Moving Toward Lean Manufacturing Implementation
Moving Toward Lean Manufacturing Implementation
With decreasing profit margins, increasing cost pressures, growing regulatory compliance concerns, mounting pressure from generic drugs, and increasing anxiety about the future of healthcare reimbursement, pharmaceutical manufacturers are now forced to re-examine and re-assess the way they have been doing things. In order to sustain profitability, these companies are looking to reduce waste (of all kinds), improve efficiency, and increase productivity. Many of them are taking a closer look at lean manufacturing as a way to achieve these goals.
Some Drivers for Lean Manufacturing Implementation
While the pharmaceutical industry has always focused on quality, it has also, until just recently, focused on maintaining the status quo in the manufacturing arena. Consequently, the pharmaceutical industry has lagged behind others in improving manufacturing efficiency and productivity. It was estimated just a few years ago that, worldwide, improvements in efficiency could result in cost savings of as much as $90 billion.
Further, we generally think of R&D as consuming the largest portion of expenses in this industry. But the reality is that manufacturing gobbles up twice as much as R&D does. On average, actual manufacturing costs amount to 36% of a pharmaceutical manufacturer's total costs. Moreover, non-value-added activities and waste account for a large percentage.
With the traditional status quo-maintaining mindset, quality has also suffered. In recent years, for example, there has been a marked increase in the number of drug recalls. And 75% of these recalls have been attributed to manufacturing defects. Also, in the pharmaceutical industry, the reject percentage ranges anywhere from 5% to 10%-a percentage that costs the industry between $4.5 billion and $9 billion annually.
Lean Manufacturing Solutions
The implementation of lean manufacturing techniques can solve, or at least noticeably ameliorate, many of these problems. That's because lean manufacturing is intensely focused on eliminating manufacturing waste and improving the efficiency and productivity of manufacturing processes. What this means for pharmaceutical manufacturers is that not only will they be able to improve productivity, quality, compliance, cost impact, and production speed. Ultimately, they will be able to bring to market better products faster and more cost effectively than they ever did before.
The painful part in all this is the change involved. We all, from senior manager to line operator, dislike and resist change of any kind, especially when we've been accustomed to doing things a certain way for years. The good news is that experienced lean manufacturing consultants can palliate the pain of necessary change and guide a company through the transition process.
The three areas where change will have to occur in the lean manufacturing transformative process are:
Mindsets/behaviors
Operating systems
Management systems
Management systems will serve well as an illustrative example.
Whenever a pharmaceutical company transitions to a lean manufacturing system, that company will have to examine and assess management systems at several different levels. Further, transition teams must determine which management tools (among which are IT and communications systems) will best serve their purposes. The company must also determine how to define and measure success, as well as creating and implementing a problem-resolution system. And all of this must span the entire complex value chain.
To the uninitiated, this can all seem pretty daunting. But lean processes do work and are worth the effort involved in change and transformation. And if a company does decide to adopt lean practices, there are highly competent lean manufacturing consultants to guide them through it.
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