Establishing an inventory management process to meet high customer service levels in a vaccines organization

Abstract

Inventory management is a complex aspect of Supply Chain Management that is frequently discussed and debated due to the fact that it has a high impact on customer satisfaction as well as financial performance. This thesis addresses how an inventory management policy was developed and established in a vaccines company where customer service is the top priority and product quantities are high. The work in this thesis is from a six month internship at Novartis Vaccines and Diagnostics in Marburg, Germany. Project work focused on three inventory management questions: What are the right inventory targets for each product? What is the process to manage, monitor and maintain the inventory targets? How should the inventory targets be measured and controlled? The results from this project show that an effective way to set inventory targets is through the combination of analytical inventory calculations and the strategic analysis of the business environment. A detailed inventory model was built in Microsoft Excel that uses common inventory formulas and considers critical product attributes such as shelf-life, process lead times, batch sizing, replenishment frequency and capacity constraints to calculate the inventory targets. The model results are part of the larger inventory management policy that was created and incorporated into the Supply Chain group's Sales & Operations Planning process. The complete inventory management policy addresses the details of regularly setting inventory targets, how they should be maintained and tracked and defines clear roles and responsibilities.