Lean Manufacturing for the Competitive Edge

Factors within the pharmaceutical industry have combined with economy-related issues to force pharmaceutical companies to seek new ways of maintaining or regaining their competitive edge.  Increasing globalization, scarcity of new blockbuster drugs, growing regulatory burdens, the failing we-are-different attitude, and a longstanding emphasis on R&D at the expense of production are all making it necessary for pharmaceutical manufacturers to strive for lower costs, increased efficiency and speed, and sustainable quality improvements. Although some companies are turning to lean manufacturing to accomplish these ends, they have achieved widely varying degrees of success to date.

In today’s pharmaceutical market, staying competitive comes down to two key elements from which cost reductions inevitably flow:  speed and quality.  The task involves eliminating all forms of waste on all fronts – everything from supplier networks and customer relations, to product design, factory management, inventory handling, time management, and all non-value-added activities.  One of the major drivers behind pharmaceutical’s adoption of lean manufacturing techniques as a means to eliminate waste is globalization.  With the buffer provided by blockbuster drugs eliminated, increasing global competition together with the consequent shorter periods of drug exclusivity has resulted in the need for everything to happen faster. Still, quality remains paramount, and therein lies the rub.

Developed by Toyota in the 1950s, lean manufacturing’s primary goals are reduction or elimination of waste in all segments of the production process, and continuous quality improvement.  In its simplest form, a lean manufacturing implementation is about doing more with less as efficiently and economically as possible, without compromising quality or responsive to the demands of the customer. Historically, the pharmaceutical industries successful implementation of lean manufacturing techniques has been pretty dismal as measured by inventory turns, however.

Although somewhat indirect, inventory turnover can be a good indicator of how well a company is implementing lean manufacturing. The factors that contribute to a competitive edge are speed, quality, and cost—all of which lean manufacturing bolsters by reducing inventory, which in turn speeds up the production process when process improvement remains the primary consideration.  Additionally, reduced inventories can greatly enhance cash flow.

Consider, if you will, the success story of Merck.  Lean manufacturing solutions provided Merck the means to improve inventory turns by transforming its supply chain, thereby improving its margins. What Merck did was to replace the traditional, rigid, top-down approach to production planning with more flexible supply-chain processes responsive to customer demand.  The company simultaneously kept a close watch on the three main components of lean manufacturing:  continuous flow in production, continuous improvement in production processes and quality, and a focus on value for the customer.  The results were impressive:

  • Changeover time on certain production lines – 50% reduction
  • Inventory costs related to production – 30% reduction
  • Plant-level operating expenses – 20% reduction

By implementing lean manufacturing’s pull system and using value-stream mapping as its main tool, Merck improved the efficiency and speed of production, and cut costs without compromising quality.

Sue Capps Morris, Senior Vice President of Manufacturing Operations- Americas, summed up the benefits of lean manufacturing solutions for Merck this way: “By implementing, we will completely transform how we manage production, view our work, organize our business, and, ultimately, we will change our culture to a ‘lean-thinking and performing’ one.”

In this time of shrinking profit margins, and increasing pressure of globalization and global competition, lean manufacturing could prove to be just what pharmaceutical manufacturers need to recapture that all too elusive competitive edge.

To learn more about how lean manufacturing strategies can streamline your business and improve your bottom line, visit Smart Lean Manufacturing .

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