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The 5th Global Health Supply Chain Summit
“Continuous productivity improvement
opportunities: Private goods supply chains to
country level healthcare supply chains”
Ananth Iyer
Gemma Berenguer
[email protected]
[email protected]
Krannert School of Management
Purdue University
[SPEAKERS NAMES]
November
14 -16, 2012[DATE]
Kigali, Rwanda
Agenda
• Private goods supply chains
• Public and nonprofit supply chains
• Our study on the Global Healthcare space
Private goods supply chains
• Summarize a project with Consumer Packaged Goods
companies supply chain benchmarking
• Explain how DEA (Data Envelopment Analysis)
techniques were used
• Explain the results and associated learning
Problem Features
• A supply chain benchmarking study typically involves many
variables with a comparatively small number of participants.
• The methodology has to consider all facets of the supply
chain and should give insights about best practices, best
performers and focus areas for inefficient companies.
• The methodology should be able to identify relationships
among various variables and should help us understand the
tradeoffs involved.
Benchmarking:
Identify best practice for each step and improve
performance
Some examples:
- Internet based DEA for warehousing at Georgia Tech
- Tourism organizations benchmarking at University of Illinois at
Urbana Champaign
- DEA study of banks
- Healthcare organizations in the UK
- Supply chain benchmarking (Martin Christopher)
Benchmarking studies
Industry
Methodology
Grocery and Retail
Customer surveys, summary statistics
Higher education
Participant surveys, DEA, SFA
Electronics industry
Process comparisons, summary statistics
Warehousing
DEA
Tourism
Summary statistics, SFA, DEA
Banking
DEA, SFA
Health care
DEA, SFA, summary statistics
Airline Industry
DEA
Inputs and Outputs
• The Data collected was divided into outputs and inputs.
• Efficiency = Weighted Output/Weighted Input
• The inputs were further divided into internal inputs and external
inputs.
• Internal inputs were the variables which were under direct control of
the companies.
• External inputs required interactions with partners and were an
indication of collaboration.
• The split in inputs gave insights about how flexible the company is
internally, and how well it collaborates externally.
Data description
Internal Inputs
External Inputs
Outputs
Capital
Average Order Quantity
Productivity
SKU commonality
number of suppliers
permanent employees
temporary employees
# of Schedule changes per month
Production capacity
lost capacity
unit cost
# of Changeovers per week
changeover time
Product Quality
Development budget
Minor new products per year
Major new products per year
Employee welfare
Order increases (day)
Order increases (week)
Order increases (month)
Partner involvement (strategic)
Partner involvement (operational)
Inbound logistics cost as% of sales
Outbound Logistics cost as % of sales
Collaboration level
direct orders as a % of total orders
POS data orders as a % of total
# of Satisfaction programs per year
% of suppliers certified
% of suppliers supplying JIT
% of suppliers using VMI
Amount of Self Access
Amount of Supplier Access
% of orders though EDI
% of orders through Internet
% of supplies single sourced
% of supplies double sourced
% of supplies multiple sourced
% of customers who are End users
Amount of Customer data access
Product Variety
Sales revenue
Gross Margin
Net Operating Profit
Market Share
Return on total assets
Rate of ontime delivery
Complaint ratio
Product defect rate
Warranty cost
Order lead time (standard)
Order lead time (single)
Raw material turns
Work in progress turns
Finished goods turns
% delayed deliveries
% defective supplies
% of returned supplies
Average total process time (hours)
Average throughput time
Data reduction techniques
• The dimensionality of the dataset was too high to conduct a
statistically significant analysis.
• Composite variables were created using Factor Analysis.
• The variable set was reduced to:
4 output factors, 6 internal input factors and
7 external input factors, each representing at least
80% of the original variance.
• The variable groupings were made on the basis of the
correlations among variables and eventually led to
intuitive factors.
Data reduction techniques (cont.)
OUTPUT FACTORS
Factor
Customer Satisfaction
Working Capital
Cycletime efficiency
Financial Efficiency
Variables with high positive
Variables with high negative loadings
loadings
Percent of defective supplies
Work in process (WIP) turns
Percent of returned supplies
Average (plant) total process
Warranty cost
Raw material turns
Average plant throughput time
WIP turns
Finished goods turns
Order lead times
Average plant throughput time
Percent supplier deliveries that
were delayed
Sales
revenue
Gross margin
Net operating profit
Data reduction techniques (cont.)
INTERNAL INPUT FACTORS
Factor
Variables with high positive
Variables with high negative
loadings
loadings
Innovation Number of minor new products
launched per year
Number of major new products per
year
Average changeover time
Product Quality
Investment Capital
Productivity
Focus on Employee Welfare
Flexibility
Average Order Quantity
Percent of complete modules as part of
Number of suppliers
all SKU
Production capacity
Percent of capacity lost
Size
Number of permanent employees
Number of temporary employees
Profit
Percent of complete modules as part of Annual production capacity
Margin from all SKU
customized Average cost per unit
Average number of changeovers per
production
week
Volatility
Number of production schedule Development budget
changes per month
Annual production capacity
Data reduction techniques (cont.)
