Improving manufacturing efficiency is an immense opportunity for Pharmaceutical Companies says EIU

By Finfacts Team
Oct 9, 2005, 17:28

Pharmaceutical manufacturing-the production processes through which companies turn discoveries into compounds for the mass market-is gaining in importance relative to R&D and marketing, according to a new white paper by the Economist Intelligence Unit, sponsored by Oracle.

Decades of regulatory and industry standard practice are being reworked to help push operating efficiency in pharmaceuticals closer to the standards of other industries such as semiconductors, industrial chemicals, and even consumer packaged goods. The findings were based on interviews with senior businesspeople and regulators in the industry.

Both regulators and industry practitioners agree that things have to change to raise pharma's manufacturing productivity while maintaining safety and quality. Compared with other industrial sectors such as petrochemicals, there has been a very slow rate of introduction into pharmaceuticals of modern process design principles, measurement and control technologies, and knowledge management systems. According to a 2001 report for the US Food and Drug Administration (FDA) that is cited in the Economist Intelligence Unit paper, the potential worldwide cost-savings from efficiency improvements in pharma manufacturing could be as high as US$90 billon a year, the equivalent to the cost of developing 80-90 new drugs annually.

Now, leading pharmaceutical manufacturers are beginning to adopt proven best practice methodologies such as Lean Manufacturing and Six Sigma. These quality management techniques are being combined with new Process Analytic Technologies (PAT) to improve quality on the factory floor.

The key findings:

Quality must be designed from the front end, not tested on the back end.
In-depth interviews with leading figures at the FDA and in the pharmaceutical industry confirm that significant changes in organisation, and even production philosophy, are required in order for the industry's manufacturing model to move from a focus on testing to a focus on design.

Lean/Six Sigma/PAT are being used to complement existing quality efforts.
These frameworks are being grafted onto existing manufacturing quality initiatives. Lean/Six Sigma are methods for looking strategically at how a business can create value. PAT furnishes a process and technical toolkit for building in quality improvements on the factory floor. Both are needed.

Managing information is as important as mixing chemicals.
Flowing parallel with chemical and biological compounds is the reporting and paperwork inherent in a heavily regulated industry such as pharmaceuticals. Internal, regulatory and operations data are often fragmented, requiring a consolidated view of production and distribution to help optimise the manufacturing process while providing a rigid audit trail to help ensure safety.

Manufacturing efficiency can raise general efficiency.
Early pioneers are discovering that lessons learned in manufacturing can be applied to other corporate processes, such as research & development and even accounting, that can raise the overall efficiency of a drug company.

Good Enough Isn't Good Enough Anymore

Quality Digest

How project managers benefit from lean and Six Sigma
by Daniel S. Munson



The Empire State Building in New York City, with its 103 stories, 73 elevators, 2,500,000 feet of electrical cable and 6,500 windows, was built in 405 days. The framework rose at a rate of four-and-a-half stories per week. That’s nearly a floor a day. Most impressive was that the project came in under budget and ahead of schedule. Today, it seems smaller-scale projects take longer than 410 days to complete, even having the technology available to do things faster than was possible 75 years ago. How did the project managers for the Empire State Building do it? Obviously, they had to have been the best project managers of the day. They applied the tenets of sound project management and used something beyond that. They used quality management concepts found in lean and Six Sigma.

Lean has its origins in the teaching and writings of total quality management and just-in-time techniques, which espouse the idea of “delighting the customer through a continuous stream of value-adding activities.” The value stream defines the lean enterprise. The objectives of the lean enterprise are to identify and specify the value to the customer/consumer in all its products and services; to analyze and focus the value stream so that it does everything from product development and production to sales and service, so activities that don’t create value are removed; and to keep continuous flow to fulfill customer pull. From the time a customer need is recognized until it’s satisfied, the process and all its elements must add value for the value stream to be meaningful. The basic components of this lean system are waste elimination, continuous flow and customer pull.

