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A case study describing how Lean can drive the creation of an improved culture within pharmaceutical companies.
Over the last decade lean management has become the vital driver of operational change, eliminating 'waste' and improving processes. From the Toyota shop floor, where the Toyota Production System was first introduced, Lean solutions have evolved, become more experimental and have now been implemented in all kinds of manufacturing industries including the pharmaceutical manufacturing sector.
( PETER GRIDLEY/GETTY IMAGES)
This article describes how Lean can not only provide the basis for an overall business system, cutting the time taken from creation to profit, but also how it can drive the creation of an improvement culture within pharmaceutical companies.
Lean can best be defined as a 'long-term philosophy of growth by generating value for the customer, society, and the economy with the objectives of reducing costs, improving delivery times and improving quality through the total elimination of waste.'1 It is derived from the Toyota Production System which was introduced by Toyota's Taiichi Ohno, a Toyota executive and father of the Lean concept, in the 1950s as a successful response to competition from larger car manufacturers.2
It is important to note that Lean is heavily based on the principle that continuous improvement can be found through the power of respect for people. 'The culture of the company is crucial in designing the business system that motivates people to want to improve, teaching them the tools of improvement and motivates them to apply those tools every day.'3 Lean therefore, must go beyond just the manufacturing process and business strategy; it needs to involve all employees, at all levels and not just the decision-makers, in order to be successful. While the concept is simple and inexpensive, it needs commitment and determination to work. It is estimated that 50% of change programmes like Lean fail to deliver or be sustained.4
Since several large pharmaceutical organisations had shown a willingness to simplify operations and processes, and reduce costs via Lean, such as AstraZeneca, Johnson and Johnson, and Pfizer, which had implemented Lean Six Sigma,5 more organisations within the industry have pricked their ears to the benefits Lean can provide.
One major concern for many pharmaceutical companies looking to implement a Lean methodology is how to integrate it into its current good manufacturing practice (cGMP) approach, where the main aim is to deliver a safe and effective medicinal product and the need to control the manufacturing environment.6 In fact, contrary to this concern, Lean and cGMP go hand-in-hand, as quality is sustained at a higher level with lower costs due to the Lean principles that are applied.
Procedures must also comply with regulatory requirements. One such company that dealt with this challenge was Lundbeck. With the aim of creating the best overall supply chain in the pharmaceutical industry (Figure 1), the company set up a series of Kaizen events (the Japanese word for continuous improvement based upon knowledge). This series of events were designed to implement improvements at a pace never seen before in Lundbeck's history thereby gradually transforming the culture to an improvement culture, where rapid improvements were the natural way of everyday working life.
Figure 1: The Lundbeck supply chain.
Lundbeck began implementing Lean in 2005 and is using a four-phase methodology. As implementing a Lean practice into a company is an ongoing process, results from Lundbeck exemplify developments up until 2010.
Figure 2: First Kaizen event; 40% reduction of packaging line change over time.
Phase 1: Build consensus in the management group (pre-2006)
Management buy-in is crucial. As leaders to teams, they are best placed to gain the support of their employees as well as understand how Lean management can impact their company goals and which areas they need particular focus on.
Senior management at Lundbeck had wished for a change in the way they had operated for several years. In 2005, the 'best supply chain' target was agreed and many believed that Lean was the best way to achieve this.
Phase 2: Build the pilot — prove that it works (2006)
Showcasing figures is a great way of inspiring an organisation; but to truly have the support of the senior management team, a pilot study of lean methodology was carried out in just one of the pharmaceutical production plants at Lundbeck in order to convince and align all management persons. The study involved approximately 20 Lean events and provided a solid basis for starting the transformation process across the supply chain. The first Lean event in this pilot secured an annual saving of approximately half a million US dollars.
Key achievements of Lean programme
Phase 3: Run a large number of Lean events and build a culture around these events (2006–ongoing)
Creating regular events to encourage and continue inspiring the team meant more improvements were made at an unprecedented pace. The number of Lean events carried out annually was set at the number of people in the organisation divided by ten. This number was required to secure involvement of all employees, to create results fast, and to teach everyone in the organisation to work with the Lean tools.
Figure 3: Result example - packaging line.
The Lean Kaizen engine, as it was known, was rolled out throughout the organisation. During the first year of this phase, the company conducted 40 Lean events with the assistance of external experts and, since then, a further 70–80 Lean events have been held each year, involving all 800 personnel in the supply chain.
Each event corresponds to 300–500 hours workload. Overall, between 2006 and 2009, a total of 250 Lean events were held, each involving an average of 10 people. Typically, these begin by thinking about how to reduce waste and enhance the value-added parts of the supply chain. People visualise the complex processes as a whole using basic materials such as pens and post-its. This is especially valuable because it offers everyone the opportunity to see the process as a whole and how each part fits together or impacts the other.
Figure 4: Result example - Lead time quality approval.
New processes derived from the Lean event are implemented immediately; beginning the Monday after the formal event is completed. Starting with a focus on the smaller changes that need to be made and then continuing to build out from thereon is important in organising the implementation of Lean. Eventually the Lean event team can make radical changes with just one week's hard work. Lean events thus become a powerful tool for creating cross-functional improvements based upon employee involvement.
In principle all the tools used in Lean events are simple and will enable the team to make significant improvements during the following week. However, Lean events and sustaining the pace of the number of events is challenging and complex. In six months, the organisation will need to use 10% of its resources on making improvements.
