Supply chain progression

Manufacturing and supply chain management is pivotal to the success of pharmaceuticals. With this in mind, what is being done operationally to progress the efficiency of its systems? NGP talks to Barthold Piening to find out.

Pharmaceutical companies invest extraordinary amounts of time, money and ideas into their R&D stages, so it is with no surprise that their supply chains and manufacturing stages should do exactly the same. If a drug is lucky enough – which nowadays means it’s successful enough – to get through to the production stages, that ‘golden ticket’ falls into the hands of a few to efficiently see it through to its final stages. Without these champions of the manufacturing leagues, many would be left literally fending for their lives, void of the drugs they so desperately need.

With the acceleration of technology and communications over the past two decades, pharmaceutical companies have had the luxury of utilising an extensive knowledge base to implement supply chain and manufacturing systems that surpass anything the industry has previously witnessed. Barthold Piening, EVP of operations at Nycomed, has a privileged perspective of what the world of pharmaceuticals is doing to deliver and progress its manufacturing expertise. “I pretty much grew up in manufacturing,” explains Piening. “I was focused on technology, construction, factory design, supply chain management and some project work launching products globally.”

With so much experience already under his belt, Piening has a firm grasp on the challenges facing the pharmaceutical supply chain. “I’m a little bit biased from the current company perspective,” admits Piening. “In the old pharmaceutical industry we saw a move from the typical high-margin, high-volume, so-called blockbuster products that we had quite frequently seen in the industry in recent years. Today, many companies have the challenge of going into much smaller, niche-related, specialised products that are, from a manufacturing background, characterised by lower volumes, more complexity and from a business perspective, often lower margins.

Motivation

“It’s not only in manufacturing. It affects all organisations. We see a price pressure more or less everywhere – even in emerging markets where we have seen the effects of the financial crisis in the last year – and we see plenty of margin pressure. , It was much easier in the past to handle a high-volume, multi-billion tablet product with efficiency than it is to manage the complexity of smaller products today. With this in mind, we started our operational excellence programme in the conceptual stage roughly two years ago. Now in its implementation stage, we have been gathering some first experiences of the project which is fascinating to see.”

The main advantage with projects such as operational excellence or Six Sigma is that you have the ability to involve, motivate and activate almost all of your employees. Whereas in the past, initiatives for special projects would be set up for higher-level management, these new projects affect the whole organisation and provide the huge potential of improvement ideas and concepts for the organisation as a whole. The key to all of these projects is how to open employees up to contributing to the process.

“We have invested a lot in the training, education and personal development of our shop floor employees,” continues Piening, “which was regarded as a major benefit for the individual employee. To give you a number, we have now touched roughly 10 percent of our workforce with education and training programmes to get into operational excellence, and are finally starting to see the fruits and to harvest from this campaign.”

However, while the human element is obviously the most important aspect in making a system as efficient as it can be, it carries the duality of also being the biggest potential obstacle during the implementation stage; resistance from employees and misunderstanding can make or break a programme. “Certainly there are some barriers to overcome. I would say the major barrier is not motivating and activating the shop floor employees, it’s more to get  the management support and buy-in. 

“People are so occupied with what they do and how they did it in the past that readiness to change is sometimes tougher to achieve in the higher management tiers rather than on the shop floor level. We have seen fantastic enthusiasm on the shop floor where people were extremely happy to get additional training, and then to apply what they have learnt in real-life projects immediately. This was perceived very positively. You have to make sure that someone sees additional opportunities from a new perspective and to take up new methodologies in contrast to what they have done in the past. Many of them were convinced that what they did in the past was the only right way of doing things, so changing their minds and going into new areas was pivotal.

“If we can achieve this change on the management level, it goes beyond the typical budget thinking. Normally, everyone on the top management level is thinking about our budgeting process. What we need is a change in the mental philosophy to think beyond budgets and to think that wherever we can improve, we want to improve.” With this in mind, Piening has adopted a multi-faceted approach to Nycomed’s operational excellence programme.

Flexibility

“In our company, we have decided to not only use one lean methodology and to make ourselves intentionally flexible. We apply Six Sigma. We apply lean Six Sigma and push the continuous improvement and 5-S quality management wherever it is feasible. We have the complexity of different types. For example, Latin America, India and Russia have different levels of technology than the centre of Europe and the US, so we said very early on that we don’t want to apply just one tool. There must be a common understanding – which we call operational excellence – that can give a variety of different tools to the teams, and whatever is appropriate, they can apply.”

And while this certainly gives Nycomed, and Piening, the luxury of being slightly more flexible than other companies, they still have to share the same air when it comes to tackling increasing regulatory hurdles. “We don’t have a problem when it comes to higher regulatory requirements coming from the FDA and we certainly comply well with the FDA guidelines. Our major challenge comes from having to operate all over the globe and comply with each and every regulatory requirement. This gets increasingly complex and could do with a harmonisation between the FDA and EMA  – and in the future all emerging markets that will also be conjuring up their own specific requirements.

“It’s a very real challenge because it gets more difficult to have just one standardised system, instead companies have to lean towards tailor-made solutions, for example to fulfil as well specific requirements for certain emerging markets, which makes things more complicated. In addition to this it is important for us to now focus much more on the typical, state-of-the-art forms of supply chain management and to catch up with other industries in order to reduce our lead-time, increase our flexibility and to reduce our inventories. In former times, far more emphasis was based on the marketing and R&D side, but since the margins are going down in general, our contribution will be much more important in terms of cost-effectiveness and working capital management.”

It is here that the true contribution from supply chain management prevails. In order for a progression to be made that will affect the discipline’s future, the management of information from the market – from point of sale to the manufacturing side – needs to become more focused and efficient to allow the backbone of pharmaceuticals to develop. As Piening puts it, “this is our key vision.”

Biography

Barthold Piening is EVP of Operations at Nycomed.