With regards to the continuous efforts in pharmaceutical industry, we certainly see a great improvement in the US, California and how much the 632% increase in employment between years 2006 - 2011 has brought substantial growth to the sector. Some of the main reasons of this improvement between R&D to prescription phases are due to the investments for enhanced technologies used in R&D, effective manufacturing techniques, and certainly the efforts towards a more efficient supply chain management. The latter one, supply chain management actually goes hand in hand with manufacturing, even though we don`t get to hear a lot about its importance. I greatly enjoy following new trends and hearing about recent developments in industries. I was in San Diego at the Biomanufacturing Summit last week and had great conversations with people from different pharmaceutical companies, had the opportunity to view the industry trends, hear about some pain points, and even discovered beer making process as part of a facility tour (you wonder how this is related to pharmaceuticals? Well, after all, beer manufacturing is just another type of fermentation!). It`s always amazing to see how manufacturing follows a common path among different industries. At the conference, I kept seeing in the workshops the terms lean, agile, kaizen, 6S, Toyota Production System. As much as these terms can be more applicable towards a manufacturing environment, I really liked to see that the pharmaceutical companies are trying to apply the best practices both from each other and from different environments. This can be limited to the manufacturing technologies today, but will certainly extend to other areas like supply chain. Having said that, referring to my previous statement about manufacturing being hand in hand with supply chain, some of the information – mostly where pain points are today - I captured from the conference below proves how valid this is:
- Cost and speed are still today`s challenge.
- Speed generally becomes an issue from development to the marketing of the product.
- Cost opportunity is very much volume driven, which is derived from an accurate estimate of demand forecast.
- Forecast is never right so capacity never remains accurate.
- Long lead times to build the product have a big impact on cost, so always need better CMOs.
- New CMOs are in general willing to make investments to improve in order to secure market place but not the old ones.
- Cost, scheduling, quality are three elements of the triangle leading to challenges.
- Tradeoff between cost and quality is not a good mindset – today`s cost saving solution may become tomorrow`s compliance problem.
- Commercial and technical life cycle management for pharmaceuticals is resource intensive to fix problems as you face them.
- Continuous improvement is critical, cannot only rely on periodic improvements such as 6S/lean project based approaches.
So just from there we see that applying lean in manufacturing is not sufficient on its own. Some keynote speakers mentioned productivity measures varying according to the product. As an example, there is an increased yield on the drug substance side whereas on the drug side it`s much smaller. However, you can think about how you can match the type of cost where you need to deploy a lower cost of production (i.e. through selecting local vendors). Also, in terms of capacity problems, there was a really good example when I got to chat with a master planner. She talked about having two reactors with x and 2x capacity in their facility defined as constraints – you can imagine how big of an issue this can be if not communicated and/or planned properly at a supply planning phase of your S&OP cycle. Let us look at it at a more detailed level, you`ll likely need to change equipment as you are switching to a different reactor too. As much as it sounds simple, it`s a basic problem that many industries are facing today. That is exactly where a well maintained supply chain management comes into play, also creating room to reduce costs. When we think of continuous improvement, a basic approach to it is simply comparing your plans from different times/people/departments without having to manually connect them to one another, always looking to find a better solution and do it in the fast pace as your business requires. This is where RapidResponse acts as the crème de la crème, creating the end to end visibility, the ability to compare multiple plans created in your single instance, and the speed to your entire supply chain like no other software can. Simply mentioning the capabilities of RapidResponse that can make their lives easier and also create a cost effective management sounded ground breaking for most pharmaceutical companies, especially after talking about how our other pharmaceutical customers made a great use of it improving their supply chain practices. We are talking about over 15-20 manufacturing sites and around 500 different suppliers for some pharmaceutical companies; in such an environment it`s simply not sustainable to do any plan manually, no matter how lean you are. For some companies the challenge starts from the raw material, where there is poor procurement/warehouse management in place leading to a ripple effect that gets carried all the way to the distributor. Key takeaways: Biotechnology is booming despite a challenging economic environment and a lot of companies have been heavily investing through M&As and/or new product developments. Once the FDA approvals are there, those products will be on the market needing to be effectively and efficiently manufactured and distributed. Also some other important points to keep in mind:
- Innovation, reach, and manufacturing technology are the three dimensions of this industry.
- Iterations of improvement (continuous improvement) give a better result moving forward.
- There is an increasing need for:
- New capabilities in the industry to lower costs, and increase flexibility and speed
- Adjusting production based on demand which comes with accurate forecast and respond to demand changes quickly
- Faster capacity increase and being able to use same facility for multiple materials
So we see it`s an absolute must to be able to maneuver your actions in such a rapidly evolving environment, learn from previous and apply fixes to following plans. How? Even though for most pharmaceutical companies the order of priority is compliance, supply and profit plan, they are recognizing that all these three can actually be improved through a better supply chain. There isn`t much room to play with R&D costs and your manufacturing is as lean as possible. What else can you do? You need a better managed supply chain. For pharmaceutical companies, high risk and high profit margin is associated with their business so they can make big investments, whereas for CMOs there is lower margin thus leaving them with not so much room for investment. However, the pharmaceutical companies do want the CMOs to make investments to improve the lead times. Maybe it`s time for more CMOs to make good use of a supply chain management software and create grounds to efficiently collaborate with their customer, the pharmaceutical companies, for a better performance of supplier consistency and reliability. As a conclusion, external and internal factors are driving changes in biomanufacturing environments which demand new operational capabilities. Cost, speed and flexibility are the key differentiators in operations. In order to operate economically and compete globally, pharmaceutical companies are looking at possible ways using the right technology and assets for a proper segmentation and appropriate deployment meaning considerations of localizing, minimizing, and making variability friendly investments. You can also check out the blog my colleague Trevor Miles wrote, "Chinese Hamster Ovaries, Medicines, Manufacturing, and Supply Chain".