Leading Operational Excellence€¦ · TQM JIT Overall Performance score ... We rely on vendors for...

Leading Operational ExcellenceComplexity and the consequences forpharmaceutical production sitesMedipak Systems AG in Grabs, 08.06.2016Dr. Lukas Budde

2 ©ITEM-HSG

StructureIntroduction1

OPEX – A Definition & The St.Gallen OPEX Model2

Launching & Maintaining OPEX3

Leading Operational Excellence4

Success Factors for Operational Excellence5

Summary6

3 ©ITEM-HSG

University of St.Gallen, SwitzerlandSt.Gallen Operational Excellence Benchmarking

API Benchmarking

Cultural Readiness

OPEX Research Group

Proj

ects

Excellence in Clinical Development

Corporate KPI-SystemsOPEX "Umbrella"

OPEX Network AnalysisDesign and Implementation of OPEX Systems

Deep Dive On-SiteAssessments

Supply Chain Transparency

Asset/Capacity ManagementSite Location

Plant Complexity Complexity Transparency

Order Fulfilment Optimization

Adapt OPEX to other MarketsIntegrated Product Development

OPEX Book I OPEX Book II OPEX Book III2004 20122006 2008 2010 2014

OPEX Structures over TimeMaturity Model

OPEX Benchmarking of individual sites and production networks

End-to-end Process Optimization

Supply Chain BenchmarkingFounded in 1898One of the leading Business Schools in Europe39 institutes and 5 schools (Management, Economics and Political Science, Finance, Law, Humanities and Social Sciences)6,941 students (25% international students), 725 research associates, 91 professors

University of St.Gallen (HSG)

4 ©ITEM-HSG

Today’s Challenges in Operations ManagementDriver 1: Rising cost pressure

010203040506070354050453025200

Number of NM

Es

R&D expenditu

res [$ bn]

+79%

-54%

2011*20102009200820072006200520042003200220012000199919981997

Global R&D expendituresNumber of NMEs first launched onto the world market

Source: www.fda.com

* Numbers are estimated

2014 20162015201324

2012

30

2011

1219 22

Total127

20

Sales loss due to patent expiration [in $ bn]Costs in development

5 ©ITEM-HSG

Costs in pharmaceutical development

6 ©ITEM-HSG

Today’s Challenges in Operations ManagementDriver 2: Quality and/or delivery issues

Source: Calnan, N. (2015)

Stericycle, 2014FDA Warning Letters: 2008: 445 2013: 6’760Source: FDA (2015)

7 ©ITEM-HSG

Today’s Challenges in Operations ManagementDriver 3: Increasing complexity

QA/QC Process Lab Cert Ship

Management/ProcurementIngredient Blenders

Ingredient SupplierWarehouse

QA/QC

8 ©ITEM-HSG

Today’s Challenges in Operations ManagementDriver 4: COGS – the cost of goods sold as major part of overall costs

25% 11% 18%

9% 11% 12%Contract

manufacturer

4%

63%

3%

Generics manufacturer

20%

53%

5%

Brand-name companies

22%31%

13%MarginSales & MarketingGeneral & AdministrationManufacturingR&D

Source: ITEM

9 ©ITEM-HSG

Since the pressure to reduce cost of medicines is high these days, to save money, increasingly manufacturing and procurement of ingredients and intermediates are being outsourced to emerging countries In fact, some pharma-executives now consider outsourcing of manufacturing as their priority since “… it would be possible to find significantly cheaper contract manufacturers, many of which would be in the Far East”“AstraZeneca to outsource manufacturing”, Times Online, September 17, 2007, by Robin Pagnamenta Thus, the overall supply chains are becoming more and more global and complex While the primary driving force for increased outsourcing to emerging countries is cost, at the same time however nearly $50 billion a year is being wasted in

manufacturing due to inefficient processesMacher & Nickerson, 2006Source: P. Basu, NIPTE

Healthcare’s hidden crisis is the state of pharmaceutical manufacturing Big Pharma on Outsourcing

10 ©ITEM-HSG






Summary6

11 ©ITEM-HSG

A Definition of Operational Excellence Operational Excellence is a philosophy directing an organization towards continuous improvementIt is the balanced management of cost, quality and time focusing on the needs of the customerIt comprises structural & behavioural changes to support the needed activities the best way possibleTo be sustainable it has to be pushed by Top Management and to be designed to engage every single employee Operational Excellence is not only about performance, it is also about the way an organization achieves superior performance and about how it continuously improves itself!Source: ITEM-HSG

12 ©ITEM-HSG

Compare your Job to the Job of a DFB Coach!What does he focus on? Which information does he need?