EXTERNAL INPUT FACTORS
Factor
Variables with high positive loadings
Reaction on order increases within a day (percentage)
Reaction on order increases within a week (percentage)
Reaction on order increases within a month (percentage)
Percent of suppliers supplying just-in-time
Supplier Initiative
Number of supplier satisfaction programs conducted per year
Amount of data access given to suppliers
Percent of suppliers using vendor managed inventory (VMI)
Percent of supplier transactions that are through EDI
Supplier Interchangeability Percent of supplies multiple sourced
Variables with high negative loadings
Responsiveness
Customer Confidence
Outbound logistics cost as a percent of sales
Inbound logistics cost as a percent of sales
Percent of orders based on point-of-sales
(POS) data
Percent of supplies single sourced
Level of access to customer data (composite variable)
Percent of suppliers running VMI
Product variety
Level of collaboration with partners (composite variable)
Customer and Supplier
Partner involvement in strategic planning
Involvement
Partner involvement in operational planning
Percent of suppliers certified
Percent of customers who are End-Users
Supplier relationship
Percent of sales based on point of sales data
maturity
Percent of suppliers supplying JIT
Percent of supplies single sourced
Percent of suppliers certified
Level of data visibility in the Level of access to supplier data (composite variable)
supply chain
Level of data access given to suppliers (composite variable)
Percent of suppliers certified
Percent of supplies double sourced
Percent of sales based on direct orders
Cost of inbound logistics as a percent of sales
DEA Analysis
DEA Frontiers
CCR frontier
G
F
D
E
Output
BCC frontier
The Idea:
P
Q
C
For a given input and read off the
associated output
R
A
DMU's
If not on the frontier, examine how
To reach it
B
Input
What do you learn from DEA ?
• Every organization is usually good at some things, can
improve on other dimensions
• For each organization, find distance to the frontier and
associated efficiency
• Identify specific ways to improve the inputs and outputs to
increase efficiency
• Examine other organizations who exemplify best practice
and share your best practice
• Cultivate the idea of “shared learning” to improve
efficiency and thus productivity
• Quantify this process to provide guidance and milestones
Continuous productivity improvement for
governmental and nonprofit organizations
Our questions:
• Is this concept implemented by governmental and
nonprofit organizations?
• If so, what measures of performance are employed?
• Based on the specific context and performance results,
what are the best operational practices to implement?
Differences between the 3 sectors
• Click to add text
Sources of revenue
Value delivered
For-profit organization
Money from sales
- Financial returns
delivered to
shareholders
- Value delivered to
customers
Governmental
organization
Taxes
- Achievement of social
mission
- Fulfillment of citizen
aspirations
Nonprofit organization
(NPO)
Charitable contributions
of money, time,
materials
- Achievement of social
mission
- Satisfaction of donors’
desires to contribute
Source: Managing for Value: Organizational Strategy in For-Profit, Nonprofit, and Governmental Organizations,
Mark H. Moore, Nonprofit and Voluntary Sector Quarterly, 2000, 29:183.
Public and nonprofit supply chains
Donor
agencies
Suppliers
Governmental
organization
or NPO
Beneficiaries
Who are we?
Purdue
University
University of
Michigan
CGD
Focus of our study
• Donor agencies: PEPFAR and the Global Fund
• Organizations in Sub-Saharan African countries
• Medicines and health products for: HIV, TB and malaria
• Country level governmental and nonprofit organizations
Funders are interested in our study:
OGAC, USAID, PEPFAR, …
Our Project
Questionnaire 1
-
General information
Supply Chain structure
Measures most proud of and most challenging
Compile all
information
-
From questionnaire 1
From other previous reports
From donors
-
Further questions about the company and
its operations
Numerical values of list of metrics
Questionnaire 2
-
Data Envelope Analysis (DEA)
- Each organization is anonymous
- Adjusting for different externalities
-
Results on where does your organization stand
related to others that are similar
Recommended performance measures to use
Recommended operational practices to
implement to achieve continuous improvement
Analysis
Recommendations
-
Your participation is fundamental!
Questionnaire 1
-
General information
Supply Chain structure
Measures most proud of and most challenging
-
Further questions about the company and
its operations
Numerical values of list of metrics
Compile all
information
Questionnaire 2
-
Compile all
information
Recommendations
-
Results on where does your organization stand
related to others that are similar
Recommended performance measures to use
Recommended operational practices to
implement to achieve continuous improvement
Your participation is fundamental!
• Incentives for participating:
– You will be able to influence with your proposed metrics
– We will be reaching out to all organizations, so you
shouldn’t miss it!
– We will get back to you with private information on your
performance relative to other organizations and we’ll give
you recommendations on how to move forward
Today: Questionnaire 1
Today: Questionnaire 1
Today: Questionnaire 1
http://www.biz-development.com/SupplyChain/6.20.12.supply-chain-management-integrated-supply-chain-management.htm
Today: Questionnaire 1
Thank you for your participation!