Galderma Gets a Global Supply Chain Makeover

Galderma, the international skincare company with a number of innovative medical solutions in over 80 countries and sales of €1.6 billion in 2012, completes a global rollout of TXT Sales & Operations Planning (S&OP) technology in an effort to increase forecast accuracy, streamline production and supply in an increasingly competitive industry.

The Pharmaceutical and Cosmetic sector faces multiple challenges. Over recent years, competition from generic drugs has increased - with skincare being no exception. In addition, shorter patent lifecycles, industry consolidation, faster product launches and increased R&D expenditures, led to greater complexity, which, overall, has called for new levels of operational efficiency. Galderma, a joint venture between Nestl and L’Oral, has been able to reduce its investment in inventory by up to €20 million in several of its central warehouses, thanks to an internal global effort in process re-engineering and the improved S&OP capabilities provided by the TXT software.

Growing both internally and through acquisitions, Galderma now operates five manufacturing plants, and has nearly 5000 employees in 33 affiliates around the world.

The Challenge

Sandrine Angles, Supply Chain manager at Galderma, explains, “Pharmaceutical and Cosmetics supply chains are highly complex: they were traditionally based on producing high volumes to avoid stockouts; but high inventory levels carry significant costs and run the risk of obsolete stock. Drugs and cosmetics - much like food - have a limited shelf life too. International regulations mean a proliferation of SKUs to manage, and the need for stronger innovation calls for greater agility from the supply chain.”   

In addition – Angles continues – “not only have we grown rapidly, but our business model has evolved in recent years and Galderma is moving away from its roots primarily as a drugs company, to one offering also a larger range of cosmetics.”

This includes some patented products, but many more over-the-counter products too, including more selling via major retailers and a growing network of wholesalers.

The opening up to new geographies, coupled with the evolution of the business model, has posed new challenges for Galderma - both from a forecasting and operational standpoint.

“Pharmaceuticals used to be a fairly stable market and easy to predict due to prescriptive products,” says Angles.

But with an increased focus on highly promoted products such as cosmetics, things are much more volatile now, making managing inventory a challenge.

“Best-sellers depend on each geography and product category (aesthetics and corrective products, drugs, cosmetics); we have to avoid running out of stock, but we only want to carry the bare minimum in reserve,” she adds.

With five production sites (France, Sweden, Switzerland, Canada and Brazil), the long production lead-times which are typical to the sector, and over 80 markets to serve, this requires a certain amount of flexibility and prowess in the supply chain.

In 2007, Galderma started a forecasting and replenishment initiative with TXT, which evolved into a comprehensive Sales & Operations Planning project: “We wanted to reduce spare capacity and inventories through better visibility on demand and volumes,” explains Angles.

Previously, the company relied on hundreds of spreadsheets for planning that were very complicated to manage. Standardizing planning processes and technology was essential. Galderma says it chose TXT because of its expertise in S&OP and because of the flexibility of the solution to support the Galderma processes and evolving requirements.

The Solution

The project with TXT started with the deployment of TXT’s forecasting and replenishment technology.  In 2011, in parallel with a corporate ERP project and in light of the results achieved, it decided to extend the scope of the initiative to manage Sales & Operations Planning from end-to-end. The process includes a pre-S&OP phase, typically managed at plants, and regular S&OP meetings.

In the pre-S&OP phase, the TXT solution supports the formulation of the demand and shipment plans, through collaborative forecasting, capacity and inventory management functionality. The demand plan can be analyzed against capacity constraints and look at any physical or regional factors that might impact on sales, such as advertising or promotions. Simulation functionality helps the whole supply chain to be predictive, rather than reactive; and analytics integrated with planning means better visibility over the process as a whole.

“Automatic reporting and analysis are now ingrained into the planning process,” says Angles. “With just a few clicks, we get the full picture on capacity loads - as a percentage - and how much we can produce, versus how much will be required by each market.”  

S&OP meetings, held every month with involvement of all functions - from logistics, to sales, to finance - cover the demand plan and shipment plan proposals. The review of KPI’s (Key Performance Indicators) generated within the TXT system - reductions in inventory; forecast accuracy; plant service performance and customer service levels – helps decisions on priorities in case of conflicts and lack of capacity, and resource adjustments over a 12 to 18 month horizon.

“KPI’s and automatic reporting means results are expressed in a meaningful way to all stakeholders and so there is a better understanding of the implications of each decision at all levels, which leads to more progressive discussions,” explains Angles.
 
The deployment of the S&OP process was supported by communication and training throughout the organization and today, the software is one of the most globally used tools: a team of around 85 people use TXT. It’s respected throughout the business and integral to Galderma’s daily operations.

“Every decision is reflected in the system. TXT has helped us centralize our core processes - forecasting, capacity planning - and calculate inventory projections. It’s flexible to use: whenever we need to create an additional view, it’s extremely easy. Visibility and planning have already greatly improved across our global supply chain, and we envisage increased support as the business constantly evolves,” adds Angles.

The Benefits

According to Galderma, the solution has contributed to a 10 percent to 15 percent increase in forecast accuracy, providing global visibility on what volumes of goods are needed, as well as when and where.

Soon after implementing the TXT software at its plant in France, the company managed to reduce its inventory holding by a month – the equivalent of €20 million in saved inventory costs. Moreover, shortly after implementing the software at its recently acquired suncare business in Switzerland, the new plant is already on track for decreasing stock levels.

Overall, in spite of growing market volatility, Galderma has managed to maintain a stable level of inventory across the global business and customer service levels have consistently topped 99.5 percent.