It needs a balanced approach! You have to understand the system not only isolated parts! You can only improve if you are able to identify root causes!

Conclusions from Basic IdeaSource: ITEM-HSG

'Standings', of course. But so what?Trainers are also responsible for Tactics Fitness Training plans Team play Trust Techniques Motivation ...

13 ©ITEM-HSG

St.Gallen Operational Excellence Model

Source: ITEM-HSG

14 ©ITEM-HSG

Key Facts – St.Gallen OPEX BenchmarkingIndustry PharmaceuticalNumber of Production Sites

280 (Total) 214 (Formulation & Packaging) 43 (API) 23 (Biotech)

Number of Companies

123 (Total)including ten companies of the Top 20*Content – Scope Enabler Implementation andPerformance Metrics (KPIs)Content – Modules Total Productive Maintenance (TPM)Total Quality Management (TQM)Just-in-Time (JIT)Effective Management SystemStatus: March 2015 *according to Pharmaceutical Executive

Source: University of St.Gallen, OPEX-Benchmarking (2014)

15 ©ITEM-HSG

A Balanced Approach for the Performance CalculationConsideration of a variety of KPIs to capture the performance holistically

Source: University of St.Gallen, OPEX-Benchmarking

Performance Calculation

Sample Normalization Calculation

KPI 1

KPI 2

KPI 3

…

KPI n

All site KPIs All site KPIs normalized

Absolute values

Categorization

Perform-anceTPMTQMJIT

Overall Performance score

Percentile Rank

Category scores

Relative value (%) Scores (%) Overall score (%)

KPI 1(%)KPI 2(%)KPI 3(%)KPI 4(%)KPI 5(%)

KPI n(%)…(%)…(%)….(%) Addition* Addition*

16 ©ITEM-HSG

Benchmarking a Plant – OverviewImplementation & Performance

17 ©ITEM-HSG

Total Productive Maintenance (TPM)TPM enabler TPM performance

36%

55%

2003

Today

Overall Equipment Effectiveness (OEE)

25%

18%

2003

Today

Unplanned Maintenance

We emphasize good maintenance as a strategy for increasing quality & planningWe continuously optimize our maintenance program based on a dedicated failure analysisWe rely on vendors for all of our equipmentWe have a housekeeping checklist to constantly monitor the condition and cleanness of our machines and equipment

+25%

+17%

-33%

+13%

Conclusion

The implementation of the TPM enabler category has only slightly increased over the last decade However, key components like Preventive Maintenance and Housekeeping did have a not insignificant positive impact on the overall TPM performance

-30%

+53%

Source: Institute of Technology Management (ITEM-HSG), University of St.Gallen

18 ©ITEM-HSG

Total Quality Management (TQM)TQM enabler TQM performance

1%

2%

2003

Today

Complaint Rate Supplier

1%

0.57%

2003

Today

Complaint Rate Customer

A large percentage of equipment on the shop floor is currently under Statistical Process Control (SPC)We regularly survey our customer’s requirementsQuality is our number one criterion in selecting suppliersWe use mostly suppliers that we have validated

Conclusion

Over the last decade pharmaceutical companies have made significant efforts to intensify business practices impacting the quality of output This explains the performance improvements pharmaceutical companies have achieved in the field of TQM

+100%

-43%


+50%

+33%

+25%

+13%

19 ©ITEM-HSG

Just-In-Time (JIT)JIT enabler JIT performance

4

5

2003

Today

Raw Material TurnsWe are continuously working to lower set-up and cleaning times in our plantWe have managed to schedule a big portion of our set-ups so that the regular up-time of ourmachines is not effectedWe use a pull system (Kanban squares, containers or signals) for production controlWe deliver to our customers in a demand-oriented JIT way instead of a stock-orientedapproach

+33%

+17%

Conclusion The OPEX benchmarking database exhibits an increasing emphasis on JIT activities as a result from companies’ higher JIT awareness Looking at the performance of the overall sample, a significant improvement with regard to the continuous reductionof overproduction, unnecessary inventory and inconsistencies by creating a pull production can be measured