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Phase 4: After two successful years, increase focus upon Leaders (2008–ongoing)
The fourth phase sees the introduction of a new Lean element. The Lean Leadership development programme was followed by personnel at every leadership level within the company. This involved all 115 managers in the supply chain, all of whom received 12 days training in total during 2008. This programme concentrated on integrating traditional leadership development methods into the Lean practice methods.
Figure 5: Cost of sales as % of revenue (2007â2008).
Four modules were created:
Each module ran for three days with a 10–12 week application period between each one. This programme continues, with new modules being added every year and is now called the Lundbeck Business System, which is a new phase of the company's shift from Lean being a project organisation to being an integrated part of the organisation.
The Business System approach is much more than just about waste elimination; Lean has become a complete business paradigm. Employees that were earlier engaged in Lean teams are now partnered with the top managers, driving Lean culture in their area together.
Implementation of Lean at Lundbeck has led to a number of measurable outcomes. Significant lead time reductions have been achieved across the supply chain, amounting to 50–75% for the overall supply chain. In some individual areas lead time has been reduced as much as 90% (see sidebar). Additionally, productivity has been increased dramatically in all areas. Scrap and yield have also been revolutionised.• After the first Lean event took place, packaging changeover time was reduced by 40% (Figure 2).• After three years, the Finished Goods Production department are now able to produce twice the volume with the same number of people and on the same number of machines (Figure 3).• Lead time in quality approval has been reduced by 90% from ten days to one day. This has also resulted in a major improvement in productivity where fewer people approve significantly more batches than before (Figure 4).• Lundbeck won the Danish Supply Chain Award in 2008. This is awarded for a logistics solution that focuses on innovation, development, customer value, and gaining the involvement of the company's employees.• Despite reduced sales pricing and adverse exchange rates, production and supply chain costs as a percentage of revenue have been brought down from 19% to 13% on internally produced products, which is well below the industry average of approximately 23% for traditional pharmaceutical companies. (Figure 5)
Changing the culture of an organisation is always challenging. At Lundbeck, the initial scepticism meant the need for a pilot project, which may not be the case for other organisations.
Figure 6: Leadership buy-in before and after Lean Leadership Programme.Despite the success of the Lean implementation, it became clear by 2007 that momentum was being lost. In particular, there was a notable lack of motivation amongst middle management, with only 36% citing Lean as a factor increasing their motivation for working for the company. The introduction of the Lean Leadership programme broke this deadlock and, by 2008, middle management motivation had increased to near 100% (Figure 6).
This succeeded by going through a journey with the Leaders, where Lean was discussed with all managers each quarter, focussing the leadership style needed from them to support Lean. Managers were given the responsibility for Lean and each of them undertook a Lean learning assignment to pass the final examination of programme forcing ownership and reflection of the Lean Leadership role. It is unusual to gain approval to take all leaders out of an organisation for 12 days of intensive training and additional homework assignments during one year — Lundbeck believed that a Lean culture could revolutionise the company and felt it was worth the effort. In part, the success of the programme was due to all leaders from all levels participating in it together; sharing views, sharing knowledge and learning together. It created a strong network between the leaders and a natural drive for learning the new Leadership style (Figure 7).
Figure 7: The vision for Lundbeck Lean Leadership Style.
Lean management has gathered success throughout many sectors of industry and the pharmaceutical industry is just one environment where Lean can really benefit not only the business operations but the culture of an organisation. Lean can create remarkable results as demonstrated by Lundbeck; the creation of Lean Leaders at all levels ensures that Lean culture takes stronger roots throughout the supply chain, supporting existing company ethical values and business objectives. The resources freed by reducing costs as a proportion of revenue as a result of implementing Lean can be dedicated to drug research and development.
When considering Lean methodologies, the pharmaceutical industry must think strategically about why the business needs to change, what the current condition is, what results the business wants to achieve with metrics, and involve their staff at every step of the way. Business leaders must make it their role to define and explain what these goals are, share the path to achieving them, motivate people to take the journey with them, and assist them in removing obstacles.
Leaders must embrace Lean with the objective of transforming the culture of the company to avoid the risk of implementing Lean and being disappointed by the results after the initial honeymoon phase has ended.
Changing the culture of a company needs to be constantly reiterated like a mantra with a strong focus on creating a Lean leadership style that enables all members of the organisation to make improvements every day. Employees are the enablers who will improve processes and deliver on bold targets. The Leaders have no more important role than to motivate and engage all employees to work together towards achieving these bold goals and revolutionising the culture of the company. Once achieved, the true value of Lean will be revealed.
Simpler Consulting, a lean management consultancy, provided Lundbeck with advice on Lean methodology during the initial stages of this project.
1. J. Davis, Lean Manufacturing (Industrial Press, New York, USA, 2006) p 59.
2. J.P. Womack, D.T. Jobes, D Roos and D. Sommons Carpenter, The Machine that Changed the World (Rowson Associates, New York, USA, 1990) pp 51–53.
3. G. Koenigsaecker, Leading the Lean Enterprise Transformation: What is Lean? (CRC Press, London, UK, 2009) p 9.
4. V. Grover, W. Kettinger and J. Teng, Business and Economic Review, 46(2), 14–18 (2000)C.
5. Pharmaceutical Technology's QPEC Quality and Process Excellence Conference (VA, USA, July 2008).
6. A. Greene and D. O'Rourke, Pharm. Technol. Eur.18(10), 33–39 (2006).