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After years of new product launches, and entry into emerging markets, Company X, a healthcare company, has seen its product portfolio proliferate and bring costly complexity into its operations. Today, Company X seeks to achieve and sustain an optimal product offering that meets their customers' needs. Through a six-month research effort, we develop a process for stock-keeping-unit (SKU) rationalization to reduce SKU complexity while maintaining sales volumes. We, also, implement operational models to compute complexity costs associated with SKU complexity and employ SKU portfolio dashboards to monitor SKU development and govern SKU creation. This thesis discusses a process for applying these tools to any healthcare company. Through two case studies, we apply the rationalization process on one pilot brand and develop a dashboard to improve product portfolio management. We expect that the SKU rationalization process will release 38% of avoidable costs associated with the pilot brand. These case studies also provide insight into how to correctly diagnose the cost reduction opportunity associated with SKU complexity, as well as methods for a step-change improvement in lead-times and cost-reduction. Lastly, removal of complexity provides flexibility to capture other business opportunities.
A significant amount of complexity exists within the brand and product portfolios of PharmaCo. This complexity is driven by several factors: first, medical needs for differing products and dosages; second, marketing requests for new configurations of current product offerings; third, unique regulations and requirements for individual country markets; fourth, product portfolio growth from acquisition activity. This complexity increases both production costs and support costs (such as planning and procurement) for PharmaCo. The focus of this project is to reduce the complexity in the brand and SKU portfolios at PharmaCo. Two approaches can be utilized to reduce complexity in the product portfolio. First, measures can be taken to reduce already existing SKUs and brands. This has largely been the focus of previous efforts at PharmaCo, although additional work remains in this area. Previous analyses have focused on providing recommendations for pruning specific SKUs and divesting or pruning specific brands. Second, measures can be taken to manage the future proliferation of SKUs and brands in order to control future complexity growth. This approach has been largely unaddressed in previous internship projects and will be a major focus of the current project. It is first necessary to clearly understand all costs that are associated with complexity. Consequently, the first step of this project was to conduct site visits with multiple plants in order to learn all costs that are impacted by complexity. At these site visits, cross functional groups involved in all aspects of operations at the site were identified and consulted. Additionally, Marketing was contacted to understand complexity costs that affect Marketing. Both cost elements will be combined to develop a complexity cost model. This model is being piloted and applied to a stable brand that still has level or increasing volumes over the next several years.
Overly complex product portfolios lead to inefficient use of resources and limit an organization's ability to react quickly to changing market dynamics. The challenges of reducing portfolio complexity are defining excess complexity, identifying it in the portfolio, and removing it while still delivering value to customers. Novartis Pharmaceuticals, in agreement with the prevalent operational excellence culture, is exploring complexity reduction as a mechanism to reduce waste, costs, and inventory levels. This thesis proposes the use of a comprehensive complexity reduction approach which targets both large and tail-end products for rationalization. The first complexity reduction focus area, redundant product rationalization, targets medium to large stock keeping units that do not directly satisfy a unique customer requirement. Removing redundant products has two benefits. First, larger products consume more resources, so the cost savings associated with removing a large redundant product are greater than that of smaller products. Second, sales levels will be preserved, as the demand for the rationalized product will shift to the remaining products that still meet the customer requirement in question. The second focus area is the more traditional tail-end pruning. By removing smaller, less profitable products and product groups, critical resources can be reallocated to more profitable products or new product launches. Novartis has piloted and partially implemented this approach with impressive results. With the support of influential leaders across all functions, Novartis is expecting a reduction of 15% of the portfolio in terms of number of finished product stock keeping units and a reduction of up to $22 million USD in inventory value. Other benefits include improvements in demand forecast accuracy, production write-offs, asset utilization, and replenishment lead times.
Shed Revenue-Draining Complexity Costs by Thirty Percent! “This is an ambitious book packed with insight and fresh thinking. Separating good from bad complexity costs is a critical task facing companies today, and the authors provide a compelling roadmap for solving the problem.” Michael B. McCallister, President and CEO, Humana Inc. “Waging War on Complexity Costs examines an incredibly important and often overlooked aspect of business and organizations in general—regulators and government officials should read this book and take notice. Complexity dramatically increases costs and risk of failure. It is like a cancer that eats away at efficiency and profitability.” Andy Beal, Chairman and CEO, Beal Bank “This is by far the best and most useful explanation of how to address complexity in a business. Waging War on Complexity Costs frames the issue in a way that companies can finally tackle the problem—this book delivers.” Ahmad R. Chatila, CEO, MEMC Electronic Materials Inc. “This is the first book that really targets organizational complexity in a compelling way, making this a must-read for any organization that is looking to distance itself from the competition. After years of cost-cutting, many companies are realizing that they still don’t have a discernable cost advantage. This book provides the platform to achieve just that, by attacking the complexity that bogs them down.” Tom DiDonato, EVP Human Resources, American Eagle Outfitters, Inc. About the Book: Complexity costs are the single biggest determinant of your company’s cost competitiveness. For the past two decades the pursuit of growth has created massive complexity in processes, product portfolios, and organizations, adding costs that companies can ill afford. The only good news is that your competitors may be carrying as much complexity as you are. Learn how to eliminate this complexity, and you can create a tremendous cost advantage over your competition. In Waging War on Complexity Costs, Stephen Wilson and Andrei Perumal deliver a powerful and practical approach for reclaiming your cost advantage. This executive-level resource presents a wealth of insight and new research to definitively answer key questions such as: How can I quantify the cost of complexity without getting lost in a sea of data? Where are the biggest opportunities for reducing product, process, and organizational complexity, and how can I cut through the interdependencies that trap these costs? How can I see results quickly by taking targeted actions against key levers? How do I keep complexity costs at bay? It is not enough to attack bloated product portfolios. Substantive cost improvements require addressing the complexity in the underlying processes and organizational structures. Waging War on Complexity Costs provides a wealth of relevant case studies with examples from Kraft, Tesco, Fiat, and the U.S. Navy and highlights specific strategies for reducing costs by 15-30% in significant portions of your business. Tomorrow’s consumers are emerging as wellinformed customers who know what they want and the price they’re willing to pay for it. Complexity not only drives costs; it creates a barrier between you and the customer. Declare a war on complexity costs and prepare for profitable growth.
