Redefining a Life Sciences Distribution Network using Supply Chain Design

By Paul Huppertz, partner at Argon & Co. How can you avoid making strategic supply chain decisions you regret tomorrow? Create a digital supply chain model and evaluate the trade-offs and outcomes of potential changes before you invest a dime. Argon, a global consulting firm, recently undertook a project to help a life sciences client redefine their distribution strategy to adapt to manufacturing changes, reduce costs, and enhance customer service. In this article I will explain how we approached the project and why we selected Optilogic Cosmic Frog as the supply chain design solution.

Redefining a life sciences supply chain

Our client, a global leader in drug delivery, consumer product dispensing, and active material science solutions, recognized the need to revamp its supply chain to align with recent changes in its manufacturing footprint. The company has a rich history of manufacturing and distributing products to customers through distribution centers located near their plants. However, with recent shifts in their manufacturing locations, it became imperative to reassess and reconfigure their finished goods supply chain. They also contemplated the introduction of "mixing centers" as a potential solution to add value to their business. Primary challenges:

• Lack of understanding of the impact of manufacturing changes on the supply chain

• Escalating distribution costs

• Difficulty maintaining or improving service levels for a diverse customer base

How we approached the problem using supply chain design

We used Cosmic Frog to:

• Define the new baseline cost: The first step was to understand the cost implications of the production changes. We worked closely with the client to define a new baseline cost structure that accounted for the alterations in manufacturing locations.

• Recommend options for distribution network optimization: We provided our client with numerous options for a finished goods distribution network that would minimize total cost while simultaneously improving service to customers.

• Quantify cost differences: One of the key elements of our work was quantifying the cost differences between the traditional direct distribution approach and the alternative mixing center model.

• Develop a supply chain network model: To evaluate these options comprehensively, we developed a network model. This model allowed us to conduct sensitivity analyses to validate our recommendations and ensure their robustness.

• Recommend a new supply chain network: After rigorous analysis, we made recommendations for a new network, specifying the product segments to which these recommendations applied. We also defined the expected cost and service performance improvements.

Results achieved

Our collaboration with our client yielded remarkable results that set them on the path to a more efficient and adaptable supply chain:

• New network design: We successfully developed a new network design that aligned distribution facilities more effectively with their plant sources, ensuring a more streamlined and cost-efficient supply chain.

• Regional distribution centers: We recommended the establishment of regional distribution centers (DCs) strategically placed to maintain or enhance service levels for most customers.

• Optimized shipping decisions: Through our analysis, we determined the optimal timing for shipping from either a DC near the plant or a regional DC, based on factors like customer demand and lead times.

• Landed cost analysis: We quantified the landed cost for products at each DC, providing valuable input for creating location-specific pricing strategies.

• Refined business case: Our recommendations and data-driven insights contributed to the development of a refined business case, supporting the proposed changes with solid evidence.

Why did Argon choose Cosmic Frog?

Argon needed a new tool for supply chain design. Our previous modeling solution had grown increasingly costly and difficult to work with. We evaluated many alternative tools and selected Cosmic Frog because:

• Cosmic Frog offers a free trial account, making it remarkably simple to test the tool

• The solution offers a full range of modeling algorithms and fast, scalable cloud computing

• We have long-standing relationships with several members of the Optilogic team and they have demonstrated exceptional supply chain design knowledge and experience

Points to remember

By redefining their distribution strategy, our client was able to adapt to manufacturing changes, reduce costs, and enhance customer service, positioning themselves for continued success in the life sciences industry. This project exemplifies Argon’s commitment to helping clients navigate transformations and achieve tangible, impactful results and to the extensive capabilities of Cosmic Frog design technology. Paul Huppertz is a partner at Argon & Co, based in the Atlanta office. He has extensive experience in operations management, network design and optimization, strategic planning, and logistics solution design/implementation. Paul has helped a wide range of clients transform their operations and realize tangible benefits.