Six Sigma refers to reduction of errors to six standard deviations from the mean value of a process output or task opportunities, or about one error in 300,000 opportunities. To put that into perspective, if you are fortunate enough to live through age 90, you would have one-third of one meal that would be defective. That’d be like getting cooked carrots that were served cold once in your entire lifetime. Simply put, Six Sigma is a philosophy of relentless efforts to continuously reduce process and product variation.

Today’s project managers have the skills to define scope, establish time estimates, provide detailed plans for task sequences, etc. They’re also skilled in budgeting, cost containment, constraint management and risk management. But do they have the tools and techniques to reduce variation and defects, and attack waste? Some project managers have these skills, others don’t. According to the project management body of knowledge (PMBOK®), control charts, cause-and-effect diagrams and design of experiments offer some help, but they’re only a few of the tools available to minimize variation. Conversely, Six Sigma offers histograms, capability studies, chi-square tests, T-tests, F-tests, analysis of variance (ANOVA), multivariant charts and scatter diagrams, just to mention a few. The PMBOK® doesn’t list value stream maps, 5-S, standard work, error-proofing, total productive maintenance, overall equipment effectiveness, TRIZ, kaizen or set-up time reductions. A project manager needs all of these tools and techniques and that’s where lean Six Sigma comes in.

Lean Six Sigma is just what the name would suggest: the marriage of lean principles and Six Sigma methodologies. The first principle of lean Six Sigma is to delight your customers with quality. The second principle says to improve process flow and speed. Lean Six Sigma emphasizes that speed is directly tied to excellence.

Are these skills really necessary?
Consider this: Forrester Research found 71 percent of respondents rated their offshore providers as achieving better quality and timeliness than their U.S. providers. That may be just a perception, but project managers need to understand that “good enough” isn’t good enough anymore. In fact, it hasn’t been good enough for the past decade as evidenced by massive outsourcing efforts, our shrinking manufacturing base and our service industry moving off shore. We need to change the outsourcing trend to “OURsourcing,” using the tools and techniques of lean and Six Sigma to regain our competitive edge.

Improvements need to be made in a triad consisting of quality, delivery and cost. Project managers must address defect rates for quality improvement and remove inefficiencies to get the job done faster. By adopting a philosophy of lean and Six Sigma, an enterprise can drastically reduce defects, deliver projects as much as 90 percent faster and reduce costs by 25 percent.

Suppose a project manager has to plan for building a bridge. The bridge needs to be completed in two years for $3 million or less. If the bridge takes 22 months to complete, it passes inspection and the final cost comes in under budget, the project would be deemed successful, right? Wrong. A project isn’t successful if a competitor could have completed the project more efficiently, with fewer defects and/or for less money—even though this project beat all of the projections. Let’s break down the 22 months it took to complete the bridge vs. the 24-month requirement. Through waste removal, perhaps the bridge could have been finished in half the time, or in a tenth of the time. Impossible? Consider this: NASCAR pit crews can top off the gas, wash the windshield and change all four tires faster than most can remove one hubcap.

Going back to the Empire State Building, it was erected in just 405 days so, to suggest that a relatively simple bridge requires 710 days (2 years) suggests a great deal of inefficiency. It should be noted that the Empire State Building project had such a good just-in-time inventory plan that many of the steel beams arrived from the forging plants to the building site too hot to touch with bare hands. That’s lean thinking. Lean and Six Sigma add the necessary tools and techniques to the project managers’ toolboxes so they can ask questions that are beyond what many project managers would ask. For example:

Was a value stream map developed prior to the bridge project to show information and material flow inefficiencies, areas of overproduction, inventory stockpiling, excessive motion and extra processing? Lean techniques use tools such as the value stream maps that help project managers to see waste that otherwise isn’t obvious.

Was a spaghetti diagram drawn to show the inefficiencies in the flow of iron and steel deliveries and cement truck routings? Were materials delivered just-in-time in a pull system fashion, or was costly inventory pushed onto the job site, sitting in skids for months? A spaghetti diagram is one more example of a lean Six Sigma tool that helps to show these inefficiencies.

