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European Pharmaceutical Contractor

Business Growth

The economic downturn in 2009 left many, if not all, industries struggling. For the pharmaceutical industry, there were some very specific challenges – patent expirations, weak product development pipelines, pressure to lower prices, and a progressively burdensome regulatory environment, to name just a few.

On the flip-side, there were also more ‘positive’ challenges to overcome; integrating operations and maximising top-line growth following major acquisitions, for instance, or responding to double-digit sales increases in China and other rapidly expanding markets.

Essentially, whether your company was profitable or not, it was a time to take a closer look at your business. This led pharma companies to embrace cost reduction measures focused on increasing efficiency. A good business process could guarantee both a high level of quality, as well as shorter lead times between production and distribution. However, these measures were often short-term fixes, and companies were unable to guarantee long-term reliability.

Ensuring long-term success became the ultimate challenge in the pharma industry. Companies needed to find cost-effective ways to increase efficiency that could be used over a longer period of time, in order to ensure stability and form the basis for future growth. They needed to be reliable, flexible and innovative if they wanted to position themselves for continuous improvement and, ultimately, long-term productivity and profitability.

In this article, we will look at how a number of pharma companies have started to use new and improved process management systems to enhance business performance and ensure sustainable progress.

Process Efficiency

A well-developed process management system should be based on long-term experience with various management and continuous improvement tools and practices, as well as hands-on customer projects. The right system will consolidate this experience into a framework that adapts for each and every customer project. The approach should be to implement sustainable process improvements, and establish a problem-solving culture within organisations which enables the individual employee to make quick decisions, thereby relieving the burden from management. This will, in turn, cause a substantial increase in efficiency.

Some companies are now developing systems which can greatly improve performance by connecting business strategy to everyday operations, with a constant focus on results and measurement. These systems can recognise the differences between companies’ expected performance goals and their current situation, then prevent deviations from occurring, or correct them when they do. Visibility for strategic goals should be created, ensuring alignment and empowering employees to focus on the initiatives that matter most and, more importantly, make the right decisions.

Ultimately, this results in eliminating waste – defined as, for the pharma industry, anything that delays work or requires activities that do not directly contribute value to the manufacturing process. Overproduction and overstocking is also seen as waste – for example, producing more drugs than necessary means excess product will need to sit in a storeroom, which is an inefficient use of space.

Using a strong management system could mean sustainably changing manufacturing processes to reflect customer demand while maintaining cost-efficiency. This way, customer needs can be dealt with flexibly according to demand, thereby reducing back orders and excessive stock – both of which can lower efficiency and raise costs for the manufacturer.

Of course, taking company goals into account is equally important, and support from management is paramount to achieving success. Managers should identify goals and use these to define key performance indicators (KPIs), as well as reference values for periodic reviews. Communicating openly and being proactive are critical.

Improving Reliability

To take a straightforward example, ConMed – global manufacturer of medical devices and instruments for surgical procedures – was facing a very specific problem and knew they needed to alter their manufacturing techniques: “We weren’t trying to get faster or save money; we were trying to become more reliable”, said Dave Johnson, Vice President of Global Operations.

The business had acquired several companies and combined multiple inefficient and wasteful product lines into one facility, resulting in inefficient and wasteful production processes. They also had large quantities of work-in-process (WIP), high productivity losses and excessive stock. In order to better serve their customers and grow profitability, they needed to improve reliability on the production floor.

Within a year of altering their manufacturing processes according to lean management methods, ConMed’s productivity increased by 22% and WIP was curtailed by as much as 85%. Floor space was reduced by 66%, especially in relation to the clean laboratory space which has a high cost per square foot. It has since increased efficiency to the extent that, today, there are no more than 24 hours between the placing of an order and product delivery. ConMed has become far more reliable and is now flexible according to customer demand.

Operational Excellence

Another example is an innovative global biotechnology company with a history of healthy profits and high margins which, by partnering with an external management system, has achieved breakthrough results. Unlike traditional Big Pharma companies, this biotech manufactures products for rare diseases and specialises in orphan drugs – products that have a very small patient population across the world and, as such, have a patent lifetime of 30 years.

