The pharmaceutical industry has been slow to embrace and implement lean principles of continuous improvement compared to other manufacturing sectors such as the automotive industry where the systems of Lean and Six Sigma were developed. Among other factors, this was due to high profit margins of patented drugs up until the 1990s combined with the relatively low cost of goods compared to the overall cost structure. Trends over the last two decades, however, have increased the need for process efficiency; the lean system is an essential tool for enabling success.
What is Lean?
The lean methodology was developed with the ultimate goal of reducing costs and increasing efficiency by identifying and eliminating activities in a given process (service or manufacturing) that fail to add value and yet consume resources. In the lean terminology, value is defined as ‘what the customer is willing to pay’. As a result, lean is heavily oriented not only to efficiency and cost reduction but also to creating value to ensure customer satisfaction.
On the other hand, Six Sigma is a system developed with the goal of controlling variation and making processes more consistent and reliable to ensure the quality of deliverables. The combination of Lean with Six Sigma results in a faster creation of value at the lowest possible cost.
Lean within the Pharmaceutical Industry
The need for pharma to implement lean is stronger now than ever. Pharma has historically favoured a push system that produces more items than those requested by customers in order to exceed demand, but this leads to excessive inventories and operational inefficiencies. At the turn of the millennium, pressures arose from government and society for pharmaceutical companies to reduce costs and improve quality. This, in combination with the loss of patents, increased the competitiveness of price relative to development and production costs. Pharmaceutical companies are currently looking to adapt lean manufacturing principles to reduce time and money invested.
Crucially, adapting lean to drug development has the potential to improve efficiency and streamline the FDA regulatory approval process, such as by decreasing the amount of outsourced work. Decreasing production development time by a single day can save hundreds of thousands of dollars in costs (Tufts CSDD. “Quantifying Savings from New Drug R&D Efficiencies”, Parexel’s Bio/Pharmaceutical R&D Statistical Sourcebook 2006/2007).
By transitioning from a push system to a pull system that produces only the number of items that are requested by customers, it is possible to gain improvements to critical factors such as key performance indicators, works in process, and cycle time. By removing “waste”, working conditions can improve at the same time as reducing variability and increasing predictability of outcomes.
However, making fundamental changes to how companies operate is not easy. Lean requires culture change from within and buy-in from all levels of employees. Continuous training and repeated kaizen events are necessary for lean to become engrained within the company. Operational excellence requires strategies for effective implementation and sustainability of lean initiatives. Through lean six sigma, businesses can ensure they are utilizing their time and resources in the most efficient way possible to generate the most profit.
Lean Six Sigma Training & Implementation
At AMSaxum we provide onsite corporate training on lean six sigma/continuous improvement methodologies and help our clients with the implementation of process improvement projects. There are Government grants available in Canada and the USA to cover the cost of corporate training.
Government Funding & Assistance Options
In addition to the tangible benefits possible through lean, the research and development efforts (labor, materials and subcontracts) required in the pharmaceutical sector could be eligible to be recovered through government funding, such as through the Scientific Research & Experimental Development (SR&ED) program in Canada.
For companies in North America, specifically, there could be applicable grants to aid in upfront costs such as capital investment and employee training. AMSaxum experts in government funding help with the application of these grants and with the preparation of SR&ED claims.
There are additional tools that can aid in improving overall efficiency, such as an RCCA labor tracking solution we offer, which is an application for collecting data or for tracking labor or KPI efficiency.
For more information on continuous improvement and Government funding within the pharmaceutical sector call AMSaxum at 905-315-6847 or contact us here.