Were time studies performed to help minimize the changeover processing (e.g., switching from a backhoe to a front-end loader to a plow or a crane, from one base position to another) to minimize the time waiting?

The project could’ve been finished more quickly and the cost of building the bridge could have also been drastically cut. Consider the costs associated with evaluating, inspecting, time spent deciding what to do with discrepant material, reworking, re-engineering, time wasted with trucks getting into position and machinery congestion. Add to that the nonvalue-added time associated with waiting, searching, sorting and stacking. Waste is evident when inventory is delivered too early or too late, or wherever there’s excessive motion. Lean and Six Sigma have the tools to minimize these wasteful activities.

In these wars on waste, variation and defects, the project manager needs to be able to answer tough questions—answers that lean and Six Sigma tools can provide. By adding lean and Six Sigma to a project manager’s toolbox, he or she is better equipped to ask the right questions, such as: How do you provide assurance that the bridge will be built right the first time? What is your plan for preventing defects? Is the process made mistake-proof using poka yoke designing? Are standard operating procedures established? If so, are the operating procedures consistently being followed by the operatives? How do you know? Are the processes for building the bridge in statistical control? How do you know? Is there a measurement system evaluation plan that assures that data collected is discriminate to detect variation, and that test results are repeatable and reproducible? Could the cement have been made stronger and more flexible? How do you know? Lean and Six Sigma are about asking questions and using the tools and techniques to get answers to those questions.

The project managers of today need lean and Six Sigma for balance. If asked, “Is the glass half full or half empty?” the project manager might say the glass is half full but it’s also half empty and the juice most likely is at the halfway point. The lean Six Sigma expert would probably say that the glass is twice as big as it needs to be, while the Six Sigma Black Belt would say, “There are 17 parts-per-million impurities in the liquid.” But the project manager who’s enlightened with lean and Six Sigma would say, “Quit wasting time with silly questions. It isn’t a matter of the fullness of the glass. It’s a matter of delivering a full glass of pure juice at the cheapest cost possible—quickly, before the competition beats us to the punch.”

Lean and Six Sigma have been successful in back offices, service industries, transactional processes and in enterprises that make tangible products. Lean Six Sigma has saved individual companies billions of dollars. If you’re not currently using Lean and Six Sigma, it’s time to get onboard, because “good enough” is no longer good enough.

About the author
Daniel S. Munson is an instructor and developer of educational content in lean and Six Sigma methodologies at Villanova University Online. His background includes more than 20 years at Honeywell and Storage Technology. He has consulted on process improvement methodologies worldwide. Dan is a double-certified Six Sigma Black Belt (ASQ-certified, and company certified). He’s also an ASQ-certified quality engineer. He has been the keynote speaker on various Six Sigma topics at numerous supplier symposia and quality conferences.

Six Sigma Comes to TMC

Source: Truman Medical Centers

In an ongoing effort to advance its commitment to quality patient care and service excellence, Truman Medical Centers will become one of the first hospitals in the region and one of the first safety net hospitals in the nation to implement a Lean Six Sigma program into its corporate environment.

According to TMC President/CEO John W. Bluford, implementing Lean Six Sigma is part of TMC’s Cultural Transformation II. “TMC has come along way in the past six years and is now ready to enter this new phase which will speak to more consistency in achieving perfection, the provision of better measuring tools and ongoing process improvement. The overall net effect will be a more robust "corporate metabolism" that energizes our service delivery to patients, doctors, visitors and staff."

Well-known in the corporate world, but less known in the healthcare industry,
Six Sigma develops a culture within the organization that is committed to reducing defects and improving customer service. Six Sigma is a rigorous and a systematic methodology that utilizes information and statistical analysis to measure and improve a company's operational performance, practices and systems by identifying and preventing defects in processes.

To lead this new effort, TMC has hired Kamran Jahanshahi as Senior Vice President. Jahanshahi is new to the healthcare industry, after spending 19 years in financial industries in the United States, Latin America and Europe. A Six Sigma Master Black Belt, joins TMC from Citibank where he co-developed Citigroup’s Six Sigma Program, “Customer Satisfaction & Loyalty Through People & Quality.”

