TAPI’s New S&OP Process Ensures Customers Have an Uninterrupted Supply of APIs
By Mar Gimeno, Director - Head of TAPI Global S&OP and Demand Planning
It’s no secret that managing a global supply chain in the pharmaceutical world is a complex undertaking. There are many reasons for this, including ever-increasing regulatory scrutiny, global economic volatility and shifts in demand, among other things.
In order to ensure that we are able to meet customer needs as they arise and eliminate uncertainty in the product life cycle as much as we can, TAPI has implemented a new Sales and Operations Planning (S&OP) business management process. As a result, while forecasting demand, we are now able to identify growth opportunities in product demand or market shrinkage not reflected in customer orders; that means we are able to reveal any potential supply gaps 12 months before they materialize. That gives us enough time to prepare our sites, get proper approvals and buy the necessary materials, supplies or equipment we need to produce the exact quantities our customers may require, on schedule—even when requirements and availabilities change.
Many of the world’s leading manufacturers utilize S&OP processes. Companies with the most mature S&OP processes realize a 2–5% increase in revenue, a 7–15% reduction in inventory and a 20% increase in the success of new products, according to a report from AMR Research titled “Sales and Operations Planning: Transformation from Tradition.” What’s more, there is a strong correlation between forecast accuracy and service level; the further we are able to accurately plan ahead, the higher the service level we can deliver. Altogether, this translates into increased competitiveness—something we hope to pass on to our customers.
What is Sales and Operations Planning?
S&OP is a management process that involves end-to-end discussions around sales and the global supply chain that seek to satisfy customer needs as efficiently and effectively as possible. In a truly collaborative endeavor, all relevant players involved in TAPI’s mid-term strategy over the next 12 months are included in these monthly recurring conversations. That way, we can make sure that every business unit—from Sales to Operations to Top Management to R&D to the Supply Chain and everything in between—is on the same page and the company knows exactly where it stands today and where it will stand one year from today and beyond. Simply put, the goal of the S&OP process is to enable TAPI to make better, more accurate decisions that allow us to support our customers even better.
The implementation of this new behind-the-scenes process represents a major change for TAPI. But it’s one our customers may not notice right away because the S&OP process seeks to ensure that our products will always be available when our customers need them. In fact, our customers may never notice this change, because there won’t be any unforeseen disruptions to our supply chain. As a result, TAPI will be able to deliver an even higher level of service to our customers. Even if demand exceeds our highest forecasts for either existing or new products, we will still be able to deliver without incurring excess costs or having to hold significant inventories.
How TAPI’s S&OP Process Works
TAPI’s global S&OP process seeks to identify future supply needs in our complex network well in advance so we can meet them on time while avoiding future backorders or other constraints (e.g., excess stock of inventory that has to be written off). The process, which occurs each month, has four main steps:
- Demand review. After forecasting the demand for the next 12 months, we conduct a demand review to see what, if anything, has changed from the forecast we made the previous month. For example, if TAPI is producing 10 kilos of an API every month and all of a sudden demand spikes to 50 kilos, the supply chain and sales teams start talking to assess what happened. Was there a market change? Was there a mistake? Did a customer just ask for more? Is there a way we can level the demand and make it smoother? Once we complete a rough analysis, we send the information over to the manufacturing site to address those changes.
- Supply review. Next, we launch a supply review with each local manufacturing site. When potential supply-related needs are identified, we brainstorm actions we can take to address them. For example, we may decide to invest in new people or new equipment. In other instances, we may decide not to escalate the situation at all because we might determine we can already meet future demand. In any case, we talk with all sites to prepare multiple different scenarios so we can figure out the best course forward for our customers. If, for example, a site comes back and says it won’t be able to boost its production capabilities, we determine how to make sure our customers will have the right amount of APIs when they’re expecting them. The first approach is always to apply our OPEX principles and look to increase the output of the plant with the least cost possible. In some cases it will be decided to hire more people, add another shift or start working on weekends to meet the demand. If we can’t add more people or more shifts, we might decide to buy new equipment to increase capacity or move production elsewhere. By having insight into our supply chain, we have the ability and flexibility to anticipate customer needs and prepare for them.
- Pre-S&OP meeting. The TAPI team then holds a pre-S&OP meeting where all involved stakeholders discuss the different scenarios that materialized during the supply review. After reviewing a number of “what if” scenarios, we then choose the most recommended course of action and decide whether to present, escalate or implement it before finalizing the findings we will show the executive team. This very important step in the process is an alignment where all stakeholders make sure they are on the same page.
- Executive S&OP. The final phase of the process includes a 360-degree view of sales, operations and potential constraints that will affect TAPI over the next 12 months. This meeting is attended by TAPI management. Final decisions on escalating or implementing the scenarios are made, and we can then begin actively working to address looming supply needs or potential excess production. This helps us to not only ensure that our customers have access to the products they need on time, but also that our APIs are produced as cost-effectively as possible.
In order for TAPI to continue delivering great service and high-quality APIs, it is important that our customers are constantly engaged with us. That way, if needs change in the future, we will know right away and can start working to meet future demand immediately, while ensuring the best service level possible.
At TAPI, we pride ourselves on being a reliable manufacturer of the highest-quality APIs on the market. Thanks to our new S&OP process, our network capacity is optimized and our risks are controlled. This means our customers will be able to continue affordably producing their products at a steady clip—even when demand spikes suddenly.
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