Life Sciences Industry Inventory Optimization Health Check
Over the last 100 years the average lifespan has doubled from 35 years to more than 70 years mostly due to advances in medicine and medical devices. In fact, experts predict that babies being born in developed countries today could have an average life expectancy approaching 100 years. Not many will argue against the benefits of advanced healthcare, but many believe we can get there at a lower cost.
One potential way to reduce costs without lowering the quality of healthcare is to optimize how much inventory is required and where that inventory is positioned. Advances in medical devices tend to make existing devices obsolete at a rapid pace. Pharmaceuticals usually have a short shelf life. Minimizing the amount of inventory required to provide advanced healthcare reduces both working capital and obsolescence.
A very powerful, yet under-utilized, tool to optimize all types of inventory across the extended life sciences supply chain is Multi-Echelon Inventory Optimization (MEIO). Through the adoption of MEIO some life sciences companies have been able to reduce inventory levels by 30% or more while still meeting customer requirements. Sounds good, right. However, is your company ready to embrace MEIO? Answering the following, four “self-check” questions will help you determine whether MEIO could be right for your company.
- How much excess inventory do we have and where is it?You have to understand your current state before determining whether you can improve. However, uncovering the types and amounts of excel inventory is no easy task. One of the early benefits of implementing MEIO is the determination of where the efficient inventory frontier lies for your company and how far you may be currently operating from that frontier.
- Can we safely reduce inventory?
Is it possible to optimize inventory considering all your company’s restraints and complexity involved in bringing products to market and maintaining a high-level of customer support. Look for examples of success using MEIO and determine whether the same or similar processes and technology could be applied at your company.
- Can we reduce inventory by applying science to inventory policies?
Are you currently managing using simple “rule of thumb” policies or basic inventory safety stock and replenishment rules? These simple procedures will often lead to having too much of some items and too little of others at the same time. Spikes in demand cause ripple effects along the supply chain commonly referred to as “The Bullwhip Effect”. MEIO’s proven mathematical algorithms outperform human judgment in managing demand uncertainty over time.
- Is your organization ready to embrace best practices and advanced solutions?Solid executive-level support is required to ensure a successful deployment of MEIO. Planners must be ready able to understand MEIO concepts and willing to use the output of MEIO to improve supply chain operations. How a MEIO recommendation is reached must be transparent and easily validated by users or they simply won’t use them.
Multi-Echelon Inventory Optimization (MEIO) is a proven method for life sciences companies to reduce costs while maintaining or even improving the availability of products and the quality of the healthcare system. The health of your inventory capabilities can be determined through a simple 4 questions “self-check” or examination.
Logility’s industry leading MEIO solution has helped companies revolutionize their ability to lower costs and improve customer service in the challenging, complex and ever changing life sciences industry. Is your company ready to embrace MEIO? Let Logility help you determine your company’s MEIO opportunity. Read Logility’s whitepaper, “Inventory Optimization, Self-Check for Life Sciences” to learn more.