+34%


95%

97%

2003

Today

Service Level - Delivery

+3%

+200%

+50%

20 ©ITEM-HSG

Effective Management System (EMS)EMS enabler EMS performance

3.0 days

7.7 days

2003

Today

Training Days

10%

4%

2003

Today

Unskilled Employees

Our production site has an exposed vision and strategy that is closely related to our corporate mission statementOur manufacturing managers know exactly what the most important criteria formanufacturing jobs areOur employees continuously strive to reduce any kind of waste in every processWe have implemented tools and methods to deploy a continuous improvement process

+25%

-13%

Conclusion

A deeper look at the EMS enabler category reveals that only little efforts have been made to improve EMS The St.Gallen Operational Excellence Model also uses KPIs to operationalize the EMS performance. Although several improvements have already been achieved, there is still big room for improvement


+157%

-60%

-13%

+25%

21 ©ITEM-HSG






Summary6

22 ©ITEM-HSG

Some «observations» after three years of OPEX (1) Managers were generally unable to identify current improvement benefits of ongoing projects. Some viewed OPEX as a project with a set completion date and

didn’t expect it to be of value going into the future. Some managers view it as a resource drain while others don’t feel the focus is appropriate for what is necessary to move the program forward.

Managers see barriers from the perspective of a lack of resources available to devote toward OPEX programs. Managers are unwilling to invest in OPEX projects since there is no guarantee that their KPIs will improve Managers tend to provide verbal OPEX support but have a strong tendency to avoid applying substantial input toward the programs. Many of the problems for failing to provide substantial input stems from a problem of silo level thinking. Managers also place a strong focus on what the Top Executive Suite is concerned with. Managers showed indication that they did not believe the executive level of the organization was supportive of the OPEX program. The managers emphasized

areas the executive level was concerned with and placed minimal interest on other programs that did not have an apparent and immediate impact on meeting the demands.

23 ©ITEM-HSG

Some «observations» after three years of OPEX (2) Supervisors do not feel the program is providing them currently with

benefits. There are a large number of existing projects under the OPEX umbrella without a visible logic.

The key barrier that supervisors see with the OPEX program is the perceived lack of interest by management or the executive level. One supervisor indicated that a number of programs were initiated by the supervisor’s team and extensive effort was placed toward it but management was not interested in providing additional resources to implement the project.

Supervisors indicated that the original implementation of the program is a considerable barrier. The program was initiated through external consultants “Top Down”. Supervisors generally feel that lack of a professional OPEX environment is a major barrier. Supervisors feel that project selection and implementation is ad-hoc and does not fit into any greater strategy within the organization.

24 ©ITEM-HSG

Some «observations» after three years of OPEX (3) Older line workers recognize the value and benefit of principles such as 5S since it cleans up the work space and makes it easier to identify tools and materials needed for the job. Some older workers that initially disliked other elements of the OPEX program indicated appreciation for a feeling of a more relaxed and structured workplace. Like supervisors, both older and newer workers feel that the program is

overburdened and are unable to see what current project benefits there are. Many workers, particularly the older group, feel that OPEX is “completed” and isn’t doing much for them currently. Others do not recognize their personal involvement in OPEX and don’t see any benefits as it is perceived as a program administered by supervisors and other superiors, including the dedicated OPEX department personnel. In general, line workers both old and new have an underlying concern of employment security. There is an underlying force limiting support as there is

concern position elimination is part of the equation.

25 ©ITEM-HSG

Launching vs. Maintaining OPEX

Source: ITEM-HSG

With an OPEX program to become more mature, the focus of management has to shift accordingly!

Vision Sense of urgency Top management communication Enabling specialists Initial success based on few Central resources to ensure take off Number of projects Effectivity Art (innovation)

Launch

Results Sense of «part of daily work» Top management consistent support Engage specialists Continuous success based on all Central resources to keepmomentum Quality of projects Effectivity and efficiency Science (profession)

Maintenance

26 ©ITEM-HSG

Managing OPEX means always re-defining the focus!1

2

3

4

5

6

7

8

9

10

RFT / 6sAgile Ops Strategy

Sustaining MomentumDefining the Next PhaseProgrammatic DeploymentMandate & MobilizationBalanced ScorecardProduction & Supply System AnalysisVision DevelopmentPilot Implementation

2003

present

2008

Implementation & Performance

Source: ITEM-HSG

Source: Friedli et al. (2013): Novo Nordisk Source: Friedli et al. (2013): Pfizer

Source: Friedli et al. (2013): Amgen

27 ©ITEM-HSG

OPEX & Complexity

Source: Rathnow (1993); Blackenfelt (2001)

