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Natale S. Ricciardi, president of Pfizer Global Manufacturing and senior vice-president of Pfizer, discusses the company's new manufacturing focus that features plant network optimization, increased outsourcing, and greater adoption of agile or lean manufacturing.
Question: Pfizer has reconfigured its manufacturing network through facility rationalization and a strategic decision to increase outsourcing. Can you outline the strategy and where it stands in implementation?
Ricciardi: The mission of Pfizer Global Manufacturing is to provide an innovative and powerful competitive advantage for Pfizer. To accomplish this, we have embraced several transformational strategies that will lead to a truly competitive global supply network with the right processes for 'make-or-buy' sourcing. This is a significant change from the traditional 'make-what-we sell' philosophy that had been in place historically as is typical in the industry and will require both operational and cultural change.
Natale S. Ricciardi
The cornerstone of this transformation has been our very effective and aggressive rationalization of our internal manufacturing network, which involves both drug-substance [active pharmaceutical ingredient (API)] and finished-product manufacturing activities. This rationalization is driven by a thorough analysis of supply–demand needs for all of Pfizer's products, coupled with a balance of business, employee relations, and community needs. We hold our 'respect-for-people' value paramount as we proceed. To date, the number of internal manufacturing sites has been reduced from just over 100 to 43 (announced or exited).
In each site-exit situation, we analyze the best value for Pfizer and endeavor to retain employment opportunities for our colleagues through the sale of facilities with trailing supply commitments from the new owner. This is in fact a key part of our increased outsourcing, and we strive to negotiate the best value for Pfizer with the intent of forming a mutually beneficial strategic alliance with the new owners.
While we recognize that this is a difficult process, we strive to keep all of our colleagues fully informed as we proceed. In many cases, they play an active role in the decision-making process. In all cases to date, we have had a strong commitment from our affected colleagues at the exiting sites. This is demonstrated by their outstanding results and high level of performance in meeting the significant milestones with respect to the uninterrupted and continued supply required.
While significant work has been done, we continue to work together to meet our goal to transform into a truly competitive global supply network that meets or exceeds the needs of all of our business partners.
Question: Can you outline your programs for continuous improvement and operational excellence in your manufacturing activities?
Ricciardi: Our continuous improvement program started almost five years ago. Initially, our focus was on the processes that directly impacted our products. Our objective was to gain a more in-depth understanding of these processes and to develop the competencies to apply the Six-Sigma tools for problem solving and process improvement. For processes that have a high level of capability, we then moved our focus from effectiveness to efficiency, applying the Lean tools to reduce cost by improving lead times, reducing inventory, and removing non-value-added activities. This approach is now being expanded into all our business processes. To date, we have completed, or have in progress, more than 3000 Green Belt and Black Belt projects that we manage and track via a software program. Our strategy for training has been to develop internal competencies that allow us to deliver all our training and coaching in house. We have a formal certification process for all levels of projects, and our colleagues are formally recognized for their achievements through communications, local recognition events, and publications. Examples of projects include: an operator applying Yellow-Belt tools to solve a local problem at his work station; a Black-Belt project to resolve a complicated technical problem with manufacturing a product; and a Lean project to halve the time to manufacture a product.
Question: Can you explain the role of lean-manufacturing principles in your strategy and provide examples of such projects implemented at your facilities?
Ricciardi: Agile and lean operations are a core component of Pfizer Global Manufacturing's transformational strategies to ensure supply and meet the needs of our customers. This is fully aligned with other transformational strategies including sourcing, the transformation of our network, the adoption of new technologies, and the standardization of global business processes. Lean-operations principles are being built upon our strong base of continuous improvement and improving process capabilities through "Right First Time," which is focused on both process effectiveness and efficiency through the use of Six Sigma and other statistical/qualitative tools. They are being used within our facilities, across global supply chains, and within functional groups to optimize our operations' productivity and to focus employees' energy on value-adding activities. These principles are delivering lead-time and inventory reductions and are resulting in significant cost improvements.
The lean activities have delivered substantial results that have improved our economics and performance in launching products and in managing product complexity. In specific efforts, we have achieved 5–20% cost reductions, 20–40% inventory and lead-time reductions, and avoidance of capital expenditures. Of equal importance, our lean manufacturing efforts have increased our colleagues' focus on our customers' needs and are increasing our organizational ability to respond to our changing environment.
Question: Can you outline your programs for continuous improvement and operational excellence in your sourcing activities?
Ricciardi: We have applied the same continuous-improvement approach to the sourcing of our raw materials and packaging supplies. We have completed various Six-Sigma projects with key vendors to address both quality improvements and efficiency opportunities. Many vendors have their own Six-Sigma programs, but where this is not the case, we have, on occasion, provided training, using our own employees. To evaluate the impact of changing a material supplier, we have a technical group that specializes in developing and applying sophisticated analytical techniques to allow us to compare the physical and chemical properties of the new material with our current supply. This gives us a good prediction of how it will perform in our operation.
Question: In terms of your sourcing activities, how has the role of central procurement increased and how is that function incorporated into your manufacturing strategy?
Ricciardi: The role of central procurement has increased, specifically in the number of global category strategy managers engaged in sourcing APIs. As a larger percentage of APIs is outsourced, a broadening of the supply base and increased understanding of supplier capabilities are required. This transition has brought the need to increase resources and focus in the countries of China and India, which we have done by establishing a center of excellence team based in Singapore to work in those markets. This team works in concert with our strategy to optimize our internal plant network on the forefront of identifying opportunities and in planning transitional inventory coverage as external suppliers are qualified.
Question: What special considerations are given when working with suppliers in emerging markets such as India and China?
Ricciardi: There are several considerations in order to qualify a supplier for the intended purpose; however, once a supplier has been qualified and a working relationship is established, then many ongoing issues need to be addressed. These topics range from quality of product and services to practices, safety, regulatory compliance, reports, and metrics. These ongoing interfaces will be jointly agreed to in the beginning and will formulate the respective expectations and interface.
Special considerations when working with suppliers in emerging markets are numerous, obviously the first and foremost is product integrity and safety. Any potential supplier is evaluated on its ability to produce material in a manner that is fully compliant in all regulatory procedures. Other considerations when evaluating suppliers include the following: their ability to sustain supply in the long run; assurance of capacity and our ability to access additional capacity if needed; use of technology; research and development assets; continual improvement efforts; and cost competitiveness.
Question: What are the most critical issues in maintaining supply-chain integrity?
Ricciardi: Industry and regulatory agencies around the world share responsibility for assuring the security of the pharmaceutical supply chain. The importance of a full and complete evaluation of a potential supplier or contract manufacturer by the pharmaceutical firm cannot be overemphasized. A thorough review of the potential partners' quality systems, including verification that they have control over their own supply chain, must be completed to determine whether they are willing and able to meet the required standards. If they are not, access to the supply chain should be denied until they have demonstrated that the required standards are being applied. Once a supplier is approved for use, ongoing quality oversight is critical to ensure that the standards continue to be met. We have done that and in fact, have not approved suppliers that have not demonstrated sufficient progress.
In developed countries, suppliers operate within sophisticated regulatory environments and typically adhere to internationally recognized standards. They generally have effective quality systems that provide a high degree of confidence in the supply chain. Companies in emerging markets operate in a developing regulatory environment and may have less effective quality systems. A pharmaceutical firm may need to work with these suppliers to upgrade their systems and standards. In addition, regulatory agencies in developed countries share in the responsibility to educate manufacturers and health authorities in emerging countries.
Natale S. Ricciardi is president of Pfizer Global Manufacturing and senior vice-president of Pfizer.