Lean thinking for pharma executives

By Chris Ellins

Virtually every pharma organisation across the world has embraced Lean thinking as a means to engage their organisation, drive structural change, pursue and eliminate capital redundancy, and liberate cash, usually in the form of excess inventories. Most organisations have embraced Six Sigma too, leveraging DMAIC (define, measure, analyse, improve, control)-as a means to drive robust problem solving and using advanced statistical tools to create and then assure process capability, especially within their industrial and process engineering communities.

When asked, the vast majority of pharma VPs are more or less content with their progress, have a clear vision of their ideal state, have embraced rhythm scheduling as a means to enable flow and are beginning to turn their attention to the improvement needs of back office, research and development and logistics functions. All in the garden of Lean pharma would seem rosy.

However, off the record, most VPs are more candid about their progress and after a glass of wine or two, highlight openly areas of concern and insufficiency. Marketing functions are disconnected from global supply teams, reducing the voice of the customer often to a measure of on-shelf availability within a wholesaler or agent. No single individual owns the customer or the enabling supply chain end to end or through life, and where moves are underway to address this, then VPs are only at the beginning of figuring out how to make this work in a matrix organisation. Managers encouraged to make improvements focus their efforts within their span of control, optimising their own business function, often at the expense of the system as a whole.

The responsiveness of final packing is sluggish despite rhyme scheduling, with the responsiveness of many packing lines still languishing toward an ‘every product every interval’ of four weeks or more. Inventory levels remain high despite significant investment in ERP and demand management systems with enterprise stock turns rarely above two per annum. The availability, performance and effective utilisation of capital assets are poor, with OEE levels rooted stubbornly between 35 to 55 percent.

Local interpretations of GMP and FDA guidelines place severe restrictions on manufacturing flexibility and responsiveness; however, there is a distinct reluctance within the organisation as a whole, and within the quality function in particular, to embrace ideas from other industries and adopt solutions that uphold the spirit of the FDA and eliminate risk, and yet enable fast, flexible flow. Perhaps the garden is not quite as rosy as it would first appear.

If this is true and more representative of the challenges faced – then where does big pharma go next with Lean? How might industry leaders more successfully identify and eliminate the root causes of underperformance and obstacles to flow? If we are bold then how might we leverage fully Lean thinking and six sigma tools to drive innovations in products and services, delivered waste and defect free, and in so doing provide greater value to patients, payors and shareholders in established and emerging markets?

Lean thinking: the value creation matrix
Figure 1 presents the key strategies, processes and behavioural enablers of almost all Lean enterprises. This framework enables organisations from any sector to contextualise their challenges, understand the different enablers to different types of improvements and reveal the gaps in their thinking, and helps executive teams build a road map for the next stages of their organisations’ development.

The value creation framework enables executives to redefine their problems, differentiating between cause and effect, and encouraging them to focus their attentions on strategy, systemic alignment and talent management.

If followed, the framework encourages pharma executives to ask themselves the following questions: What compelling products and value adding services might we offer payers and patients enabled by innovations in process capability? What combination of leadership skills, market insight and operational awareness will enable us to imagine and construct them?
How might value stream thinking guide the design of end-to-end, through-life value streams that transcend functional structures yet leverage fully the functional capability and expertise available? What knowledge, skills and behaviour are needed to conceive their design, gain support for their introduction and sustain their implementation?

How might systemic transformation be achieved without losing management control or talent? How might we leverage Lean thinking to enable fast, flexible flow throughout our organisation, defect- and waste-free, without exposing patients to unacceptable risk?
What knowledge, skills and behaviours must we nurture throughout the organisation to enable performance to be improved at a rate that exceeds the annual reduction in drug costs demanded by institutional payers?

Left to right and right to left thinking

To answer the first of these questions, pharma executives must look simultaneously inward and outward – a process known as ‘left to right and right to left thinking’.

Left to right thinking encourages an organisation to focus internally, to map its current state, to identify waste and the causes of variation, to standardise process and to set about the elimination of root cause. Right to left thinking, in contrast, looks to the burdens endured and the benefits enjoyed by patients, payers, GPs, pharmacists and supply chain partners and seeks to provide compelling propositions enabled by Lean processes.

Left to right thinking tunes the senses to waste and enables individuals and operating teams to learn, practice and master their craft. It is accessible, galvanising, immediately rewarding and falls within the span of control of most managers.

Right to left thinking, in contrast, forces teams to define value through the eyes of their current and future customers, ensures we are improving the right things, drives innovation and ensures the voice of the customer penetrates deep into their organisation. It is strategic, imperfect, carries more risk, transcends organisational boundaries and scares the holy bejesus out of all but the most strategic.

Seeing the whole

By answering the first of these questions, one very rapidly find oneself asking the second. How do we design an end-to-end flow? How do we forge a relationship with our customers through life? Who is going to design and implement the future state and oversee its successful implementation? How do we deal with legacy assets and behaviour? How should we navigate a route through the choppy waters of transformation?

Many VPs at this point decide to put their pens down and content themselves with the path of least resistance. History suggests they should have more courage.

Clayton Christenson has written extensively on the merits of “Skating to where the money will be” and his work suggests disrupting markets with process-enabled innovations offers a significant and sustained advantage to the supplying organisation. Dan Jones has consistently encouraged practitioners to “see the whole”. His research suggests end-to-end alignment typically liberates about 20 percent of the total system cost and 75 percent of the throughput time. Combined companies can enjoy the equivalent of corporate alchemy – a lot more out for a lot less in.

However, combining left to right and right to left thinking has its challenges. Implementing organisations need to identify the current and future values of different patient groups. They must learn to design value propositions that are compelling to payers and patients alike and that are enabled by process, making them difficult to simulate. They must learn to translate propositions into value stream designs and deploy these while remaining in control of today. They must equip each value stream organisation with the skills, knowledge and behaviour to prosper without diluting functional best practice and they must recognise and mitigate risk.

In the next NGP publication, I will explore the process of transformation and the practicalities of driving daily improvement within value streams. In what remains of this article, I would prefer you to reflect.

The pharma industry has made enormous strides to embrace Lean thinking in recent years and for the first time it has grabbed the imagination of more than the operations community. With a bit of courage and skill, pharma companies can combine compliance, standardisation and the reduction of operating expense with process and proposition innovation.
Left to right, right to left or an informed combination of the two?

As an industry we have a once in a lifetime opportunity to reduce operating expense and provide service innovation. Let’s not let it pass us by.

Biography

Chris Ellins and Total Flow, the organisation he founded in 2005, are regarded as innovators in the world of Lean enterprise. Chris is an expert in customer value creation, end-to-end value streams, the elimination of systemic waste and the realisation of waste-free production systems.