The Indian Pharmaceutical industry is undergoing a very interesting shift; at one hand it is creating its own mark in the global landscape with its latest innovations/discoveries, while on the other hand, the fragmented Indian market is poised for a major consolidation. As the pharmaceutical industry is booming rapidly, the expectations of customers are high and there is a demand for high-quality, and defect-free products. Over the last decade the Indian Pharmaceutical organisations, have started adopting measures for bridging the gaps in operational executions, and other areas.
Lean Management, is one such concept, that is founding its entry into various organisations across different industries across the globe. An edifying concept, ‘Lean Management’ is a management philosophy with an immaculate focus to reduce or if possible eliminate the wastes, across the supply chains, in order to be able to deliver the maximum customer value. The philosophy of Lean Management has found different initiatives, collectively known as ‘Lean Initiatives’, and models of implementations, which include TQM, Six-sigma, TPM, JIT, TOC, business process engineering, Kaizen, QC circles and 5S.
In the past, the pharmaceutical industry neglected the significance of this transitional concept, because organisations were oblivious to regulatory requirements, compliance, and quality. Operational improvements were considered as a compromise with the quality and operational excellence and manufacturing efficiency were non-existent. Since manufacturing cost was a fraction of sales, very little significance was given to efficiency.
During the late 2000s, globalization and modernization had become widely entrenched in the country and pharmaceutical industries started entering the Global Generics Market. This led to an increased demand for mission-critical treatments and also capacity constraints became more common.
In order to survive globally it became critical for pharmaceutical companies to adopt Lean management due to the tremendous pressure of the government and society, on pharmaceutical companies to reduce costs and improve quality. Additionally, contract manufacturing became a big opportunity for the pharmaceutical companies as it resulted in operational efficiency offering reduced lead times, productivity, lesser costs.
Decoding the secret formula of the Toyota Production System, Steven Spear and H.K. Bowen in 1999 captured 4 rules that are very powerful during the challenging moments and will enable you to improve a process.
Standard Work- The work with respect to the content, sequence, timing, and outcomes should be highly specified.
Clear Relationships and Communications- Every customer-supplier connection must be direct and there must be unambiguous ways to send requests and receive responses.
Simple Flow- The pathway for every product and service must be simple and direct.
Scientific Method- Improvement must be made in accordance with the scientific method, with guidance, and as close as possible to the actual work.
The flow concept of Lean implementation focuses on:
- End to end operations.
- Continuous material movement, no in-process storage.
- Full visibility of all operations, preferably on the same floor.
- Each process should be a pull system instead of a conventional produce and push system.
- The next batch will be taken only if the first batch is produced completely.
- No in-process quarantine.
- Inspection and QC are non-value-adding activities (so that the time taken for inspection and quality control activities can be minimized).
- Solving problems during a process immediately by utilizing the rest of the resources.
Need for Lean Implementation:
Lean is considered as an important winning strategy. It is important:
- For competing effectively in today’s global economy.
- To cope up with customer pressure for price reductions.
- To adapt immediately to fast-paced technological changes.
- Continued focus by the marketplace on QCD.
- Quality standards established by regulatory agencies worldwide.
- To develop a standardized process to obtain uniform superior-quality outcomes.
Successful implementation of Lean in Toyota, inspired a lot of organizations around the world to start their journey towards Lean Management. Increased efficiency, improved productivity and reduced waste are some major benefits of Lean implementation.
There are various Lean tools such as Value Stream Mapping, Heijunka, A3 Management, Nemawashi, TPM, Kanban, Poka-yoke, JIT, SMED, 5whys, Cellular Mfg., Big P.map, etc. The choice of methodologies/tools to be implemented depends on various factors including experience, value delivered, resources required, numbers of people involved, the ability to create transformation, etc.
Numerous Pharma organizations across India have started adopting initiatives like Lean Six Sigma, TPM, and Strategic Cost Reduction. Such types of initiatives will assist organizations in creating value and face challenging business needs.
There are certain arguments about the effectiveness of Lean implementation in the Pharma industries because here the improvement quantum is not very high in comparison to other industries. The reason being that unlike other industries, it is not easy to implement the principles of flow optimization, inbuilt quality, process management, and reduction in equipment setup time in the healthcare industry.
However, you can’t deny the fact that after lean implementation many organizations have shown improvement in overall business performance. It has led to an improvement in quality, elimination of waste and reduction in costs. Better use of assets, flow optimization, greater flexibility, and a sustainable and consistent improvement strategy are some of the key areas that the industry needs to focus on.
Pharma companies such as Pfizer, AstraZeneca, Johnson & Johnson, and GSK increasingly adopted Lean as an approach to address these challenges by driving improvements in cost, quality, and supply. Here are some of the benefits that are enjoyed by a leading pharmaceutical company in the initial 4 years of its Lean journey:
- Manufacturing volume increased from 20 Mikron to more than 100 million from the same facility and lesser resources.
- Cycle time reduced from 600 hours to 80 hours from dispensing to packing.
- Lead time reduced from 35 days to 15 days.
- Material yield improved from 97.5% to 99.6.
- Improved quality
- Enhanced throughput decreased inventory
- Improved response time
- Improve service level
- Improved flexibility
- Increased profit
- Healthy work culture
- Reduced cost
By eliminating waste, prioritizing the customer and flow focus, the healthcare industry is expected to grow at a very fast pace in the foreseeable future. According to various studies and surveys, Pharma companies who have successfully implemented Lean initiatives are seen to grow at a higher CAGR and by embracing such initiatives they realized millions of benefits.
Quality is a very important aspect in the pharmaceutical industry, as lives are at stake. Therefore, in-line data is critical to quality that enables pharmaceutical companies to manufacture defect-free products. As technology becomes more and more integrated into our daily lives, a deep understanding of such initiatives together is advantageous for any pharmaceutical manufacturer. Given the pricing and regulatory pressures that the industry players are experiencing, it is natural to adopt such cutting edge innovative improvements.
Lean can help pharmaceutical companies to
- Reduce production lead time by implementing principles of flow management
- Improve Quality and reduce defect rates by using Total Quality Management tools
- Reduce inventories
Pharmaceutical companies need to combine the knowledge of science and the concepts of Lean Management to move forward with a proactive problem resolution strategy and focus on variation reduction.
About RIB Consulting
RIB Consulting is dedicated to delivering coherent solutions to the complex business challenges that various organizations are facing today. We are working with companies on industry-specific strategic, operational, and financial issues.
Our team participated in a global benchmarking event which covered more than 25 companies all over the world and it was found that:
- Indian companies are lowest in per unit cost due to low labor costs.
- These companies are performing poorly on all efficiency parameters like productivity, inventory turn around, utilization, etc.
- Labor cost advantage can not last for long.
This led to the introduction of Lean in Indian pharmaceutical companies to
- Improve through-put time and Yield
- Improve Value added time and Productivity.
- Improve machine efficiencies through Autonomous Maintenance & TPM
RIB Consulting can help you achieve these objectives. We specialise in the implementation of Total Productive Maintenance (TPM), Lean Management, Kaizen, Total Quality Management, Total Flow Management, Hoshin Kanri, and many other operational excellence tools.