Sponsor:

Genentech

Research Team:

Phil Kaminsky

Universities Involved:

University of California at Berkeley

Start Date:

06/01/11

End Date:

NA

Summary:

Genentech’s inventory philosophy has typically involved building inventory to hedge against shortage risk, and to keep expensive production capacity fully utilized . Conversely, many companies have focused on minimizing inventory in the supply chain. This project will focus on the development of novel risk/cost assessment tools to rationalize Genentech’s inventory strategy . Inventory levels impact cost of goods sold, required capacity, and shortage risk levels. Indeed, there is in many cases a trade-off between risk, required capacity, and cost. While managers must ultimately decide how to make these tradeoff, they can do this more effectively if they have tools that help them to understand the impact of specific inventory decisions on these measures, and tools to help them to ensure that they are operating on the efficient frontier, so that, for example, a particular acceptable risk level is achieved with the lowest possible cost, or conversely, for a given cost and capacity level, risk is minimized. We are developing tools that account for the key characteristics of biopharmaceutical manufacturing, including the uncertainties inherent in biological production, regulatory restrictions, rapidly changing technologies, uncertain demand, and expensive production capacity.
This project has two core components:

1) Development of novel tools based on retrospective optimization that can be used to optimize parameters in Genentech’s supply chain

2) Application of these tools to answer specific questions regarding inventory positioning and risk management accounting for potential disruptions in Genentech’s supply chain.