A Different Approach to Inventory Management

Various factors drive a business to increase efficiencies in business operations. During the past two years, the state of the economy has caused many companies to examine their books very carefully and reallocate, eliminate, or re-evaluate where necessary.Such was the case for the Printed Components business of Catalent Pharma Solutions (www.catalent.com), a global, full-service printed component supplier with an integrated network of packaging operations. "The current state of the economy is forcing businesses to look at cost savings opportunities," says Adrian Stoch, general manager, Moorestown Printed Components. "In addition, the pharmaceutical industry has seen a shift to smaller order quantities." These two factors, he adds, have led Catalent to investigate operational and supply chain improvements and provide mechanisms for easier order processing. The result of this impetus is a new approach to an overall integrated supply chain between Catalent and its customers that includes inventory management, quote requests, product configuration, order processing, quality data management, billing data access, and artwork management—its eMagineering™ Suite.

A new approach

The eMagineering suite is designed to contain a number of automated online functions that result in significant improvements in the supply chain for Printed Components, including ordering, quality, and inventory management. It is "an expanded e-business solution that integrates concepts and components from ERP, Lean, and supply chain to provide customers with easier means to process and manage orders with their print vendors," says Stoch. "E-business solutions do exist today that provide functions such as electronic order processing and real-time access to order information. But, the eMagineering suite will streamline numerous touch points across the supply chain and extends well beyond many of today's existing offerings. A customer will not only have immediate access to its own historic data, but will also be able to set up new product configurations and review quotes in real time." The entire solution is Web-based, with the exception of customers who wish to install the full electronic vendor-managed inventory (eVMI) solution, which requires installing webcams at the client's site.

Know your ABC's

eVMI is a major component of the eMagineering suite, according to Stoch. It is a combination of a Lean inventory management system (Kanban) and webcams to provide real-time online access to actual inventory levels at the customer. Using this solution, Catalent's customer service representatives (CSRs) monitor the actual inventory levels within the customer's warehouse. There are three "bins" in the supply chain:

• A Bin: Source bin for material to pull inventory from;

• B Bin: Replenishment bin at the customer warehouse; and

• C Bin: Replenishment bin located at Catalent.

As soon as the source bin (A Bin) is depleted, the CSR will see this via the Web-based Kanban monitoring system (the webcams) and initiate a release of the replenishment Bin C (after material in Bin B is moved to Bin A), as well as create a work order in the Catalent ERP system.

The eVMI concept has been well received by Catalent's internal users, according to Stoch. "Purchase orders and MRP have essentially been eliminated from the process, resulting in freeing up of planner/buyer time to focus on more strategic activities. The business case for adopting eVMI for Catalent and its customers is overwhelming," he says. "As a result of this Web-based Kanban system, we have been able to reduce lead times from days or even weeks to hours. Obsolescence in the supply chain is significantly reduced, we have not experienced a 'stock out' for any items that are on this system, and we achieve all of this without the need for a forecast or other traditional MRP predictive mechanisms that are subject to volatility and uncertainty."

Online quality management

During the past two years, Catalent has been enhancing its production equipment to include automated vision systems. Any new piece of printing or converting equipment features an integrated vision system. "We see the use of vision systems as a strategic imperative for us and our customers. As an example, we recently upgraded our 6-color offset printing press for cartons with a separate console purely for managing the vision system," adds Stoch. This approach is a transition to automated quality management systems that build quality into the production process and is an improvement over traditional manual inspection processes which attempt to inspect bad product out of the process."

Migrating to automated quality systems has provided a new opportunity for Catalent to further streamline the process for its customers by allowing them to review samples of the production images online. "In the near future, quality staff at our customers will be able to pre-approve production runs resulting in significant improvements in receiving and quality control," says Stoch.

Commercial availability

Catalent is still in development for the eMagineering offering, but has made substantial progress. There are elements of it deployed internally and with vendors and its beta test customers. The company has a fully functional and ready-to-deploy solution (eVMI in a Box) and a strong core competency in Lean supply chains. It is also considering licensing arrangements for the technology.

Victor Dixon, vice president and general manager for Catalent's Printed Components business has conducted several "top-to-top" meetings with key customers who have indicated a strong desire to streamline their supply chains and continue to drive out cost while enhancing service and improving lead times. These customers have embraced the concept of eMagineering and have demonstrated a strong willingness to partner and develop this type of collaborative and innovative e-business tool.

As the economy continues to recover, the ability to adapt is key. Using the Catalent example and examining your business to identify ways to streamline and increase efficiencies could end up creating substantial new value. pP