According to Jahanshahi, Six Sigma methodologies aim to reduce the variation and "non-value added" activity in clinical and business process, which give rise to long cycle times, high cost and poor outcomes. A process that operates at true Six Sigma levels is producing acceptable quality levels over 99.9999997% of the time.

“This increase in performance and decrease in process variation leads to defect reduction and vast improvement in profits, employee morale and quality of product, and ultimately in an excellent customer experience,” said Jahanshahi.

Some of the world’s largest and most profitable companies – including GE, Bank of America, Honeywell, DuPont, Samsung, and Motorola – have used Six Sigma to achieve improvements in business performance, in everything from products to processes to complex systems and even in work environments.

Locally, companies such as GERC, Bank of America and Raytheon have benefited from Six Sigma.

“Truman Medical Centers has consistently demonstrated their commitment to delivering the highest quality care to the community they serve,” said Paul Black, chief operating officer, Cerner Corp. “Like their long-standing investment in healthcare information technology, the decision to implement a Lean Six Sigma program is further evidence of the importance the hospital places on excellence initiatives.”

Although hospitals have been slow to developing Six Sigma into their corporate environment, those that have developed such a program, including Yale New Haven Hospital, John Hopkins, Northwestern Memorial Hospital, New York Presbyterian and Health South, have delivered substantial gains to the organizations. Noted improvements have included:
· Emergency Department, Operating Room, Laboratory and Radiology patient flow and cycle time
· Billing, coding and reimbursements
· Reducing bloodstream infection rates in the Surgical Intensive Care Unit
· Reducing length of stay for patients with congestive heart failure
· Supply Chain Management Improvements

Experts claim a typical Six Sigma project in healthcare has delivered an average of $500,000 in annualized savings. “Hospitals have lagged behind in adopting Six Sigma methodology,” said Jahanshahi. “The past four years we’ve been seeing more and more healthcare leaders beginning Six Sigma programs, but this includes more of the pharmaceutical, insurance and for-profit health systems, not direct, not-for-profit healthcare providers.”

So why is TMC becoming one of the first not-for-profit healthcare providers to use Six Sigma? “We are implementing Six Sigma now because it is consistent across many industries, businesses and companies that are trying to meet different challenges like marketplace instability, reimbursement rates and access to capital,” said Bluford.

The Lean Six Sigma program at TMC will be called “TMC Innovation Process (TIP)” and will begin in the fourth quarter of 2005. The launch of TIP will include the training and projects of Six Sigma blackbelts (approximately 4% of exempt employees) and greenbelts (approximately 40% of exempt employees).

“These projects will be across the organization and will be more about a shift in the culture of the organization,” said Jahanshahi. TMC expects to see improvements in the third quarter of 2006.

Bluford states that net effects of implementing Lean Six Sigma is to become a fit, trim, efficient and quality laden organization. “This is one of several tactics we are using to get to that state of affairs,” said Bluford. “You will see a quicker pace, more ideas and better execution of ideas.

Government's BPM Imperative

CIO Australia

Peter Fingar, CIO

30/09/2005 10:27:54

Tear down those walls with business process management.

The 21st century mandate for business is Do More With Less. The 21st century imperative for business is Business Process Management (BPM). The 21st century mandate for government is Do More With Less. The 21st century imperative for government is Business Process Management.

The Aberdeen Group says: "Business process management enables government agencies to dismantle obsolete bureaucratic divisions by cutting the labour- and paper-intensive inefficiency from manual, back-end processes. Faster and auditable processes allow employees to do more in less time, reducing paper use as well as administrative overhead and resources. The BPM category may arguably provide the greatest return on investment compared to any other category available on the market today." But there's a catch.

The term "BPM" has been adopted in the marketing communications of just about every IT vendor and management consultant, as what comes after the dotcom fiasco. It seems everyone selling IT products or management consulting services has put BPM lipstick on their products and services. Even the IT and financial analysts are having a field day defining BPM to mean whatever they want it to mean. BPM is a business discipline or function that uses business practices, techniques and methods to create and improve business processes. From this general definition, just about any process improvement discipline or activity, including re-engineering, TQM or Six Sigma quality methods, outsourcing and lean manufacturing, can be considered as BPM. Thus, from an extremely general perspective, BPM has no distinguishing definition at all; it's just about anything that contributes to process improvement - it can mean whatever you want it to mean.

