“Supply Chain Transformation: Improving the Customer Experience
for Competitiveness”Kevin Pegels
Vice President, Global Supply ChainIllumina
“Driving Innovation and Technologyin the Bio-pharma Supply Chain”
Customer-Centric Supply Chain TransformationKevin Pegels – VP Global SCMOctober 2017
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Illumina Mission – To improve human health by unlocking the power of human genome
FINANCIALS
$2.40B 8%2016 Revenue
REVENUE GROWTH YOY
AWARDS
TOP 3 SMARTEST COMPANIES2016 MIT TECHNOLOGY REVIEW
10 BREAKTHROUGH TECHNOLOGIES2016 MIT TECHNOLOGY REVIEW
12 MOST DISRUPTIVE NAMES IN BUSINESS2013 FORBES
TOP 10 INNOVATIONS2015 THE SCIENTIST MAGAZINE
TOP 10 INNOVATIONS2012 THE SCIENTIST MAGAZINE
FASTEST GROWING TECH COMPANIES2010 FORBES
COMPANY
Fall, 1998FOUNDED
July 27, 2000IPO
~7,000EMPLOYEES
San Diego, CAHEADQUARTERS 20
Francis deSouzaPresident and CEO
OFFICESGLOBALLY
TOP 10 MOST INNOVATIVE COMPANIES IN BIOTECH2017 FAST COMPANY
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Who We ServeInnovation drives expanding market opportunities
Research
Forensics Agriculture
Complex Disease
Reproductive Health Oncology
Consumer
Genetic Health BioPharm
Infectious Disease
Population Sequencing
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● 4 months post SAP go-live
● Consumables customer service levels in low 70s and minimal supply chain collaboration with customers
● Sales force spending a lot of time dealing with customer delivery issues and supply chain is in complete “fire fighting” mode
● Inventory accuracy was poor
● Inventory levels rising faster than sales growth
● Global cold storage capacity limited
● Supply Chain is not considered an asset within the company
Context: illumina supply chain as of Q4 2015
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GSCM Vision 2020 – 100% availability of life-changing products by decoding complexity & generating innovative Supply Chain solutions
Implement best practice IT enabled processes in planning, logistics, and sourcing/procurement
Enhanced collaboration with internal and external partners is one of the key levers of the supply chain strategy to drive efficiency
and responsiveness
Optimization of network structure and product
flow are key enablers of illumina’s rapid growth
Complex product portfolio calls for a differentiated
supply chain management approach to meet our customer expectations
Customer-Centricity
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Understanding Customer requirements is a critical first step
Criteria Customer Volume (Revenue)
Clinical Non-Clinical
General focus • Responsive/Flexible Supply Chain • Reliable/Accurate Supply Chain
Fill Rate High 99% • OTC is more important than OTR• More likely to have Sch. Agreement • Hold some SS• Patient impact if receipt delayed
beyond Promised Date
95%• Might hold SS
Low 99%• Might hold small SS, but most do not• Patient impact if receipt delayed
beyond Promised Date
95%• Some Customers might need higher
service levels due to low inventory strategies
OTD Cycle Time High 2 days 3 days
Low (quicker than High-volume Clinical) (quicker than High-volume Non-Clinical)
Special Services High • Lot pre-qualification• Lot sequestering• Single-lot shipment• Shelf-life > 3 months• Bulk packaging• Online order-tracking• Unpacking & removal of boxes• Supply Centers / consignment
• Single-lot shipment• Bulk packaging• Online order-tracking• Unpacking & removal of boxes• Supply Centers / consignment
Low • Single-lot shipment• Shelf-life > 3 months• Online order-tracking• Packaging return process
• Real-time availability prior to ordering
• Ability to order kit-components• Online order-tracking• Packaging return process
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Fixing key SCM foundational processes were a key driver of customer service level improvements
Service Levels
Capacity & Attainment
Inventory Target Mgmt
MPS & Production Planning
DRP and Deployment
SAP Stabilization
and Inventory Control
Management & Oversight
Quality and Change
Management
Demand Planning
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GATP is a key enabler of illumina’s customer experience strategy
# Strategic Enablers Future State
1 Improved Customer Experience
• Real-time order promising• Empowers customers by providing ability to evaluate alternate
products, locations and routes • Rules based order promising to maximize “touchless” fulfillment• Spares incorporated into consistent planning and
promising processes
2 Same-Day Shipment • Ability to systematically promise and ship products on same day (no longer manual process)
3 Efficiency & Scalability
• Ability to source complete deliveries from alternate products or locations, reducing cycle time to customer
• Reduce manual intervention from Planning & Customer Service teams
• Ability to access ATP data and alternative promising options seamlessly in one system
4 Data Integrity
• Seamless integration between core SAP data and APO data
• Leverage standard SAP data and functionality• Improved APO functionality & master data which can be
leveraged by SAP ECC
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● Historically, illumina’s DC network was located near our production facilities
● Completed network optimization design and currently in implementation mode
● Future network will be driven by volume growth, compliance, and customer requirements
USA+5,2%
Brazil-4,2%
Russia+13,4%
Network Strategy is critical to customer experience
Quick delivery
to clinical labs
Grow China!