This is interesting because it illustrates that, regardless of whether you are a successful and profitable company or one that is struggling, looking at your processes and developing better ones can improve your business performance. Sometimes, operationally speaking, market success can actually hide a lot of problems.

Following its acquisition and an exercise in benchmarking similar operations, the company discovered that production costs were well above best-in-class. They decided that they could not continue to build properties and increase headcount. Instead, they needed to leverage the investments they had already made to the site; they wished to become operationally excellent.

Step by Step

Using the new management system there were four phases which had to be followed:

1. The external system and the client worked together to develop the business strategy, including all of the company’s divisions. The yearly strategic objectives in the operational units were then fed down in line with the policy deployment, which drives the rating of KPIs throughout the entire business.

2. The KPIs were fixed in all departments. Performance management was separated into the following five main categories: safety (S), quality (Q), delivery (D), cost (C) and performance (P). SQDCP boards allow all users to see, at a glance, what the current problems are, what needs to be done, and who is responsible for making sure problems are resolved. The boards can also serve as focal points for daily walk-throughs by management team members.

3. A team-based, inter-divisional, problem-solving culture was introduced. The management team reviewed the KPIs as needed – in general, daily – and the longterm strategic goals on a weekly or monthly basis. Corrective measures, such as fault prevention and troubleshooting, were also implemented at this stage, and commitment was required from the entire workforce for continuous and sustainable improvements.

4. Consultants coached the client’s business leaders on how to push through and guide cultural change within the organisation through appropriate leadership.

For this biotech company, the competitive intelligence team began working internally with the site leadership team to decide on the vision and strategy of the site going forwards; they believed that every employee held tremendous potential, and wanted to base their strategy on harnessing and capitalising on that individual potential to reach their forecasted 20-25% year-on-year growth. This was aligned with the new system, which drew on lean management techniques and results through people.

The client wanted to be the site of choice for fill-finishing, and to take on the additional volume of products coming through due to the recent acquisition, without increasing headcount, meant they needed to look at people and processes. Initially, they agreed on their vision and strategy and, the following year, they began to focus on executing that strategy with the establishment of managing for daily improvements (MDIs).

The MDIs were a step-change in how they managed the business. In the first year, this was a breakthrough activity but, in the following years, this became a standard, business-as-usual procedure.

In terms of executing the strategy, they ran 22 weeks of problem-solving kaizens, and then teams began to set up visual management tools – including SQDCP boards displaying daily and hourly safety, quality, delivery, cost and productivity metrics for each area. These boards made it possible for status meetings to happen on a daily basis so that, by 10am, the site leadership team received a full overview of the site’s performance over the previous 24 hours, what had been done to resolve any issues, and what needed to be done to ensure each day was a success.

Goal Achievement

Combining daily performance with strategic activity, the boards also reported progress toward 100-day plans and breakthrough objectives. Such practices have contributed to building a culture of open communication at all levels.

Today, the company’s culture is characterised by trust and collaborative problem-solving. As a result of many productivity improvements, overall employment at the site is up slightly, but output has grown by 50% over the past four years. In the quality control area, total headcount has actually declined by 25% − staff have moved to other areas of the business and taken on responsibility for other testing activity.

Most recently, process improvements in some administrative areas have freed up 60 people – over 7% of the workforce – who will work on several major new products being readied for production at the facility. That additional output will improve the site’s cost position even further, which will continue the cycle of improvement and drive future business growth.

These case studies demonstrate that, whatever your company’s goals, changing the mentality surrounding processes can provide the starting point for lasting benefits. Success can only be maintained through the connection between everyday operational execution and long-term strategic goals, as well as the empowerment of employees at every level to proactively contribute to solving business problems, further enhancing a company’s competitiveness and market growth.

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Richard Holland is Vice President of TBM’s Consulting Practice in Europe. He has over 15 years’ experience in lean management – improving quality and reducing waste – in many sectors, including process, manufacturing and service industries. During his career he has consulted with leading companies, including Alstom, Eurostar, Genzyme, GETRAG and Shell. Richard has specific expertise in strategy deployment, rapid deployment of improvement initiatives and supply chain optimisation. He also handles steering committee reviews, and is involved in many mergers and acquisitions with clients.
Richard Holland
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