AngioDynamics aims to improve patient care through leading-edge medical device innovation. Company leaders are committed to providing safe and effective products and services, continuous improvement, and maintaining effective quality management and compliance with global regulatory requirements.
Not long ago, decision-makers at the Albany, New York-headquartered organization identified about $80 million of excessive inventory. This caused significant cashflow challenges, which were exacerbated by the need to rent additional space and hire more material handlers. To address these issues, AngioDynamics supply chain professionals aimed to achieve the following goals:
- Reduce inventory by at least $10 million.
- Increase service levels.
- Diminish overhead spending.
- Develop an effective product life cycle management program.
- Improve forecast accuracy.
- Lower safety stock levels.
Better understand enterprise resources planning (ERP) challenges in order to reduce or eliminate the use of spreadsheets, queries and macros.
The APICS body of knowledge played a key role in this transformation, particularly with regards to engaging cross-functional team members. “As a company, we felt it was important that we provide employees with consistent training on the supply chain process,” says Barb Baldwin, CPIM, senior manager of supply chain. “We selected 10 people to represent purchasing, planning, distribution, warehouse and management. With this cross-functional team, we were able to have constructive discussions on some common practices and their downstream effects.”
During these dialogues, APICS education and concepts helped reveal the fact that organizational silos were causing more problems than AngioDynamics leaders had originally anticipated. Moreover, multiple managers and communication channels resulted in conflicting priorities and decisions that often had a negative impact on other areas of the business.
To break down barriers, purchasing and planning personnel were relocated to a common area, which encouraged communication, created a sense of teamwork and increased effectiveness with support groups such as engineering and quality. In addition, by consolidating the supply chain team under one manager, communication and goals became much more consistent.
“Elimination of organizational silos struck me during the APICS course,” says Katie Authier, a senior buyer. “Purchasing, planning, quality assurance, receiving, warehouse and engineering now work in sync, on a daily basis, with more of a team feeling.”
Baldwin adds that, to lower inventories and increase free cash flow, enhanced forecast accuracy also was essential. “This allowed us to lower safety stocks and give us more confidence that the requirements we were seeing adequately represented demand,” she says. “To do this, we needed to improve the [sales and operations planning] (S&OP) process as well as the very manual and error-prone process used to load the forecast into our ERP system.”
AngioDynamics began with a forecast analysis, including tracking results by both product family and marketing manager. Then, the organization expanded its participant list at S&OP meetings to include representatives from finance, domestic and international sales and marketing, regulatory, and operations. “This much larger group provided insight to promotions, registration issues and any internal capacity constraints,” Baldwin explains. “Including finance also helped validate that our forecast was in line with budget projections.”
Meanwhile, information technology professionals improved the forecast-loading process, which helped minimize errors; cut the amount of time required to prepare and manipulate data into a workable format; and enabled employees to concentrate on more proactive tools, such as providing sales and marketing with a dashboard that forecasts down to the individual stockkeeping unit level and can be filtered by product family or marketing manager. These changes brought about a 20 percent improvement in forecast accuracy over a 12-month period. “We continue to advance,” Baldwin adds, “and are now near a best-in-class level of 94 percent.”
Perhaps the most important discovery was that ERP system implementation had been rushed, which was causing the tool to generate false demand. In response, AngioDynamics team members validated ERP using test instances, with optimal parameters identified during kaizens. Then, they executed changes in the live production system. These advancements made it possible to react to real signals and exceptions by de-expediting and canceling excess material orders.
“Because we had direct classroom learning with our entire supply chain team, we were able to understand the total impact of problems along the entire supply chain,” says David Painter, a senior planner. “Mapping problems and talking about resolutions within a group forum ensured that the resolution of an issue within one area wouldn’t create another problem downstream. Using process mapping in kaizen events helped draw attention to inefficiencies and limitations.”
In the end, the business reduced overhead by 33 percent, achieved a backorder goal of less than one-quarter-day of sales and reached near-99-percent service levels. Buyers and planners now have greater confidence in the ERP system and are thrilled to have no more spreadsheets to deal with. Perhaps most importantly, AngioDynamics has decreased inventory levels by 25 percent.
“A 25 percent reduction in inventory carrying value over the past year-and-a-half is outstanding progress,” says Paul Laniewski, director of finance-manufacturing/research and development at AngioDynamics. “This nearly $18 million in positive free cash flow has allowed us to pursue strategic opportunities to grow the company.”
AngioDynamics supply chain decision-makers are highly focused on sustaining these results and keeping the process in control. To that end, they established
- weekly inventory reviews
- effective tracking and trending of raw material space and spend
- evaluations of system parameters
- monthly safety stock and slow-moving-good assessments and updates
- monthly forecast accuracy appraisals
- monthly S&OP meetings that involve global, cross-functional teams to align all action items.
“AngioDynamics sees sustainable and strategic supply chain not as an initiative, but as a core tenant to how we do business every day,” says Barbara Kucharczyk, senior vice president of global operations, adding that these actions have resulted in a strong balance sheet, which is freeing up cashflow and enabling the organization to invest in valuable new product development, clinical studies, and monitoring and assessment activities.
While the supply chain leaders expected the company to be more efficient with the APICS education, Baldwin says they hadn’t realized just how much of an impact it would have: “The leaner we became, the more efficient we became. We have a smaller staff today, but it is much more versatile and effective than the much larger staff we had just two years ago.”