Support shift to point-of-care
usage
Improve lead time
Improve delivery
reliability Enable Dx Sales
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Customer Supply Chain Teams are being established in each global region● Establishing cross-functional teams consisting of supply chain, sales, sales
operations, and customer service
● Meeting with key customers on a regular frequency to discuss KPIs, order to delivery process, packaging, launches, demand projections, and special services
● Key benefits thus far:- Alignment on critical KPIs- Improved demand forecasts- Packaging improvement priorities- Customer complaint process improvements- Order to delivery improvement priorities, eg. master data
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Product/Customer Segmentation is driving our tailored supply chain strategies
Key Capabilities
• Products are segmented by volume and volatility
• Customer expectations are clearly identified, understood, and segmented in both the clinical and RUO markets
• Sourcing strategies, planning processes, manufacturing strategies, and order fulfillment processes are differentiated by product/customer segment
• We have clarity on the cost to serve of our various supply chain models
Source Plan Make Deliver
Product Segmentation Customer Segmentation
Product packaging & labeling•Product differentiation•User instructions•Kit contents•Shelf visuals
Ordering & pack out•Order consolidation / bulk options
•Order confirmations & paperwork
•Pack out relative to size of order
•Having the right mix of containers
•Pack out based on duration of lanes & seasonality
•Bar coding readiness
Shipping containers & methods•Sustainability/re-use•Minimize dry ice•Remove mylar bags•Active or phase change containers
•Ground freight
Mission: To optimize customer experience and environmental impact by deploying more efficient & sustainable packaging and order fulfilment solutions
Functions: Packaging Engineering, Marketing, Supply chain
Functions: Logistics & warehousing, Packaging Engineering, Supply Chain, Product Development
Functions: Customer service, Logistics & warehousing
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Packaging transformation is another focus area for supply chain
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Areas of Focus
Skip level leadership team meetings
Pushing down decision making closest to the issue
Continuing to explain the ‘why’
Increased team building
Increased feedback, both positive and constructive
Release of Career Guides and
focusing on IDPs
Skip level 1:1’s
Constant focus on engagement and capability building of our people is critical
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Daily backorder has improved dramatically since late 2015
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Mill
ions
(U
SD)
Week
Average Daily Backorder - Global ($M)
$2.1M2.2M$2.4M
$1.6M $1.6M
Q3'16
$2.1M
$7.2M
$9.0M
Q1'16 Q2'16 Q1'17 Q2'17 Q3'17Q4'16Q4'15
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60%
65%
70%
75%
80%
85%
90%
95%
100%
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar April May Jun Jul Aug Sep
SOFT
%
SOFT % Trend
SOFT % Goal
2015 2016 2017
Customer service levels continue on an upward trend
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Other key wins for illumina supply chain● Inventory growth less than sales growth
● Scrap/COGS is on the decline
● Cost Savings driven by Supply Chain (leading company)- Logistics costs reduced by 15% in 2017- Material cost reduction at 4-5% Total Material cost each year
● Improved SCM readiness at launches
● Supply Chain complaints declined
● Net Promoter scores are increasing
● Engagement of SCM team in upper 80s
● Recognized by Sr. Leadership as value additive to business performance
