Todays Strategy and Execution Challenges for a CIO

Date:   Tuesday , July 31, 2012

Dr. Reddy's Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy's offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars, differentiated formulations and NCEs.

Today's IT scenario is completely different from what it used to be in the year 2002 or 1992. The current expectation from board level to shop floor level is "more for less". IT dept is being pushed hard for Faster, Better, Cheaper, solutions delivery department rather than just support business applications. The current demand from shop floor is to maximize automation and bring clear visibility to top floor. Being this demand coming from available matured technology and the matured generation with technology. Untill recently the CIO’s journey and expectation was to give system generated P & L and may be to large extend system supported business consolidation if the organization operates from multiple geographies. This IT goal is much beyond the accomplishment. The board expectation is to have the entire business visibility and shop floor demand is to increase the productivity with less efforts. This is where the focus of ongoing prioritization, planning, visibility and control of business processes, increasing the speed and flexibility with which organizations can manage their business process activities and decision making is the changing trend and always a moving target for IT.

Let me share my recent experience, where alignment of IT to the business need's situation has come to us when we were informed that business wanted to change the tracks and run the business on TOC (Theory of Constraints) principle. The first thought that came to our mind was, there would not be any IT role with this decision. The entire business is running on ERP platform and the process was aligned to suit every situation. Finally when the business process was changed to align with TOC, the changes in supply chain and manufacturing were dramatic. These changes forced us to create new Service Oriented Architect and forced us to add few more applications to strengthen the new TOC based business process. The main challenges were when all Supply Chain Nodes across all geographies changed from demand management to replenishment mode. The previous method of forecast and S & OP process was redundant. At the same time manufacturing plants also changed the production plans to a pull system from push system.

The main challenging and critical activities were:

• Creating and maintaining new business process
• Capturing inventory of each Supply Chain Node
• Continuously improving on current process
• Creating new capabilities

In addition to the above challenges was to handle change management on new tools and data collection on the new process. In India the Pharma industry is quite matured. It was not easy to handle change in the market without losing business, at the same time manufacturing plants also are governed by regulatory bodies and change in business process should be handled carefully. The visibility of stocks was limited to the distributors. All our distributors were on our ERP and we had online daily stock status. The sale beyond distributors which is stockiest sales was important to track and keep a tab on replenishment of stocks. All these exercise was to increase the INVENTORY TURNS and THROUGHPUT. Finally at the end of the TOC training, we realized that the entire process is going to change and the role of IT is going to be much bigger than expected. Everyone in the organization realized that there is no IT (inventory turns) without IT (information technology).

We have built customized multiple applications to suit every geography and integrated to our ERP system. To strengthen the integration and make it seamless, a business process tool with middleware features was implemented.

However all these efforts and challenges was not the end of the journey on TOC track. Creating the sustainability of the system was another major task ahead. Finally it is over three years now the entire organization runs on TOC with a strong support of IT. The inventories have been drastically reduced from 45 days to 15 days in the national market and 60-90 days to 30-45 days in the international market. The early warning on market getting dry is well built within the system. The detailed shop floor management to optimize the production output along with built-in throughput is the current project planned and under execution