How Novartis optimized its supply chain with real-time risk insight

Novartis set out to create a standardized, scalable approach to managing SMNM and related risk provisioning globally, within an integrated enterprise performance management (EPM) framework.

The solution lay in redesigning the SMNM goods inventory system using an innovative approach that combined SMNM functionality with SAP technology, including SAP Profitability and Performance Management. The initiative required rethinking the logic, the data flow and the risk model. “Together with Novartis, we redesigned the core calculation logic for SMNM goods in SAP,” says Sveinung Baumann-Larsen, EY Global Tax SAP Leader.

EY teams drew on their alliance with SAP to implement SAP Profitability and Performance Management as the core solution. The software integrated seamlessly with existing systems and is capable of processing large volumes of data at a highly detailed level to detect inventory risks categorized by various reason codes. With built-in review, commenting and posting functionalities, the entire process now runs end to end in SAP, reducing manual steps and workarounds outside the system, such as emails and spreadsheets.

The new calculation logic enables precise, transparent and forward-looking stock valuation Novartis can rely on. “This advanced analytical tool uses sophisticated calculations to provide early warnings on inventory risk,” says Alex Gomes, LDC, Core Enablement and Finance Lead at Novartis. The SAP-enabled system automatically flags items that are slow-moving or have no movement at all, thereby improving overall stock control, risk visibility and consistency.

Additionally, the SMNM module provides much-needed automation to a process that was highly manual. It provides a comprehensive, standardized solution for inventory provisioning, offering the analytics and forecasting functionalities needed in a solution that is truly integrated across finance, operations and technology.

Novartis also worked with EY professionals to redesign global inventory provisioning. It introduced a new standardized and automated calculation method across all countries that has eliminated interfaces, manual steps and siloed approaches, “improving global visibility and significantly boosting operational efficiency,” Gomes adds. Notably, the redesigned SMNM module has reduced the time and effort in provisioning calculations by at least 50%. The increased level of automation will allow teams to concentrate on strategic priorities in future.

The system also enhances compliance through detailed monthly analyses and provides transparency for audits and financial reporting. “And consequently, we are now better positioned to respond swiftly to patient and business demands while effectively managing risks in advance,” says Bastianelli.

Besides gaining clarity on risk exposure and provisioning rationale throughout the organization, Novartis has laid the foundation for proactive inventory management that enhances global visibility of SMNM goods risk. The shared data platform enables Novartis to identify products approaching expiration earlier, helping to reduce the destruction of goods and improve stock control.

For Novartis, this has resulted in standardized and automated global processes, improving operational efficiency and helping ensure accurate, compliant financial reporting with full transparency for audits. The automation of previously manual, error-prone provisioning processes has also reduced manual effort and improved risk identification, allowing the company to respond more swiftly to patient and business demands.

Customers benefit from a more reliable supply chain, that ensures timely delivery of medicines, while the improved inventory management supports Novartis’ commitment to maintaining an efficient, compliant, and resilient supply chain across all locations.

The unified data model created through this initiative also unlocks potential for future AI use cases by leveraging inventory-related information, positioning Novartis to further enhance its inventory risk management capabilities.