Hope is Not an S&OP Strategy: An Interview with Jan Aggerbeck, CEO of icon-scm
Jan Aggerbeck
Project: Interview with Jan Aggerbeck,
CEO of icon-scm

Interview at BSMA Conference, Oct 2012
Interviewer: Lee Stein, Editor, BSMA Newsletter.

Lee: You opened your presentation at the BioSupply Chain Academy Conference by talking about hope. Could you expand on that?

Jan: Yes. Many companies, even major Fortune 500 companies developed their S&OP process as much as 20 years ago or more. In many cases, their process still consists of multiple, complex spreadsheets based on manual input and grueling reviews by the data analysts responsible for each segment of the business. These organizations can only hope that their spreadsheet data is correct or else they experience business disruptions. Forecast errors, either on the supply or revenue side can result from mis-entered data in the spreadsheet, errors in one or more formulas or both. The impact of errors can be harsh ranging from failure to hit revenue and other financial targets to loss of one or more customers. The point of an S&OP process is to quantify the sales and operations of a business to provide consistent, automated reporting that supports data-driven decision making. The alternative is senior managers operating by gut instincts or seat of the pants forecasting, a certain prescription for failure.

Lee: If the process is data-driven, IT must be crucial to the process, true?

Jan: The role of IT departments has expanded from being outgrowths of the Finance Department years ago to emerging as a crucial and strategic role in the company. The role of IT now is to automate and integrate data from a single point of entry. Ideally, even processes like customer orders operate automatically because the possibility of errors from manual data entry are so high. This applies as well to analysts attempting to insert numbers into a monthly S&OP forecast spreadsheet as well.

Lee: The data itself has changed too, hasn’t it?

Jan: Of course. As our computer-driven culture has continued to multiply, especially now with mobile devices, data intensity has risen dramatically. It’s not just the volume of data, it’s also the complexity and richness of data. In biotech, that includes the massive amounts of new genomic and proteomic and any other “-omics” data in biotech. Some observers have noted that the genomics data alone is scaling exponentially, though that doesn’t usually impact the S&OP process.

Lee: The challenge of today’s data complexity can be mind-boggling. You mentioned something about the impact of one decision per order for one customer’s change. Can you expand on that?

Jan: Yes. During an evaluation at one of our clients, we learned, based on a supply plan of one decision per order, when that customer changed the order, it resulted in 318,200 production decisions, 228,073 external procurement decisions, and 244,708 primary demand decisions. In total, one customer change per order resulted in a total of 790,981 decisions. This highlights the complexity of today’s global supply chains and the need to automate decision processes as much as possible.

Lee: In your presentation, you mentioned that the biopharma industry lags other technology industries by as much as ten years in their S&OP processes. Can you share more about that?

Jan: Consumer electronics manufacturers, for instance, need to monitor demand and balance supply and manufacturing capability almost in dynamic real time. A hot product like an iPhone or Samsung Galaxy for instance can suddenly have a demand jump into the millions of units in a matter of days. We’ve seen for instance that a major Korean electronics company prepares updated global S&OP reports three times per day. Here at the BSMA conference, presenters seem very pleased if their company is achieving one constrained S&OP report per month or at best, once per week.

Lee: By comparison to other industries, does this lagging implementation of advanced S&OP processes show up in any industry measures?

Jan: A fairly recent study found that the pharmaceutical industry dramatically lagged other industries such as automotive and high tech. The glaring statistics that bring home the point relate to measures of working capital. The measure for inventory, Days of Inventory Outstanding, means, how many days of inventory does a company maintain as a percentage of the Cost of Goods Sold. Manufacturers in the networking and communications equipment industry run 48 days while pharmaceutical companies run 172 days. It’s a similar story for Days Sales Outstanding – the pharmaceutical industry lags other industries by as much as 2:1.

Lee: In your opinion, what’s causing the lagging performance of biopharma companies?

Jan: Even though S&OP has been around some time and apparently been successfully implemented in many major enterprises, supply chain executives still report that S&OP is a problematic area. With the advance of globalization, demand forecasting becomes more challenging. Outsourcing results in fragmented supply chains that span the globe. These outsourced suppliers in themselves become a potential source for supply disruption, especially if they are a single source vendor. In fact, it’s not unusual in the extremely complex world of biopharma supply chains to find that single-source vendors multiply down through the many tiers of suppliers. So S&OP needs to involve these outsourced vendors as well to truly be effective.

The S&OP process needs to account for the production constraints of these vendors as well as internal production. In addition, many companies haven’t truly integrated S&OP as a crucial strategic process with strong C-suite commitment. Without that senior level buy-in, even the most well designed S&OP processes are doomed.

Lee: So what’s the key?

