J&J’s European Distribution Network

Laurence Coudroy

Supply Chain Integration Director

EMEA, MD&D

2

Table of content

– Johnson & Johnson

– How to get boardroom attention ?

– EMEA distribution strategy

– Conclusion

3

Founded 1886 New Brunswick, New Jersey

in a Former Wallpaper Factory

By three brothers with a dream… that Joseph Lister’s theories about sterilization could save lives

in America’s hospitals

4

World’s Largest Health Care Company

119,000 Employees

250 Operating Companies in 57 Countries

Selling Products in More Than 175 Countries

5

2008 Net Trade Sales : 63,7 bn USD

6

MD&D in EMEA consists of 7 franchises

Total Revenue (2008)

EMEA: 6+ Billion USD

and 15,217 employees

7

1/3 of the world’s health

care spend today and in

the future

Second largest medical

device market in the

world (28% of global)

Influences and shapes

global policies (e.g. WHO,

OECD)

EMEA Medical Devices Industry

A key region in the global market

Source: IMD World, U.S. Patent bureau, WMM (Global Insight), EIU Part of EMEA geographic region

J&J MDD EMEA presence

8

Table of content

– Johnson & Johnson

– How to get boardroom attention ?

– EMEA distribution strategy

– Conclusion

9

Get to the boardroom

Boardroom

Key message

Make it accessible

Stakeholder management

Change management

Be ahead of the game but not too much

Elevator Speech

Solid technical foundation

10

Supply chain excellence overview

Supply

planning

Demand

planning Inventory

management Metrics Master data

management

Customer

service Tech

nic

al

skills

Str

ate

gic

skills

So

ft s

kills

Org

an

izati

on

an

d p

roje

ct

man

ag

em

en

t skills

No one fit all solution

Assess and adapt

11

Table of content

– Johnson & Johnson

– How to get boardroom attention ?

– EMEA distribution strategy

– Conclusion

12

MD&D historical configuration in EMEA

Warehouse

Systems Fra

nc

e

Ge

rma

ny

UK

Sp

ain

Po

rtug

al

Au

stria

Sw

itzerla

nd

Be

lgiu

m

Ne

de

rlan

d

Italy

Sc

an

din

av

ia

Hu

ng

ary

Po

lan

d

Cze

ch

ia

Slo

ve

nia

Gre

ec

e

13 13

MD&D manages a very complex distribution network across Europe.

The potential for operational synergies across the group is strong.

Athens

Rome

Milan

Madrid Lisbon

Garonor

Lyon

Strasbourg

Leeds Gargrave

Livingston

Dilbeek Beerse

Amersfoort

Roden

Norderstedt

Warsaw

Prague

Budapest

Vienna

Lbjuvania

Viskafors

Stockholm

Sulzbach

~300 miles

Zurich

Historical situation of distribution in Europe

Distribution network of 26 distribution sites

11 different systems

Shipping more than 2.1MM orders/yr.

152 different inbound routes

Physical distribution costs above benchmarks

3.7+% of sales (excluding order management)

600 FTE across Europe

Multiple transportation service providers

– 40 different carriers used for inbound transportation

– 40 different carriers used for outbound (customer)

shipping

Lowest service level region

Highest inventory level

14

Distribution Optimization Journey

2005 2006 2007 2008 2009 2010 2011

EMEA Orga change SC Orga changes

15

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

avr-

07

m

ai-

07

ju

in-0

7

juil-0

7

ao

ût-

07

se

pt-

07

o

ct-

07

n

ov-0

7

dé

c-0

7

jan

v-0

8

févr-

08

avr-

08

m

ai-

08

ju

in-0

8

juil-0

8

ao

ût-

08

se

pt-

08

o

ct-

08

n

ov-0

8

dé

c-0

8

1 Year

later

EDC plan

Key project drivers :

Buy-in from all countries and all franchises

Cross-country and cross-franchise harmonization

Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10

EDC Construction

Design Development/set-up Pilot

Mitek

Benelux All

France All

Process

improvement

1600 orders/day

6000 lines/day 7500 orders/day

27000 lines/day

Conveyor system and automatic packing machine

Advanced shipping notice notifying electronically of what is in transit

Development of a Cognos metrics tool

Travelling under quarantine - Shipment of non-released products from the

manufacturing site to the EDC

Other transfers – Volume increase

16 16

Current implementation status

FR DE

UK

GR

IT BNL

AT SI

Iberia HU

PL

CZ

IE

CH

Scandi

17 17

Planned 2011/2012 status

FR DE

UK

GR

IT BNL

AT SI

Iberia HU

PL

CZ

IE

CH

Scandi

18

Distribution optimization cycle

19

Product Characteristics

Pack Density

Valu

e D

en

sity

LOW HIGH

HIGH

LOW

€/M³

Unit/M

³

Inventory Optimization

Handling Optimization Transport/Storage

Optimization

•Pack Density = 1/gross cubic (m³)

•Value Density = Real cost (bx)/gross cubic (m³)

Model Ploos Van Amstel

100

5000

Note: Study boundaries defined by University of Eindhoven (TUE) in the 90th.

Boundaries on value are influenced by the interest rates.

In the 90th rate was 12% => boundary = 3000 €

Now rate in the 3% => boundary = 5000 €

* Source : « Werken met distributielogistiek », Van Goor, Ploos van Amstel,

Ploos van Amstel, 2005, Wolters-Noordhoff

20

Overall MD&D picture

Pack Density

Valu

e D

en

sity

LOW HIGH

HIGH

LOW

€/M³

Unit/M

³

•Pack Density = 1/gross cubic (m³)

•Value Density = Real cost (bx)/gross cubic (m³)

100

5000

Note: Study boundaries defined by University of Eindhoven (TUE) in the 90th.

Boundaries on value are influenced by the interest rates.

In the 90th rate was 12% => boundary = 3000 €

Now rate in the 3% => boundary = 5000 €

* Source : « Werken met distributielogistiek », Van Goor, Ploos van Amstel,

Ploos van Amstel, 2005, Wolters-Noordhoff

21

Inventory Management Scope

Inventory monitoring

Planning

&

Replenishment

Inventory entitlement

Network design &

Optimization Inventory positioning

Network design (warehouses /lanes /..)

Definition per code/market:

•Direct distribution next day (DD24)

•Direct distribution with 48H (DD48)

•Distribution to order (DTO)

•Local distribution with stock (MTS)

•Make to order code for the region

(MTO)

•Based on a set of constraints

•Transport costs

•Product costs

•Fixed and variable

warehouse costs….

•MTO/ MTS/ DTO

•Segmentation

•SS calculation:

•Normal distribution

•Demand variability

•Peak of sales

•Non-normal distribution

•Manage product life cycle

•Flatten demand peak

•Daily forecasting for distribution

•SS calculation:

•Other distribution

•Forecast error

•Aggregated /detailed view

•Replenishment frequency

•Minimum order quantity

•Lead-time variability

•Service level simulation

•Actual inventory visibility

•All level views

•Exception based analysis

In original scope

Interesting Additions

Future

Legend :

22

Table of content

– Johnson & Johnson

– How to get boardroom attention ?

– EMEA distribution strategy

– Conclusion

23

Conclusion

Rationalization

Robust Network

Inventory optimization

Optimization Tools •Creating the capabilities

•Change management

•Opportunistic approach

•Education

•Assess the organization readiness

•Consider the implementation timeline constraints