Implementing Lean and Operational Excellence Initiatives Within a Distribution Strategy



Pharma IQ
03/29/2011

Lean has existed as a concept for more than 40 years, but it is really only in the past two decades that the pharmaceutical industry has begun adopting it as a philosophy.

The ultimate aim of Lean is to create a system of processes which provides ultimate value for the consumer with zero waste. In reality, of course, the implementation of lean strategies usually ends in the reduction of waste rather than its elimination.

One of the common misconceptions surrounding Lean is that it can only be applied to manufacturing operations, and this is one point where Robert E Spector, principal at Tunnell Consulting, claims pharmaceutical companies have been failing to realise Lean's full potential.

Writing for PharmaManufacturing.com, he explained: "Without focusing on the entire supply chain benefits will be limited; long lead times and high inventories within external logistics pipelines tend to cancel out the greatest Lean successes in operations."

Changes afoot in pharmaceutical distribution

Recent analysis produced by PwC identified that in the future, particularly as more biopharmaceuticals are developed, supply chains "will become an increasingly important source of differentiation for makers of medicines."

Published as part of the Pharma 2020 series of reports, Supplying the Future: Which path will you take? said the current supply chain and distribution strategies in place are ill equipped to deal with the future demands which will be placed on the pharmaceutical industry.

"The current pharmaceutical supply chain worked well when the 'blockbuster' paradigm prevailed, but pharma's focus in a post-health reform world is shifting from products to patients, and their supply chain processes need to adopt the speed and agility of other, more consumer-oriented industries," the report said.

It identified four key scenarios which pharmaceutical companies could implement in the coming years to overhaul their supply chain and deal with the challenges which lie ahead.

For mass-market manufacturers, in particular those which produce generic drugs - the number of which are likely to grow with the number of patent expiries happening in the near future - one option was said to be to "position themselves as high-volume, low-cost providers."

To do this, it was said these manufacturers would take on the Lean ideology and look to minimise waste and reduce the time it takes their products to get to market.

Lean distribution

The key principle for pharmaceutical companies implementing Lean strategies within any part of their operation is ensuring controlling risk and improving operational efficiency is equally balanced.

PharmaManufacuring.com's editor-in-chief Agnes Shanley explained in an article on the website that the problems experienced by the car manufacturer Toyota, the creator of the Lean methodology, in relation to defective products had thrown this issue sharply into the spotlight.

"Toyota’s situation has created a greater awareness within the pharma industry, of the need to manage risk in a much more systematic way," Ulf Schrader, a partner in McKinsey's German office and leader of the company's Pharma/Ops joint venture, told the news provider.

Others argued that despite the strong imperative for quality within the pharmaceutical industry, it still lags behind other sectors when it comes to continuous improvement.

The PwC report suggested the key to creating a cost-effective supply chain was said to be a thorough understand of costs, particularly as new medicines do not always fetch the high prices they once did.

Currently, many manufacturers are looking to develop products and then simply "scale up" their existing supply chain, "but this locks in expenses that would otherwise be unnecessary and creates problems further down the line".

"Conversely, if the development and manufacturing functions work closely  together, the manufacturing function  can advise on any issues that have  implications for production and develop a  supply chain as early as possible," the report said.

For this reason, ensuring operational excellence within a distribution channel begins very early in the drug development timeline, by understanding just what is needed and how much it is likely to cost.