An expert offers a set of rules that will help managers achieve dramatic improvements in operations performance. In recent years, management gurus have urged businesses to adopt such strategies as just-in-time, lean manufacturing, offshoring, and frequent deliveries to retail outlets. But today, these much-touted strategies may be risky. Global financial turmoil, rising labor costs in developing countries, and huge volatility in the price of oil and other commodities can disrupt a company's entire supply chain and threaten its ability to compete. In Operations Rules, David Simchi-Levi identifies the crucial element in a company's success: the link between the value it provides its customers and its operations strategies. And he offers a set of scientifically and empirically based rules that management can follow to achieve a quantum leap in operations performance. Flexibility, says Simchi-Levi, is the single most important capability that allows firms to innovate in their operations and supply chain strategies. A small investment in flexibility can achieve almost all the benefits of full flexibility. And successful companies do not all pursue the same strategies. Amazon and Wal-Mart, for example, are direct competitors but each focuses on a different market channel and provides a unique customer value proposition—Amazon, large selection and reliable fulfillment; Wal-Mart, low prices—that directly aligns with its operations strategy. Simchi-Levi's rules—regarding such issues as channels, price, product characteristics, value-added service, procurement strategy, and information technolog—-transform operations and supply chain management from an undertaking based on gut feeling and anecdotes to a science.
Effective development and management of a supply chain network is an invaluable source of sustainable advantage in today’s turbulent global marketplace, where demand is difficult to predict and supply chains need to be more flexible as a result. This updated 4th edition of the bestselling Logistics and Supply Chain Management is a clear-headed guide to all the key topics in an integrated approach to supply chains, including: • The link between logistics and customer value. • Logistics and the bottom line measuring costs and performance. • Creating a responsive supply chain. • Managing the global pipeline. • Managing supply chain relationships. • Managing risk in the supply chain. • Matching supply and demand. • Creating a sustainable supply chain. • Product design in the supply chain.
Today many organizations face challenges when developing a realistic plan or schedule that provides the best possible balance between customer service and revenue goals. Optimization technology has long been used to find the best solutions to complex planning and scheduling problems. A decision-support environment that enables the flexible exploration of all the trade-offs and sensitivities needs to provide the following capabilities: Flexibility to develop and compare realistic planning and scheduling scenarios Quality sensitivity analysis and explanations Collaborative planning and scenario sharing Decision recommendations This IBM® Redbooks® publication introduces you to the IBM ILOG® Optimization Decision Manager (ODM) Enterprise. This decision-support application provides the capabilities you need to take full advantage of optimization technology. Applications built with IBM ILOG ODM Enterprise can help users create, compare, and understand planning or scheduling scenarios. They can also adjust any of the model inputs or goals, and fully understanding the binding constraints, trade-offs, sensitivities, and business options. This book enables business analysts, architects, and administrators to design and use their own operational decision management solution.
Cisco has announced big changes to its certification program. As of February 24, 2020, all current certifications will be retired, and Cisco will begin offering new certification programs. The good news is if you’re working toward any current CCNA certification, keep going. You have until February 24, 2020 to complete your current CCNA. If you already have CCENT/ICND1 certification and would like to earn CCNA, you have until February 23, 2020 to complete your CCNA certification in the current program. Likewise, if you’re thinking of completing the current CCENT/ICND1, ICND2, or CCNA Routing and Switching certification, you can still complete them between now and February 23, 2020. A must-have study guide for exam 640-911 on Cisco's Unified Data Center The Cisco Certified Network Associate Data Center certification is Cisco's newest certification, covering the Cisco Unified Data Center technologies. Written by unparalleled author and Cisco authority Todd Lammle, and CCIE John Swartz, this comprehensive study guide is essential reading for anyone preparing to take the 640-911 exam (Introducing Cisco Data Center Networking), providing in-depth coverage of all the exam's objectives. In addition, it offers expanded coverage on key topics reflected on the exam. Addresses understanding basic networking and ethernet technologies Reviews the OSI and DoD model and TCP/IP Transport Layer Covers basic IP routing technologies, layer 2 switching technologies, and routing principles Provides an introduction to Nexus switch as well as how to configure it CCNA Data Center Study Guide offers you access to additional study tools, including bonus practice exams, electronic flashcards, a searchable PDF of a glossary of terms. Plus, you will be able to use the free nexus simulator to perform all the hands-on labs in the book.