It is a known fact that India is the world’s largest supplier of generic drugs to the world. In recent years, however, increased competition (resulting in price erosion) and reduction in FDA approvals have contributed to acute margin pressures for Indian generic pharmaceutical companies. This has forced companies to rethink their operations and see if they can reduce capacity waste and increase productivity without significant additional investment.
However, the challenge for pharmaceutical companies is that regulations require that each product (drug) is processed on a fixed, pre-approved set of machines and cannot be transferred to another comparable (non-approved) workstation. In this environment with a unique material flow, factory managers have a huge challenge to ensure proper utilization of their production equipment in the factory, while also ensuring the reliability of orders.
The Problem With Monthly Planning
To try to ensure good performance at maturity and capacity utilization, plant managers typically establish a monthly production plan with a daily dosing schedule. The problem here is that such a planning exercise cannot predict and absorb all the anomalies that will inevitably occur during the actual production process. When there is uncertainty, there is therefore an overload and underload of the routes that some products take in the factory. For example, two batches of drugs may converge in the same coating work center, resulting in additional waiting time for one. At the same time, there may be underutilization of some other work centers. Consequently, factory output is less than ideal, on-time delivery of the product becomes an issue and work-in-progress keeps piling up (with the threat of waiting time variances)!
Typical solutions that contribute to the misery in pharmaceutical factories
Faced with these challenges, pharmaceutical manufacturing planners use the following strategies.
1. Release orders ahead of schedule: To compensate for the longer drug lead times, planners release the batches early – as soon as they see the first work centers are free. Rather than helping, this exacerbates the problem by creating traffic jams downstream.
2.Batch orders together: To minimize unproductive high setup times (usually between 4 and 24 hours), planners bundle anywhere between 3 and 10 batches and release them as one large batch (“campaign”). However, such large batches mean that some orders that cannot be shipped immediately will be made (capacity theft) and that some drug orders that are needed immediately will be delayed (increase in turnaround time and speed up). The resulting and continuous pressure on capacity often leads to unnecessary Capex investments.
The solution – Dynamic Dosing
Obviously, to avoid wasting capacity, the monthly scheduling system needs to be abandoned and a daily scheduling mechanism is needed that allows releases based on the ground situation – somewhat similar to the track management system, where the signaling system loads the actual one first tracks and then schedule the train releases accordingly. This prevents overloading of the route because release only takes place on routes with sub-optimal load (route capacity-current load). Planners can choose to issue future orders if there is underload after this.
Management support – An essential aspect to implement such changes
To successfully implement this solution, the way in which raw material (RM) is purchased and how quality is assured, will also have to fit seamlessly with the daily distribution needs of the shop floor.
1. Use a dynamic buffer management system to track and replenish RM inventory according to changes in consumption (rather than buying it based on sell orders). Instead of SLAs, also use a similar mechanism to ensure the availability of QC-approved RM.
2. Creating banks of complete kits ready to be distributed – with required QC-approved RM/PM and documentation, using a separate team.
3.Use simple color-based priority triggers to communicate the urgency of each order to all stakeholders.
Continuously reducing other wastes, such as high set-up times, failures and inflated workshop cycle times, will help further improve production processes.
If the above steps are sincerely followed a pharmaceutical production plant can reach:
•Increase output by up to 30%
•Reduce stock level by ~ 25%
•About 1/3rd reduction in lead times
•Create a competitive advantage with shorter lead times
•Increase sales without additional costs/investments
•Elimination of inventory write-offs due to deviations in waiting times
• Elimination of charges related to air freight, penalties for delayed product delivery, etc.
Sounds too good to be true? Well, implement the suggestions and find out for yourself. Many have done so and are reaping the benefits.
About the author:
Achal Saran Pande
Achal (IIM-Indore) is a partner of Vector Consulting Group and helps companies implement the Theory of Constraints based thinking and flow solutions. The pharmaceutical companies Vector has worked with include Sun Pharma, Ajanta Pharma, Lupine, Strides.