Key concept applications in practice
Johnson & Johnson (NYSE:JNJ) is the world's leading producer of healthcare, pharmaceutical and medical devices with annual revenues for their latest fiscal year of $61.5B and Net Income of $13.3B, operating in 57 nations and selling into over 175 countries (Johnson & Johnson Investor Relations, 2012). While the company operates across a very broad value chain, it has successfully integrated many of the core supplier management, procurement, strategic capacity planning and constraint-based planning into a centralized strategy (Atherton, Kleiner, 1998). Integrating these elements together has given Johnson & Johnson greater agility and accuracy in managing aberrations in quality and supplier performance, stabilizing both end-product quality and manufacturing performance at the same time (Slobodow, Abdullah, Babuschak, 2008). From the most basic aspects of job design to the development of its strategic sourcing and strategic capacity planning, Johnson & Johnson concentrates on creating a platform to ensure their Total Quality Management (TQM) and House of Quality ongoing efforts stay synchronized corporate-wide (Johnson, 1993). This makes constraint-based planning and manufacturing execution systems (MES) more effective, while also minimizing the level of demand and process/product variability, leading to accelerated new product development cycles and more profitable medical products (Atherton, Kleiner, 1998). What Johnson & Johnson has been able to do is unify their entire value chain to deal with these aspects of constraint-based planning. As the company is very metrics- and quantitatively-driven, production managers and company executives know the relative level of success or failure for each of these areas relatively quickly based on the use of real-time analytics and dashboards that include Key Performance Indicators (KPIs) (Atherton, Kleiner, 1998). This mindset around measuring and quantifying performance is predicated on the company's approach to delivering business value by ensuring the entire value chain is transparent from a strategic capacity planning and risk management perspective (Williams, 2004). Johnson & Johnson has learned over decades of work on their constraint-based planning systems that creating a high level of supply chain, sourcing, route assurance, non-conformance and traceability visibility throughout their value chain can save millions of dollar a year and thousands of cumulative hours (Atherton, Kleiner, 1998). The next section discusses how the company uses capacity and constraint-based planning to better manager their value chain.