Cost

Variety

Cost/Profit of varietyProduct differentiation

Profit

Max.net profitCost reduction

Management ofcomplexity is a majorbenefit for achievingoperational excellence

28 ©ITEM-HSG

OverallComplexity Index

Globalization of the customer base Number of customers Type of customer (internal or external) Number of customer orders Demand variability

MARKET & CUSTOMER Management span of control Number of employees Share of temporarily employed FTEs Employee turnover Shift model Clarity of objectives Percentage indirect FTEs

PEOPLE Globalization of the supply base Number of active suppliers Percentage of supplies externally Supplier delivery reliability Frequency of supplies

SUPPLY Final bulk product mix Number of different drugs (formulations) Number of stock keeping units (SKUs) Packaging mix Number of new product launches Number of newly launched SKUs

PRODUCTS Number of process steps Number of batches Number of campaigns Percentage of dedicated production lines Number of changeovers Manufacturing schedule stability

PROCESSES

External Complexity (Environment) Internal Complexity (Plant)

Significant complexity impact according to St.Gallen benchmark data (Pearson Correlation Coefficient)

More fact- and data-driven Decisions – Example Complexity: CI and its Drivers

Plant Complexity (I/IV)

29 ©ITEM-HSG

0 %10 %20 %30 %40 %50 %60 %70 %80 %90 %100 %

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

Internal CI score

External CI score

Complexity Creators

Complexity Masters

“Creators“ struggle even with low levels of external complexity

“Masters” are able to transfer high levels of external complexity into low internal complexity

Plant Complexity (II/IV)Cluster Analysis: Complexity Creators and Complexity Masters

30 ©ITEM-HSG

0 %10 %20 %30 %40 %50 %60 %70 %80 %90 %100 %

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

Internal CI score

External CI score

AverageHigh PerformersLow Performers

10 high performing plants here = The true masters!

Complexity Creators

Complexity Masters

External CI vs. Internal CI vs. PerformancePlant Complexity (III/IV)

31 ©ITEM-HSG

CI, Performance & Enablers in ComparisonPlant Complexity (IV/IV)

59.9 %39.4 %

3.4

77.4 %True Masters

(Avg.)Low-Performing

Masters (Avg.)Complexity

Creators (Avg.)Site A fromCompany X

Site B fromCompany X

61.7%47.8 %

3.6

55.3 %54.2 %50.5 %

3.4

37.8 %

39.3 %

3.1

64.0 %47.2 %64.0 %66.1%EXTERNAL

COMPLEXITY

45.9 %INTERNALCOMPLEXITY

78.3%PERFORMANCE

3.7OPEX ENABLERS

32 ©ITEM-HSG

The Origin of Complexity ManagementTwo simplification programs, started with the analysis of the value chain complexity: 1. Below the skin: Complexity optimization which is not visible to the customer, e.g. product formulas, materials, packaging, work process, and the consolidation of platforms to leverage scale effects. 2. Above the skin: Complexity optimization which is visible to the customer, e.g. re-aligning the product portfolio from a customers’& Channels’, shoppers’, consumers’ and company’s perspective.

Both approaches are hardwired to the corporate strategyBoth are coordinated centrally and supported and implemented in all regions. Complexity is targeted end-to-end

33 ©ITEM-HSG

Complexity Approach 1Below the Skin Simplification

The approach of “Below the skin” to target this four simplification pillars follows four steps: 1. Data transparency to identify current state complexity and costs2. Future vision and “lighthouse”3. Migration plan to create the new technology platforms 4. Sustaining results by creating a new culture

34 ©ITEM-HSG

Success Story for Below the Skin ApproachGlobal Pumps Simplification ProjectStarting point: Over 100 pumps engines Moved to performance base-specification Aligning global to standard menus

Outcome: Reduced pump engines Increased scale delivered savings Faster speed for new pump to market Streamlined suppliers

At the end of the project there were 15 pumps

35 ©ITEM-HSG

Success Story for Below the Skin ApproachPrinting Inks Simplification Project

In addition to hard savings, the program intends to free up people to engage them in value-adding activities to strengthen the innovation portfolio

36 ©ITEM-HSG






Summary6

37 ©ITEM-HSG

OPEX becomes to an entrepreneurial Challenge!Leader Communicator+ +

The good entrepreneur comprises various functions and capabilities

Vision Intuition Conviction Determination Courage

Objectives Allocation Knowledge Perseverance Organization

Make the right things! Make things known!

