Track: Life Sciences
End-to-End Inventory & Asset Optimization for Medical Devices
We are presenting a broad initiative that aims at optimizing inventory for a Medical Device (MD) franchise at J&J on end-to-end basis: (1) Multi-Echelon Inventory Optimization (MEIO) — representing upstream of MD supply chain handling global and regional hubs. (2) Asset and Inventory Management Right Sizing & Placement (AIM-Right) — representing downstream of MD supply chain inclusive of forward stocking locations / loan centers (FSLs) and hospitals.
(1) MEIO: As inventories represent cash stored in our warehouses, having too much inventory directly affects costs and our ability to provide customers and patients with reasonable prices. On the other hand, when the inventories are not enough, we are not prepared to face unexpected events such as demand spikes and supply issues. The second dimension is the placement of inventories. They can be either centralized in primary distribution centers or more atomized in downstream stocking locations, with the corresponding trade-off between total inventory and responsiveness. The optimal values for all our safety stocks are obtained using Multi-Echelon Inventory Optimization, a holistic approach that looks at the entire supply chain to understand the correct location and inventory for each material. During 2021, the Digital & Data Science, the business franchise, and the Planning Excellence organization teams have been collaborating to optimize the safety stocks settings for all main distribution centers. An internally developed optimization solution in collaboration with Carnegie Mellon University along with Coupa MEIO engine were used.
(2) AIM-Right Medical Device businesses are heavily dependent on investment in field assets and inventory to build the foundations and generate surgical capacity to fulfill surgery demand. To maximize demand fulfillment in the most cost-effective manner requires thousands of detailed and interdependent decisions regarding deployment of these resources. These decisions include hospital consignment levels, asset and inventory stocking levels at loaner sites, sharing of assets between loaner sites, redeployment of assets, and future investment plans. To meet this need, a cloud-based decision support system (AIM-Right) utilizing advanced mathematical optimization and a web-based user interface was developed in close collaboration with the business. At the heart of AIM-Right is a mixed-integer programming model to optimize loaner operations in minutes, as well as innovative algorithms to determine the right consignment levels for each SKU. Access to the most recent sales and inventory data from ERP systems is provided through integration with the J&J Common Data Layer (CDL) and a cloud-based architecture to manage the application. Complex data manipulations (ETL) are fully automated, and relevant reports and dashboards allow the user to have an efficient workflow. Outputs from the application are presented via interactive Tableau dashboards and downloadable reports to allow for easy comparison of different business scenarios.