On the other hand, the term BPM has been propelled onto the front pages of the business and technology literature for far more specific reasons. Whether manual or automated, ­companies have learned that the piecemeal process improvement methods and techniques they have scattered throughout their organizations don't produce breakout results. BPM in its contemporary context is a holistic vs piecemeal approach to the use of appropriate process-related business disciplines that can drive business performance improvements, not just across the departments in a single organization, but also across multi-organization value delivery systems. This approach has only now become practical as a result of the new category of BPM software systems.

My Government, on My Terms

E-government does not mean putting scores of government forms on the Internet. It is about using technology to its fullest to provide services, and that's where process-powered e-government comes in. Today's constituents demand "my government, on my terms", and agencies must support citizen-centred, customer-focused government. Whether it's G-to-G, G-to-E, G-to-B or G-to-C, government agencies must do what businesses are challenged to do, and that is to tear down silos of information, and go beyond just data sharing to actually "conducting business".

In order to tear down silos of information, agencies must organize their portals around customer groups and topics, instead of agency names. Examples of cross-agency portals include: students, people with disabilities and exporters. But instead of just serving up zillions of documents, portals must allow their users to actually do business online.

It's two sides of the same coin: Users should be able to select an appropriate gateway - citizens, businesses, nonprofits, and federal employees - to find exactly what they need. Then, from their computers, the users should, under process-governed controls and mechanisms, apply for student financial assistance, buy government publications, apply for social security benefits, request an export licence, apply for a passport, and so on. It's the combination between the "finding" and the "doing" that will make government effective, and that's why process-powered e-government is imperative.

Government agencies that want to increase their effectiveness in this new way of operating must bite the bullet and take on the challenge of making process, not data, not the back-office application, the basic unit of computer-based automation and support. They must shift their focus from "systems of record" to "systems of process".

In short, "data processing" must give way to "process processing" if agencies are to actually deliver services and not just data and documents. This concept extends beyond publicly accessible portals and on to the back office of government operations. For example, the Australian Department of Finance & Administration faced the major challenge of processing, tracking and dealing with the large volume of information related to ministerial operations, including the Ministerial Briefing, Question Time briefing, Parliamentary questions and cabinet meetings, as well as all ministerial correspondence. To address these challenges the department created the Parliamentary Workflow System (PaWS), that promotes better staff collaboration with process consistency. The BPM solution has helped the department to make processes run more efficiently, and gives it the agility it needs to respond to changing conditions, new regulations, and higher demands for service.

It is not just about doing more with less resources and effort, but rather doing more by working smarter. To generalize, the department's example means that employees, businesses, and citizens must share not just a "data base" but an actionable "process base" that is always on and always up to date, allowing constituents to "get things done". Agencies need "systems of process", not the after-the-fact "systems of record" of typical back-office applications.

Beyond Boundaries

Ever since former US Vice President Al Gore "invented the Internet", progressive governments around the world have pursued e-government initiatives, some more successfully than others, especially those that approached the endeavour as a one-time automation event. In today's global economy, a nation's effectiveness depends on governments meeting the challenges of process management, not just one-off process automation, for operational effectiveness is not a one-time affair. The processes agencies use to deliver their services must meet the ongoing changes introduced by new legislation, the requirement for governments to interact with other governments at a process level in areas such as security and trade, and response to unforeseen events. Furthermore, G-to-G process management must go beyond national boundaries. Just a few years ago, you wouldn't find foreign nationals inside US government installations. Today, it's common to find Australians working side-by-side with US nationals in those installations - both physically and virtually over secure Internet connections.

But all this doesn't come easy. The Washington Post reported, "A report card issued in February 2005 by the government reform committee, which is chaired by Rep. Thomas M Davis III, gave the government as a whole a D-plus for computer security. Several major government departments - including health and human services, energy, and homeland security - received Fs."

