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EMS implements ACCERA’s S&OP solution with Preactor 400 APS and GMPS
June 2014
EMS has been the leader in the pharmaceutical sector in Brazil for the last seven consecutive years. It was founded 49 years ago, using 100% Brazilian capital. EMS has two functional industrial complexes, one located on “São Bernardo do Campo” and another one in “Hortolândia”, both in São Paulo State. A third complex is being completed in “Manaus”, in Amazonas State.

EMS is currently Brazil’s biggest pharmaceutical group in both volume of sales and revenue and the second biggest pharmaceutical group in Latin America, according to the IMS Health Institute. The group manages the laboratories Legran, EMS Pharma and Germed, along with 12 different business units that, together, generate an income of greater than U$ 1.3 billion.

EMS commercializes products in practically every field in Medicine, through the production and sales of more than 2500 products such as Medical prescriptions, OTC (over the counter) products, generic medications, brand-name drugs and products specific for hospitals. Generic medications deserve a highlight, for EMS was the first Brazilian laboratory to produce them, starting in 2000. In 2005, it was exporting its products to Europe and in 2011 it was providing to the Brazilian market generic versions of important products that had their patent period expired. Pioneering and a lot of investment in technology have ensured EMS a special place in the Market.

There are many differences between pharmaceutical products on the market, especially generic medications. Companies in this market face strong competition over shelf occupation in the drugstores that sell their products. The generic medication market and this competitive environment contribute to improved medicine accessibility to the population, reducing costs to public health agencies.

On the other hand, public procedures have strict clauses for companies that fail to supply product to the agreed delivery dates. Failure may also mean prohibitions in terms of participation in new public procedures, which makes the lack of products at the moment of delivery (backorder) an aspect of direct financial impact. Therefore, the sales and operation planning process precision is a key factor to business success.

In this context, an average growth (in value) of 19% per year in the last 17 years has brought to EMS, along with profit and a leading position in the Brazilian market, many operational impacts, such as higher finished products, raw materials and package stocks, higher working capital and even more complexity in logistics, among other aspects.

Along with this increased operational complexity, sales and operations method of planning needed attention. Supplies, sales and production plans were generated manually on spreadsheets that used a single logic for all 2500 items, being defined provisionally by the commercial team, not using specialized systems to support their processes.

This lack of systems in sales and production’s planning process contributed to miscommunication between PCP and commercial areas. Additionally, metrics and commercial incentives were not aligned with the company’s global objectives and not connected to the variable compensation of its executives. This generated imbalance between expectations set by the commercial team and the production master plan managed by the PCP team. It was not uncommon to face backorders on financially important products, while stocks of less important items were high and near expiration dates, which meant that they would need to be discarded.

In this scenario of constant growth and new challenges, EMS perceived that it was time to invest in a solution capable of supporting all of its sales and operation process, from sales planning to advanced scheduling in all production units. In order to achieve that, the company gathered a qualified committee to research the market for a solution that could meet their expectations. The acquisition of SAP’s APO module was practically concluded, however, a more detailed analysis of the available options in the market have led EMS to hire Accera Supply Chain Solutions to implement an integrated solution for their process, remodeling it from the collaborative demand planning brought by ACCERA S&OP to the solid advanced planning and scheduling solutions brought by both Preactor 400 GMPS and Preactor 400 APS.

With a single project scope, delivered 100% on time, meeting expectations and needs of 4 companies, 12 business units, 8 factories and more than 70 users, the technology used in ACCERA S&OP provides statistical forecasts with more than 13 different models of demand. It shows sales history and data comparisons in a single webpage, making it possible to completely control and ensure collaboration during all sales planning processes, along with reports of the plan’s indicators and values.

The sales plan resulted in ACCERA S&OP being integrated with Preactor 400 GMPS, a process repeated monthly in order to generate feasible and revised production plans for medium and long terms, while considering the capacity limitations of the factories. In order to do that, product routes and production times are loaded automatically in Preactor with a data connector developed jointly between ACCERA and Preactor Software India.

The medium term plan generated by Preactor 400 GMPS is oriented to address curves of profitability, sales volume, production complexity and variable stock cover policies, allowing anticipation of supplies plan, which is based on the MRP and the direct alignment between commercial and production teams. At the end of this process, a consensus meeting is made between them to choose the most suitable scenario, considering the whole company’s objectives.

After the consensus meeting, Preactor GMPS loads the operation plan to SAP’s MRP module, where production orders are generated. According to their respective production routes, they are distributed among the 8 Preactor 400 APS configurations developed. Orders are then sequenced, inside short-term periods, which is considered as 30 production days in pharmaceutics industries.

Communication between these configurations and the use of custom material consumption rules guarantees perfect synchronization in the factories, allowing proper consumption of bulk products (semi-finished items), correct allocation to production orders and efficient bottling and packaging of other factories. This has raised visibility and control of production times and transportation processes by the PCP, allowing further evolution on WIP (work in process) analysis and better stock balances during all of the process.

Preactor’s GMPS solution also integrates its data with other Preactor APS configurations, providing attribute ranks of profitability, sales volume (in both units and monetary value) and critical stock values curves. This data, together with policies defined during the planning process, is used in custom calculations to determine which items are critical in terms of supply and thus affecting advanced planning and scheduling of production lines.

Sequencing priorities in Preactor 400 APS configurations are prioritized by making use of the weight configurator, which uses critical levels defined by the described curve rankings, ensuring scheduling with high aggregated value and totally aligned with the strategical objectives of the company (reducing backorders and supply deficiencies) thus maximizing financial return.

The implementation of the 3 tools on the sales and planning process generated positive results in a short amount of time. The first process to generate positive results was the demand forecast, which had its accuracy improved by 30%.

The tight relationship between demand forecast and operations planning promoted improvements in information quality and precision of the process as a whole, which has guaranteed that factory production is exactly what has been planned in consensus between all involved areas. The advanced scheduling of the 8 Preactor Configurations, together with stock curve analysis, made it possible to achieve better objectivity in PCP’s processes, improving resources and product balance. Therefore, backorders were reduced by 13.7% during these initial months of operation which met with the company’s expectations regarding the project.

Integration among different planning levels and the scheduling visibility reduces reprogramming quantities, reducing the usually high stress levels between sales and operation teams. The use of automated processes reduced the time invested in the creation and review of the Sales and Operations Plan by 75%, from the initial amount of time of 2 days to 6 hours to develop an Operation Plan. The time saved in operational activities is directly converted to more detailed and more precise analysis about possible scenarios, which makes this solution and processes progressively more strategic to the company.

José Medeiros is Demand Planning Director at EMS. “The visibility provided to us by Preactor has meant that a process that was once operational has become strategic”.

The current expectation revolves around the completion of Manaus’ factory, which will be fully prepared to work in this new model of Sales and Operations Planning, totally integrated with the other business units.