Manager

Do things right!Source: ITEM-HSG (2013)

38 ©ITEM-HSG

Workshop Floor:

Machine Area –Relocated to improve area flow and create space. User friendly work benches and trolleys purchased. These optimally located to ensure ease of access for all types / sizes of job. 5S applied to the work areas and tool storage.

5S Tools used to determine ideal flow, reduce waste, create space

and improve working conditions.

Before

New E&I work area New Mechanical area New Consumables area New Meeting Area

39 ©ITEM-HSG






Summary6

40 ©ITEM-HSG

Embedding Excellence!

Source: ITEM-HSG

Top ManagementExcellence Leader(part of global manufacturingleadership team)

Excellence BU/Reg Leaders(part of BU/Reg leadership teams)Excellence Leaderson Site Level Specialists

Direct Reporting Lines are structured along Business

Overall StrategyGlobal Communication& LeadershipLocal Communication& Leadership

Local InitiativesCommunication Training Local MetricsImplementation

41 ©ITEM-HSG

Process Orientation as Basis for SuccessImportant for OPEX successBusiness Process Management

From pure functional organisation to business process focus …

functional thinking filtering of information steering problems coordination problems

function barriers hierarchy barriers operative islands

trigger

Intransparency Dysfunctionality Double Work Redundanciestr

igge

r

+ =

Source: Müller

42 ©ITEM-HSG

Success factors for an integrated complexity management

Cross-functional dialogue and collaboration are the keysIntegrated Complexity Management

End-to-end transparency provides the right focus Good and bad complexity differentiation is mandatory

IT systems and data consistency are the technical challenges

Non-value adding complexity Value adding complexity

Effective management system

43 ©ITEM-HSG

Summary of Experiences & Success Factors in OPEX Plan long-term and select the right leaders! Establish a convincing and powerful support structure! Have and communicate a true excellence not a pure cost focus ! Train all levels from Shop-floor to Top Management! Establish and communicate a direct link between competitiveness, strategic objectives for manufacturing and OPEX! Align the initiative with other ongoing corporate programs! Visibly allocate resources to the initiative! Have key people going where the action is, motivating and engaging people (management as caring & coaching)! Leave the implementation responsibility in/with the line functions! Establish transparent mechanisms throughout! Establish a common understanding and language! Set comprehensible objectives, taking into consideration the different maturity levels of sites Source: Friedli et. al. (2013)

44 ©ITEM-HSG






Summary6

45 ©ITEM-HSG

10 Hot Topics in Pharma from an OPEX Perspective

OM: Operations Management; CI: Continuous ImprovementShift from Tool to CultureCICulture Knowledge Management

Managing Complexity

OPEX Leadership

Quality Metrics Organizing OPEX OPEX Maturity

OPEX in Network

Benchmarking the Quality. Org.

46 ©ITEM-HSG

Summary OPEX is dynamic in its nature and a never-ending journey! Managing OPEX is a leadership challenge today! Facts and Data help you to define priorities for your program that people understand and accept! In the right meaning OPEX can be a perfectly suited basis for real new quality metrics!

47 ©ITEM-HSG

The St.Gallen OPEX Books“Operational Excellence in the Pharmaceutical Industry”

Detailed overview of the result of the first OPEX Benchmarking conducted by the University of St.Gallen Shows the different key issues of setting up an improvement program for operational excellence as well as the status of pharmaceutical production with regard to lean thinking

For more information please visit: www.opexbenchmarking.com

“The Pathway to Operational Excellence in the Pharmaceutical Industry”

The follow-up to our first OPEX Book is bringing together academia's research and companies' experiences in one book Leading company representatives describe and explain their OPEX programs in-depth, discuss successful practices, and challenges (e.g. Pfizer, Wyeth, Merck Serono…)

“Leading Pharmaceutical Operational Excellence”

The latest findings from St.Gallen Research Leading company representatives describe and explain their OPEX programs in-depth, discuss successful practices, and challenges (e.g. Pfizer, Novo Nordisk, Novartis, …) Leadership Practices & Challenges

48 ©ITEM-HSG






Summary6

Date post:	21-Jul-2018
Category:	Documents
Upload:	lenhi
View:	214 times
Download:	0 times

Leading Operational Excellence€¦ · TQM JIT Overall Performance score ... We rely on vendors for...

Documents