Baxter Health Care: Strategic Alliance Background Business Process Redesign: Process, IT Lessons...
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Transcript of Baxter Health Care: Strategic Alliance Background Business Process Redesign: Process, IT Lessons...
Baxter Health Care: Strategic Alliance
• Background
• Business Process Redesign: Process, IT
• Lessons Learned
- 2 -
XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
Baxter Is a World Leader in the Production and Distribution of Health Care Products
• Sales exceeded $7 billion in 1990:- Manufacturing plants all over North America- Strategy to be “low cost producer”- Supplier alliance programs since early 80’s
• Purchases over $50 million in corrugated material:- Quality packaging critical to distribution- Considered a “strategic material”
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
Baxter Corrugated Strategic Alliance Was a Multi-Year Commitment
Objectives:
• Reduce the supplier base to a minimum number
• Develop a long term strategic alliance
• Have a continuous improvement program
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
The First Step Was to Select Suppliers for Partnerships
1990 Corrugated Purchases
Georgia-Pacific/GNN
Temple InlandJSC/CCA
Wabash FibreWeyerhaeuser
Green Bay
Stone
Western Kraft
Boise Cascade
MacMillian Bloedel
JSC/CCA
Temple Inland
Weslvaco
Temple Inland
Weyerhaeuser
Stone
MacMillanBioedel
JSC/CCA
Longview
Temple Inland
MillerContainer
InternationalPaper
PCA
Green Bay
JSC/CCA
Temple Inland
GP/GNN30 Others 3 Others St. Joe WestvacoGP/GNN
BoiseCascade
Stone
UnionCamp
Weyerhaeuser
Plant EPlant CPlant BPlant A Plant D
Percentof
Total
1990 Purchases
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
A Target Was Established to Reduce the Supply Chain Cost by 16 to 24 Percent
Targeted savings ranged from $8 to $12 million.Targeted savings ranged from $8 to $12 million.
Box redesign
Volume discount/price reduction
System cost
20
0
5
10
15
• Spec consolidation
• Source reduction (tray substitution)
• High performance linerboard
• Reusable containers
• Suppliers:-Production planning-Shipping logistics-Fewer customer/products
• Buyer:-Packaging line downtime-Receiving inspection-Accounts payable-JIT delivery
• Capacity utilization
• Long-term committed volumes
• Singular opportunity for competitive bid
Percentof
Savings
%
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
Baxter and the Supplier Identified 34 Major Steps in the Supply Chain Process
ForecastMaster
Scheduling(MRP)
PlannedPurchase
Orders
ObtainQuotes
SelectSupplier
InitiatedPurchase
Orders(MRP)
IssuePurchase
Order
OrderReceived
andMatched
OrderInspected
Transfer to
Inventory
Inventory CycleCounted
Held andTracked
asInventory
WorkorderIssued(MRP)
PicklistGenerated
Pickedand Sent
toProduction
Floor
Issuesto
Workorder
Inventory Reconciled
(MRP)
Matched in
AccountsPayable
CheckIssued
Baxter Process Before Redesign:
Current Baxter Process:
CheckedIssued
Issuesto
Workorder
ElectronicMatchingForecast
Sent toProduction
Floor
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
The Value Improvement Process Reduced the Effort to Eight Major Steps
Current Corrugated Supplier Process:
Forecast ReceiveCheck
OrderShipped
Receive“Request
forQuote”
PrepareQuote
ForecastReceiveOrder
Buildto
Inventory
PickOrder
PrepareShippingInvoice
OrderShipped
PrepareInvoice
Matchto
AccountsReceivable
Acct.
SendDocu-ments
toBaxter
ReceiveCheck
Corrugated Supplier Process Before Redesign:
(1)
(1) Does not include internal plant manufacturing systems
ReceivePlant
Request
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
The New Procurement Process Is a Whole New Way of Doing Business
• Selected two suppliers in stategic alliance - they invest and share in program
• Price base on published corrugated plus convesion
• Taken off MRP and inventroy systems
• Decision-making responsibility at the lowest possible level
• Pre-released at supplier and process monitoring/validation to ensure quality
• Electronic process with high IT utilization; matching of purchase order with goods(electronic funds transfer
• Rules established for partnering continuious improvement with revenue sharing
NewOld
• Multiple suppliers: 68 in United States
• Each purchase was priced
• All planning through Forecase and MRP system
• Low employee empowerment—lack of decision- making authority and responsibility at the execution level
• Inspection on each lot at receiving
• Payments to suppliers are made upon receipt of the invoice
• Improvement projects managed seperate at Baxter and suppliers
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XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
Baxter Achieved Many benefits from the CorrugatedStrategic Alliance
Cost Reduction Benefits
• Savings exceede $12 M by year three
• Reduced inventories by $17M
• Reduced accounts payable staff
• Reduced receiving staff
• Streamlined administrative functions—practically eliminated paperwork and indirect overhead
Increased Quality
Supplier Benefits
• Improved profit margins
• Increased plant capacity
• Used program with other customers
• More effective use of capital
• Early involvement in new design
• Joint problem solving
Staff Benefits
• Allowed Buyers to pursue other area
• Plant staff actively involved in programs
• More interesting work
• Quality improved 34 percent
• “0” defects rather that % acceptance
- 10 -
XXXXX / Gemini Innovation Workshop
04/20/23 16:41
Baxter Health Care
Key Lessons Learned
• A Strategic Alliance takes over two years to fully realize:- Requires continuous involvement of management (champions) and employees- Always establish financial/quality targets
• Information technology is not always the answer:- System justifications are critical- Not a solution looking for a problem