Publication Date
Authored by
Lukasz Ploszczuk, Rebecca Nolan
Advisor(s): Matthias Winkenbach
Topic(s) Covered:
  • Inventory
  • Strategy

Nowadays end customers and shareholders are setting high expectations, putting pressure on companies to do their best not only to meet their needs but also deliver shareholder value at the same time. In order to be both competitive and customer-centric, firms are increasingly focused on their supply chains as one of the areas for future improvements. Some industries (e.g., rare medicines) are even more complex, as demand is stable over time, so the only way to increase profitability is to constantly focus on cost reduction. In order to be more competitive and meet customer demand, our sponsoring company must ensure that its supply chain is agile enough to provide its customers with life-saving medicines quickly and without delays. These might be achieved by switching to late product customization at a third party-logistics-provider's location. The goal of the model is to provide the proper tools and information necessary for our sponsoring company to use when evaluating whether to put in place a postponement strategy. Thus, in order to capture the entire end-to-end changes in the supply chain, we broke it out into three separate models, including a materials model, “naked vials” (unlabeled) model, and finished goods model. This allowed us to process the information in separate parts and capture all costs at the level they were acquired. A comparison of the base scenario to different customization scenarios is also included in order to understand potential cost benefits. Based on the sensitivity analysis, it makes sense for the company to implement a customization strategy for almost all analyzed scenarios, as in 84% of cases the company can deliver cost savings. Overall, this model reduced the information gap within the sponsoring company by providing them with the proper tools needed not only to evaluate their current inventory strategy but also as a tool to use when negotiating with their third-party providers.

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