Drawing a line
Some drug companies see the potential advantages of JIT manufacturing, but don't believe that current pharmaceutical production
processes are sufficiently quick, robust, or reliable for JIT concepts to be applied throughout the whole supply chain. The
technique of postponement can enable JIT approaches to be appropriately applied to complex supply chains, says Thomas. Postponement puts a dividing line between separate planning techniques within a supply chain. Slow and unreliable processes can be run
as push systems, and quick, robust processes as pull systems, he adds.
The line, or push–pull point, might be in a different place for each product, but manufacturers can follow basic guidelines
to find the right spot. Companies typically produce consistent, large quantities of active pharmaceutical ingredients (APIs)
on equipment that operates at a constant speed. This process runs best as push manufacturing, Thomas says, so postponement
would have to occur after this process.
Pull systems need manufacturing steps with short lead times to enable responsiveness. The time between ordering and receiving
materials must be relatively short after the push–pull point, says Thomas. Pull systems also require reliable and robust processes.
If the product can be stored in a stable state, the push–pull point can occur after final dosage-form manufacturing. Upstream
processes often exhibit long lead times and high variability, Thomas says.
The best place for postponement might be the point at which a product is differentiated such as the labeling, packaging, and
shipping processes. If the process of packaging pills in bottles, cartons, and cases for shipping is fast and reliable, "what
we might want to do is keep a relatively large inventory of tablets close to the packaging lines and label, carton, and ship
them when we receive an order," Thomas says. Running product-differentiation processes in a pull system protects a manufacturer
from fluctuations in demand and inaccurate forecasts. Postponement can thus help a drugmaker achieve sales without waste,
with less inventory, and with better use of its assets.
In addition, postponement can greatly increase supply-chain efficiency and improve order fulfillment, thus benefiting distributors,
retailers, and patients. Cartoning, packaging, and distribution plants differ from country to country, and incorporating these
procedures into a pull system prompts a manufacturer to "design and employ manufacturing and distribution assets that are
in sympathy with the characteristics of the region and the market," explains Thomas.
A pharmaceutical manufacturer must understand the inherent reliability of its process because postponement exposes variability
in production. It is better to make manufacturing processes more robust and responsive before incorporating them into a pull
system, Thomas says. Otherwise, a pull system would expose unreliability and unresponsiveness in the manufacturing process
by not fulfilling customer orders.
From theory to practice
Several pharmaceutical manufacturers have incorporated JIT concepts into parts of their supply chains. Roche uses projections
of market demand to determine how much of a dosage form (e.g., tablets) it will need in specific markets and runs its production
accordingly. Semifinished products are planned and replenished weekly or monthly depending on demand, according to Wegmann.
"We use our equipment efficiently and work hard to minimize downtime for cleaning and changing instrumentation," Wegmann says.
The company produces drugs in campaigns (i.e., multiple batches of the same product), but distributes the campaigns throughout
the year to keep inventory levels low. The strategy helps Roche to be responsive to the market and satisfy demand, Wegmann
To further reduce inventory levels, the company organizes events during which employees throughout Roche's production network
pool their knowledge and capacity to continuously improve the production of chemical and biopharmaceutical products. Often,
one site transfers semifinished products to another for the next stage of manufacturing. "We have synchronized our manufacturing
network a lot more than we traditionally did and have created a high level of transparency along the whole supply chain,"
MedImmune has gotten a huge benefit from JIT concepts by applying them to its raw-material purchasing, McNelly says. Because
sampling and analytical testing are so expensive, pharmaceutical and biopharmaceutical companies have traditionally bought
and stored large quantities of raw materials, testing them only upon receipt so they would be available when needed. Several
years ago, MedImmune used an economic-ordering-quantity calculation to compare the cost of acquiring and testing the materials
with the cost of carrying them. The company realized it had been ordering too much of various products, which lay unused for
long periods. "We cut quite a bit of inventory out of our system by using the JIT techniques to optimize the inventory," McNelly
MedImmune applies JIT principles throughout the process for manufacturing its "FluMist" live attenuated influenza vaccine.
The vaccine is made in eggs that the company receives no more than seven days after they are laid. MedImmune must inoculate
the eggs with the master virus and grow the virus in an incubator within eight days. The company applies JIT principles to
its egg flow because the eggs' shelf life is limited. "If we don't do that right from a JIT perspective, we can shut the plant
down or we have obsolete eggs that we would have to throw away," McNelly says.
Three facilities produce different strains, known as monovalent bulk, of the flu vaccine. After they're manufactured, the
strains enter another facility to be blended into a trivalent vaccine. "We regularly have a monovalent show up a day or two
before it must be used in our facility because we minimize the amount of bulk that we have to keep the supply chain moving,"
McNelly explains. After production, the vaccine is sold within three to four months.
The whole ball of wax
In 2005, Novartis developed an operational-excellence strategy called the Target 2010 Vision, which was to become "the Toyota
of the pharmaceutical industry," van Laar says. The project's goal was to improve the company's business by applying JIT principles
to the entire supply chain—including manufacturing sites, distribution, and transportation—for Novartis's major products.
The company began by assembling crossfunctional teams at major manufacturing sites. Each team toured its site to understand
its production processes and how work flowed through them. In a half-day meeting, the teams learned about JIT principles and
how they could improve drug production at their sites. Next, teams brainstormed to come up with radically revised processes
that incorporated JIT concepts. The idea was for employees to invent creative solutions with no constraints on their thinking,
says van Laar.
After mapping out on paper how current processes worked, thereby revealing waste and inefficiencies, teams identified a future
state for their processes. Each team's goal was to use JIT principles to achieve their future state within two years.
Part of the process entailed changing the company's organizational structure to increase speed and reduce waste. Novartis
eliminated traditional functions and departments at its manufacturing sites, replacing them with process-oriented organizations
(i.e., teams aligned around products). The aim was to streamline and empower manufacturing teams. "Most of our sites had between
five and eight levels of management, and now they have three," says van Laar.
As employees gained experience in applying JIT concepts, Novartis began to extend its approach to more of the company's sites.
JIT projects branched out from manufacturing sites to the rest of the supply chain. By 2010, the company expects to have transformed
its business and achieved measurable improvements in inventory, speed, flexibility, and cost. Novartis has already reduced
the throughput time for some products by 50–70% and reduced inventory by about 30%, says van Laar.
The pharmaceutical industry's interest in JIT manufacturing is not likely to wane. Pressure on drugmakers' margins is mounting,
and companies see JIT concepts as ways to reduce costs. The scientific and process understanding that a drugmaker achieves
through FDA's QbD initiative would likely help it improve production and set the groundwork for JIT manufacturing.