Jan: A truly living S&OP solution reaches across functions including sales, production, customer service, and finance. The process must dynamically adapt to changes in the nearly perpetual process of replanning across all of these functions. A fully synchronized process means on the spot, near-real-time reporting crucial to provide data-driven decision support tools to senior managers.

About icon-scm: The company was founded in 1992 as a spin-off from the University of Karlsruhe, Germany and now has offices in Europe, the US, and Asia.

More Questions? Reach Jan Aggerbeck:


In order to assist the biopharma industry, BSMA is pleased to announce an initiative to meet the challenges of supplying products, as well as sourcing ingredients, finished products and services from emerging markets.

Announcing the initiative, Devendra Mishra, the Executive Director of BSMA, stated, “Shankar Suryanarayanan, the former Head of India Operations at Takeda Pharmaceutical Company, has been appointed as the Vice President of Emerging Markets special interest group. The mission of this group is to establish a biopharma industry information and knowledge exchange for supply and sourcing of products and services, governmental regulations, best practices and market entry strategies. Our strategic intent is to empower and build relationships between professionals, companies and agencies.”

Shankar Suryanarayanan is a consultant specializing in strategy development and execution in the areas of global sourcing, manufacturing and supply chain. He has done business on six continents and lived in USA, Switzerland, Germany, Singapore and India while working for Takeda, Roche, Novartis, Emerson Electric and Monitor Group.
Most recently, at Takeda, Shankar worked with colleagues in IT, R&D and manufacturing to develop and implement five year road maps to leverage India’s vast talent pool in these areas. He also led Takeda’s efforts to enter the rapidly growing but highly competitive Indian pharmaceutical market.
1. What is driving the growth of biopharma in emerging markets like China, India, Brazil and Russia?

After two to three decades of rapid economic growth, emerging markets now have a critical mass of middle and high income consumers. These consumers, their employers and governments are spending more on healthcare than ever before. In most of the emerging markets, healthcare affordability is outstripping access to quality healthcare. The good news is that increasing healthcare affordability is funding creative solutions from both public and private sectors to expand healthcare accessibility to broader geographic and socio-economic segments. With 85% of the global population living in emerging countries, these healthcare markets will continue to grow as long as their economic growth is sustained.

2. You have served major biopharma companies in both developed and emerging markets. How are emerging markets different? What will it take to succeed in these markets?

Each emerging market is different in terms of regulatory requirements, healthcare delivery, insurance penetration, disease areas etc. In addition to the top 10 global companies, almost always there are well established local generic biopharma competitors. Pricing is a fraction of developed markets and governments put pressure on biopharma companies to improve local capabilities in manufacturing, research and development.

Although there is a lot of euphoria about the emerging market opportunity, companies have to approach emerging markets with a long term perspective and a clean sheet of paper. Based on a thorough analysis of the market opportunity, competition and internal capabilities, companies should develop a laser sharp focus on which countries and more importantly, which market segments within each country to play in. For the chosen therapeutic areas, it would also be a good idea to consider configuring the global value chain such that it leverages emerging market opportunities and capabilities e.g. conducting a significant portion of R&D and manufacturing for diabetes in China and India. This will result in lower costs, faster regulatory approvals and reputation as a trusted ‘go to’ company within the healthcare community in these emerging markets which are considered the ‘diabetes capitals of the world’.

3. Members of BSMA are responsible for the global supply chain within their organizations. Once we cross the initial hurdles of entering an emerging market, what can we expect in the supply chain landscape, and how can we overcome the challenges?

Some of the supply chain challenges currently being faced by the biopharma industry in emerging markets are:

  • Significantly lower selling prices than developed markets resulting in lower product target costs
  • Wide performance range in quality, cGMP, GDP and reliability of supplier base
  • Highly fragmented, multi-tier distribution system with limited supply chain visibility
  • Vast geographies with multiple segments e.g. urban vs. rural, coastal vs. inland
  • Limited infrastructure in transportation, warehousing, and distribution
  • Higher incidence of counterfeits

On top of limited capabilities, as emerging markets grow rapidly, the supply chain is facing additional demands:

  • Volumes are doubling every 3 to 5 years
  • Sales and Marketing efforts are targeting rural, more difficult to reach segments
  • Biotech products are being launched which require reliable cold chain distribution infrastructure

Fortunately, there are several potential solutions to overcome the supply chain challenges in emerging markets.
Some successful practices are:

  • Careful portfolio selection and product design based on detailed analysis of regulatory requirements, competition, target cost and in-country capabilities
  • Importing only key ingredients and maximizing local value add to reduce cost of goods
  • Partnering with established multinational and local biopharma companies to leverage existing in-country capabilities
  • Segmenting the market into manageable and attractive regions to prioritize establishment of supply chain infrastructure and commercial presence
  • Supplying directly on demand rather than pushing product through multi-tier distribution channel e.g. shipping expensive biotech drugs directly to hospitals, using the post system for delivery of OTC medicines to rural markets
  • Using life cycle supply chain planning for on-market and pipeline products
  • Designing global manufacturing networks in a way that creates capability and capacity in important emerging markets
  • Learning from the success of consumer goods companies that have very effective supply chains
  • Using mobile telephony which is available widely in most emerging markets