Australian BPM consultant Roger Tregear of Leonardo Consulting provides a road map for managing expectations, The Rule of 3s, an indicative timetable for the adoption of process-based management across an organization. 3+3+3+3: 3 months to promote the ideas of BPM and get executive commitment to process-based management; 3 weeks to establish and agree the analysis framework, modelling conventions, and overall process architecture; 3 months to get appropriate tools, techniques and support structures and systems in use and delivering results; 3 years to fully achieve true enterprise-wide process-based management orientation. In government, as in business, BPM is not an event, it's a journey. Let the journey begin.

Peter Fingar, executive partner in the digital strategy firm the Greystone Group, is one of the IT industry's noted experts on business process management, and a practitioner with over 30 years of hands-on experience at the intersection of business and technology. He is co-author of the landmark books: The Real-Time Enterprise: Competing on Time; and Business Process Management: The Third Wave (www.mkpress.com). He can be reached at pfingar@acm.org

For more of Peter Fingar's views on business process management, see "Competition Gets Extreme" in the September 2005 issue of CIO

Solectron Drives Lean Six Sigma Manufacturing to its Suppliers

Supply & Demand Chain Executive

By Editorial Staff

Electronics manufacturer honors sites for quality achievements; first-annual Supplier Day focuses on "Embracing Lean" theme

Milpitas, CA — September 30, 2005 — Solectron, a provider of electronics manufacturing and integrated supply chain services, is moving forward with its lean manufacturing initiative with two consecutive events — the first-annual Global Solectron Production System (SPS) Kaizen Competition and its Supplier Day conference to help drive lean into the supply chain.

Solectron said the Supplier Day conference gathered several hundred suppliers for a full day of keynotes and educational sessions to help encourage suppliers to embrace lean manufacturing.

Solectron announced the Penang, Malaysia, facility as the winner of Solectron's first annual Global SPS Kaizen Competition. SPS is the company's Lean Six Sigma methodology for continuous manufacturing improvement in quality and efficiency. Solectron employees have completed more than 5,000 Kaizens, a Japanese term that means continuous improvement, this year throughout its global operations.

"At Solectron, Lean Six Sigma is a way of life on our shop floor, which allows us to bring tangible business benefits and cost savings to our customers worldwide. After two years of the lean journey, we are expanding our vision to include our suppliers for creating a truly differentiated supply chain," said Marc Onetto, Solectron's executive vice president, worldwide operations. Onetto explained that the Global SPS Kaizen Competition was designed to recognize the work Solectron employees are doing worldwide for the company's customers. "We are thrilled to recognize the Penang, Malaysia, team as our first winner, and applaud all of our finalists for their commitment to customer satisfaction," he said.

Entries for the contest were submitted from over 50 Solectron sites around the world. From those entries, 11 finalists from Europe, Asia and the Americas gathered in San Jose, Calif., to recognize the winner. Judges included Jim Womack, founder of the Lean Enterprise Institute and co-author of Lean Thinking, and Chichiro Nakao-San, who spent over 30 years at Toyota Corp., refining its ground-breaking manufacturing methodology.

"Lean has fundamentally changed the manufacturing landscape, led by Toyota," said Womack. "The future of the EMS industry is found in Kaizen. But to reap the full value and benefits of lean, Kaizen must permeate up and down the supply chain — from [original equipment manufacturers (OEMs)] to suppliers."

Solectron's 2005 Supplier Day formally launched Solectron's lean supplier program, which forms the foundation of Solectron's vision to deliver competitive supply chain solutions to its customers. The one-day event included breakout sessions on Lean 101, an introduction to the Solectron Production System; Solectron's Lean supply chain program; an overview of increasing customer value through design and engineering for Lean production; and Lean deployment from a supplier perspective.

Most recently, Solectron's manufacturing plant in Columbia, S.C., was recognized as one of the 10 Best Plants in North America by IndustryWeek magazine for lean implementation and value to customers.