insights from highly outsourced supply chains
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Copyright © 2011 Kinaxis Inc. All Rights Reserved. 1
Copyright © 2011 Kinaxis Inc. All Rights Reserved.
Insights from highly outsourced supply chains
Trevor MilesDirector, Thought Leadershiptmiles@kinaxis.com
Copyright © 2011 Kinaxis Inc. All Rights Reserved. 3
Comparison of Pharma Supply Chains
BioPharmaceutical High-Tech/ElectronicsReverse V-shaped BOM Regular A-shaped BOM
Nascent outsourcing Pervasive outsourcing
Highly regulated Relatively little regulation
Product expiry Price ‘expiry’
Over 75% gross margin About 15% gross margin
Avg DOI of 200 past 3 years Avg DOI of 30 past 3 years
Avg C2C of 220 past 3 years Avg C2C of 30 past 3 years
Avg WC Ratio of 0.33 past 3 years Avg WC Ratio of 0.12 past 3 years
High-tech supply chain’s recognized as best-in-class
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Why compare with High-Tech/Electronics?
• Highly outsourced
• Global supply chains
• Very volatile demand
• Explosion of products
• Consistently outperforms other industries
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Price ‘Expiry’- ASPs Decline 15% per Year
Also faced with demand ‘expiry’ leading to E&O
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Price ‘expiry’ experienced throughout SC
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Highly Outsourced
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Global Supply Chains
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Explosion of Products
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Very Complex Foundry Manufacturing Process
• Constantly changing technology – speed/power, size• $3B-$4B investment• 2-3 years from ‘first shovel’ to ‘first wafer’• 6-18 week manufacturing lead time
• Variable yields• Low yields• Speed binning
Source: http://www.sematech.org
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Growth of Fabless Semiconductors
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Semi ($M)Fabless ($M)Fabless/Semi
SI ASSource
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Foundry Concentration = Supply Chain Risk
NA Fabless, 600
EMEA Fabless, 200
APAC Fabless, 500
NA Foundries, 100
EMEA Foundries, 50
APAC Foundries, 100
Fabless• 24% of Revenue• 84% of Companies
SI ASSource
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Foundry Concentration = Supply Chain Risk
30
40
50
60
70
80
90
100
0.0
400.0
800.0
1200.0
1600.0
2000.0
2400.0
2800.0
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Perc
ent
CapacityWafer StartsUtilization
SI ASSource
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Foundry
Fabless Semi
Postponement is key
• Very lean• Tightly
coupled• Risk
mitigation• OEM/Fabless
– Design– Sales
• CM/Foundry– Mfg– Efficiency
Wafer Fab
Wafer Sort
Assembly Test
Assembly TestSuppliers
Customers
VMI
Suppliers
Customers
Contract Manufacturer
Assembly Test VMI
Suppliers
Customers
Original Equipment Manufacturers
Kitting/ Assembly
Order Mgt VMI Customers
Push Pull Pull
Pull
Pull
Pull
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Visibility is a core requirement
Secure systems integration across a globally distributed heterogeneous manufacturing environment
Automated data exchange with ERP systems
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What this means for biopharma
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Utilization of Outsourcing in BioPharma
Source: Frost & Sullivan
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Global Bio-Pharma CMO Market Forecast
Source: Koncept Analytics
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Supply Chain efficiency impacts the bottom line
Source: How to Unlock $43 Billion in Value by Improving Working Capital Management, PharmaPro.comBy Carol Cruickshank, David Hanfland, Paul Inglis and Shiv Shivaraman; A.T. Kearney, Tuesday, April 27, 2010
$16.60 $16.60
$13.50
$16.60
$13.50
$13.70
$43.80
05
101520253035404550
Inventory Receivables Payables Total
Potential Working Capital Improvement - Pharmaceutical Industry 3Q2009 ($B)
The Pharmaceutical industry can free up over $43B in cashby operating at the first quartile of industry performance
1st Quartile = 137 Days 1st Quartile = 82 Days 1st Quartile = 48 Days
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• Many– Companies– Data sources– Objectives– Horizons– Functions
• One– Place– Second– Supply Chain
• Single data model• Single UI
– Role specific views
• Single set of analytics– S&OP– Demand planning– Supply planning– Inventory mgt– Lean– CTP– …
• Imbedded reporting/alerting
• Long/medium/short term
• Finance & Operations
Copyright © 2010 Kinaxis Inc. All Rights Reserved.
Thank You!Questions?
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