It is really important for supply chain professionals to play a leadership role during development of market entry and product launch strategies. This will help develop an integrated market entry strategy that will overcome local limitations and also ensure that the supply chain can support the business’ evolution over time. As an example, choosing to focus on oncology which is treated predominantly by hospitals in the medium size to larger cities, versus anti-infectives which have relatively higher demand in rural areas, would have very different implications for the supply chain.

4. As BSMA’s Vice President, Emerging Markets, what are the deliverables you would like to aim for?

I would like to create a forum for sharing information about the challenges and successes in emerging markets. Given the background and interests of BSMA members, it would be best to focus initially on two areas:

How to successfully source raw materials, finished goods and manufacturing services from emerging markets while mitigating the risks
End to end supply chain strategy for making products available in emerging markets
The annual conference in October 2012 would be an excellent opportunity to share our learnings with the entire membership.

5. Besides sales, what other opportunities do emerging markets represent to biopharma companies?

Besides sales, there are clinical development opportunities in several emerging countries. A few countries like China and India also offer significant opportunities in areas like R&D, manufacturing, IT and business process outsourcing.

6. You made significant inroads in India as the Head of Operations for Japan’s number one biopharma company. What did you learn from the experience?

Our mission was to leverage India’s vast patient pool and talent pool for revenue growth as well as improve profits. After a thorough evaluation of India’s capabilities in the areas of R&D, Manufacturing, IT and business process delivery, we are now implementing five year road maps in these areas for maximum impact. We are also implementing our strategy to enter the local Indian market.

In terms of lessons learnt to ensure success in emerging markets, as I reflect back on the process and recall feedback from colleagues, I would recommend:

  • Creating a lot of excitement within the organization with examples of competitors and other industries that have benefitted significantly by leveraging emerging market opportunities
  • Enlisting support from the highest levels of the organization
  • Gaining support of internal subject matter experts from all functional areas who can objectively evaluate and lay the groundwork to leverage opportunities
  • Engaging in-country trusted and knowledgeable advisors who can help avoid potential pitfalls
  • Choosing in-country business partners who share similar cultural and ethical values besides technical competence
  • Creating a well-defined mechanism for communications, governance and escalation for internal stakeholders as well as external business partners

The key is to proactively ensure success of early pilot projects. Once emerging markets start contributing positively to everyone’s personal and business objectives, the organization will wholeheartedly embrace the opportunity. Until then, it is important to stay close and ensure that momentum is maintained.

7. The larger biopharma companies have successfully globalized like the hi-tech and consumer packaged industries. What are the opportunities for small and mid-size firms?

Going global is a must for all organizations. Besides business reasons, an opportunity to improve the lives of 5 billion people is far too compelling. However, companies have to be prudent in terms of the sequence of activities they choose for globalization. The sequence should be driven by business priorities and where companies are in their own evolution in terms of size, portfolio and capabilities.

8. What kind of support and queries do you invite from readers of this interview to further the initiative?

The emerging market initiative of BSMA can succeed only with the support of members. I welcome input on supply chain challenges faced and solutions implemented successfully in leading emerging markets like Brazil, Russia, India, China, Mexico, Turkey and the Middle East. It would also help if members share their expectations of what would provide them the most value from this initiative. I can be reached at

March 21, 2012 Webinar
Supplier Lean: A Successful Supplier Relations Management Strategy


Marc Lampron, Senior Director – Procurement, Genentech, Global Procurement and Supply Leader, Bio-Rad Laboratories


The “Supplier Lean” approach has been proven to be a valuable focus area within an overall Supplier Relationship Management (SRM) program. It enables Companies to collaboratively engage Suppliers to leverage their expertise to drive out waste from current practices, thereby improving productivity and achieving year-over-year reductions. Learn how this approach was piloted and the concept proven for Facilities Management Services at a manufacturing site.

About Our Speaker:

Marc Lampron joined Genentech’s Procurement team in April, 2008 and is a member of their Procurement Senior Leadership Team. He has been responsible for sourcing and procurement for their GMP direct materials, facilities and business operations, and CAPEX. More recently, Marc has taken on global procurement responsibility for all of Roche’s biologics drug substance raw materials. Prior to joining Genentech, Marc was Amgen’s Executive Director – Strategic Sourcing (Facilities and Capital). Marc also worked for several years at Merck & Co., holding positions of increased responsibility in procurement and CAPEX project management. Marc holds a BS from Queen’s University, Ontario (Canada).