Operational effectiveness

Last year, I used this space to tell you about the importance of operational effectiveness–ongoing efforts to streamline and improve business processes from production planning to order fulfillment, along with information technology, procurement, manufacturing, distribution and customer service–to BD’s overall performance. Operational effectiveness fuels the innovation engine, delights customers and rewards shareholders.

     I also promised you that we were going to get better in 2005. So this year, I‘m pleased to describe the progress we have made in line with one of BD’s Core Values–“We Always Seek to Improve.”

     Notably, savings from operational improvements in 2005 helped us to absorb a significant increase in the prices of raw materials, primarily petroleum-based resins. We received industry recognition this year when Cardinal Health presented its Operational Excellence Award to our BD Diagnostics operations in Maryland. Our distribution centers are making significant progress and becoming world-class performers. Our primary North American distribution group has dramatically improved several performance measurements, including shipment accuracy, to 99 percent, and the costs of distribution-related customer claims were down by more than $8 million in fiscal 2005.

     The construction of a new distribution center in Indiana, scheduled to be operational in 2007, will allow for more direct shipments, higher service levels to customers and shorter cycle times. Approximately half of all BD customers in the U.S. will be serviced from this location; 70 percent of customer orders will cycle in one day, versus 40 percent currently. This will also allow us to consolidate a number of distribution center operations for maximum operational and service efficiency.

Operational effectiveness fuels the innovation engine,
delights customers and rewards shareholders.

     We continue to concentrate on initiatives that eliminate waste in manufacturing and in business processes. These include Genesis (our SAP-based global enterprise resource planning system), Six Sigma, Lean and Process Validation. These tools, along with outstanding program management, are intended to help us design processes and deliver products that have outstanding quality, with virtually no defects, that are delivered on time around the world.

     The next level of operational effectiveness is a disciplined focus on innovation in products and processes. We initiated three key actions this year:

• A diagnostic audit of our innovation and product development processes, revealing ways we can improve our processes and be more disciplined in product development as we move into more demanding, higher-value products.
  
  
• The launch of a new Clinical Development Group under the leadership of Dr. David Durack, Vice President–Corporate Medical Affairs. The group, including clinical, quality and regulatory experts, will facilitate new product development and will work to reduce the risks, costs and delays inherent in clinical trials.



• The creation of the BD Operational Effectiveness Task Force, to focus on creating greater value and seamless integration in our

  The Operational Effectiveness Task Force, pictured from left to right: Holger Rathgeber, Senior HR Business Partner; Johnathan Macy, Vice President, Global Manufacturing Operations; John R. Considine, Executive Vice President and Chief Financial Officer; Patricia B. Shrader, Vice President, Corporate Regulatory and External Affairs; J. Peter Natale, Vice President and Chief Information Officer; James R. Brown, Vice President, Quality Management; David Malpiedi, Vice President, Business Processes.

   end-to-end processes. Led by John Considine, Executive Vice President and Chief Financial Officer, the members lead five critical global functions: Business Processes, Information Technology, Manufacturing, Quality and Regulatory. The linkage of these functions–each of which is focused on core competencies, execution and value to the customer–will accelerate our continuous improvement efforts and result in enhanced quality and customer satisfaction.
  

     All of our operational effectiveness efforts are designed to increase operating margins, improve customer service and accelerate revenue growth, making more resources available to invest in our future.

– Edward J. Ludwig