pace of change in the pharmaceutical industry has quickened through advances in biotechnological research, patient centric health care, growing regulatory pressures, unpredictable demand and new sourcing opportunities in emerging markets.
These developments have converged to create a permanent state of volatility for the industry. To operate effectively amid these “new normal” conditions, multinational pharmaceutical companies are increasingly trying to turn uncertainty into opportunity by centralizing their supply chain-related operations.
When a new managing director was put in charge of the local market of the pharmaceutical company, the out-of-stock issue—with serious consequences in terms of lost revenue and growing customer dissatisfaction—immediately became his number one priority concern. He believed that Accenture—with its deep supply chain capabilities, vast industry knowledge and a proven commitment to helping its pharmaceutical clients achieve high performance—was ideally suited to help address this out-of-stock dilemma.
The team of Accenture supply chain professionals quickly set out to help the global pharmaceutical company determine the reasons for—and ultimately resolve—the out-of stock problem. The initial root cause analysis revealed a mix of issues at both local and central level.
At the local level, the managing director felt that a lack of operational focus and governance were the main culprits behind the high out-of-stock levels, and that an effective response needed to be developed by local managers.
Such a high level of stock volatility represented a real crisis for the company in terms of customer dissatisfaction, loss of market share and degradation of its brand. Accenture advocated a true crisis management response. It remained focused on helping the global pharmaceutical company develop a dynamic and flexible supply chain operation, capable of addressing the challenges of permanent volatility.
The second element of the Accenture solution involved working closely with the company to develop the localized capabilities and skills needed to sustain high levels of performance after the initial out-of-stock improvements were achieved.
To avoid further out-of-stock surges, Accenture introduced a new governance structure and new ways of sharing information which helped the company develop the strategic agility necessary to manage future volatility. Specifically, Accenture created a globally centralized and easily accessible repository that systematically captures, shares and tracks progress of various out-of-stock items.
Accenture’s experience and ongoing High Performance Business research suggests that leading companies adapt their supply chains to flex with the “new normal” market conditions and insulate themselves from risk. Rather than fighting the unknown, they create dynamic supply chain operations powered by strong analytics capabilities that enable them to weather unpredictability. With Accenture’s help, the global pharmaceutical company has created such a dynamic capability. With better access to higher-quality data and analytics, the pharmaceutical company now is able to gain greater visibility into the out-of-stock issues that need to be resolved. The company implemented fast changes that dramatically improved its out-of-stock performance. Within just four months, the improvement initiatives reduced out-of-stock rates from approximately 15 percent to less than four percent. This was the lowest level of out-of-stock performance the company had ever experienced and it translated into more than $32 million in first-year savings.
As impressive as it is, the financial value of the solution does not tell the whole story. There are also a number of other benefits associated with corresponding improvements in the company’s brand image and market credibility, customer satisfaction and loyalty, and market share recovery. Several factors contributed to the project’s success, including the company workforce’s willingness to adopt a shared approach to problem resolution.
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