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Pharmaceutical Manufacturers
Embracing Lean Six Sigma
Pharmaceutical manufacturers are looking to Lean Manufacturing and Six Sigma
principles to help them boost operational efficiency and improve quality, while facilitating
compliance.
John E DaneseProduct Strategy Director,
Life Sciences,
Oracle, USA
Dennis ConstantinouSenior Director,
Life Sciences,
Oracle, USA
Today, pharmaceutical manufacturers are focused, as never before, on reducing operational costs while
ensuring compliance. Cost pressures are increasingly acute as many pharmaceutical manufacturers
see a dwindling product pipeline, as well as greater competition from generics. To ensure that their
bottom lines remain solid, pharmaceutical manufacturers are looking to increase the efficiency of their
operational and manufacturing processes—optimising resources, improving efficiency, reducing waste
and controlling inventory. The regulatory climate is, at last, conducive to focusing on such changes, as
the U.S. FDA as well as other regulatory bodies now support approaches that seek to reduce risk by
building quality into the manufacturing process from the start, as opposed to relying on end-process
testing. In this climate, pharma manufacturers are looking to Lean Manufacturing and Six Sigma
principles—proven in other industries—to help them boost operational efficiency and improve quality,
while facilitating compliance.
Moving beyond the status quo
Despite the pharmaceutical industry’s focus on quality, it has failed to keep up with other industries in
terms of manufacturing efficiency and productivity, largely because of the cost and burden involved in
revalidating any process changed in the spirit of improvement. Once manufacturers confirm or validate
their processes as compliant, they traditionally have been very reticent to change them. The simple fact
is that pharmaceutical manufacturers, which historically have enjoyed consistently robust profit margins,
have had little economic incentive to introduce change.
The industry’s focus on maintaining the status quo in its manufacturing environment has produced
inefficiency and waste. It is estimated that the potential world-wide cost savings from efficiency
improvement could be as high as US$ 90 billion. While Research and Development (R&D) is generally
considered a major cost centre for the pharmaceutical industry, manufacturing quietly accounts for more
than twice the expense of R&D—representing, on average, 36 percent of a pharmaceutical
manufacturer’s costs. The true cost of manufacturing becomes even more apparent when one considers
the amount attributed to non-value-added activities and waste which is 80 percent and 50 percent,
respectively.
Quality has also suffered under the status quo. It is interesting to consider that the number of drug
recalls has risen sharply in recent years—three-quarters of which are attributed to manufacturing
defects. The reject percentage in the pharmaceutical industry ranges from 5 percent to 10 percent (<2
Sigma), compared to 0.0001 (6 Sigma) in the semiconductor industry. This reject-percentage costs the
industry between US$ 4.5 billion and US$ 9 billion per year based on US$ 90 billion/year spent on
manufacturing.
Several important factors have converged in recent years to jumpstart substantial change in how
pharmaceutical manufacturers approach and manage their manufacturing operations. First, many
manufacturers face a declining development pipeline as well as shrinking profit margins as they face
increased competition from generic drug manufacturers. As such, they see a growing need to abandon
the status quo to focus on improving productivity, efficiency and quality. At the same time, the U.S. FDA
and other regulatory bodies are acknowledging that the industry has fallen behind other sectors in terms
of efficiency and quality, and have begun to endorse a “quality by design model” that contrasts with the
industry’s historical “quality by test” results approach. As part of this shift, the U.S. FDA launched its
Process Analytical Technology (PAT) initiative, a risk-based guidance model that seeks to direct
pharmaceutical manufacturers toward consistent and predictable quality (higher sigmas). The PAT
approach is to build in quality improvements on the factory floor through a deep understanding of how
variable process attributes affect product quality at a fundamental level.
The road to Lean Six Sigma
As pharmaceutical manufacturers seek to transform manufacturing operations and enhance quality,
many are turning to two highly regarded management approaches—Lean Manufacturing and Six Sigma
—that have proven effective in other industries, such as electronics and auto manufacturing.
Lean Manufacturing focuses on eliminating manufacturing waste, with the objective of making
manufacturers more responsive to customer demand and market changes. Six Sigma is a business
process methodology that focuses on minimising variation—in product and process—to reduce product
defects.
Using the methodology, one standard deviation from the mean is one sigma; therefore, manufacturers
operating at ±6 sigma are operating at 99.9997 percent compliance. When pharmaceutical
manufacturers implement Lean and Six Sigma concepts they have a powerful methodology to help them
improve quality, compliance, productivity, costs and speed—ultimately enabling them to bring better
products to market, faster and more cost effectively. To achieve transformation to a Lean Six Sigma
environment, organisations must focus on change at three levels—operating systems, management
systems, and mindsets / behaviours. (Figure 1) At the operating system level, manufacturers must
understand demand levels, design lean production systems around material and information flow
analysis (e.g., optimise layout), create tactical implementation plans, and develop standardised work
charts and instructions.
When transitioning to a Lean Six Sigma environment, pharmaceutical companies must also assess their
management systems at several different levels and direct changes that support Lean concepts.
Transition teams must consider what management tools, including IT systems and communication tools,
the company requires. The organisation must also consider how it will define or measure success, by
setting Key Performance Indicators (KPIs) at different levels of production. It is also essential to create a
highly visible problem resolution system to drive and institutionalise change. Finally, organisations must
implement and scale these capabilities so that they span the entire value chain—which is often
dizzyingly complex and can extend beyond traditional organisational boundaries. The final arena for
hange—transforming mindsets and behaviours—is often the most challenging for many organisations.
Individuals often fear, and in turn, resist change. This truism is especially applicable in the
pharmaceutical manufacturing industry, which has, until recently, thrived despite its focus on
maintaining the status quo.
In transitioning to a Lean Six Sigma environment, it is critical that the management team defines and
communicates a consistent mission, vision and value system throughout organisation—always
maintaining the customer focus. The transformation team should focus on achieving top-down buy-in by
aligning resources to help build and transfer momentum across the organisation. Training cannot be
overlooked. Transformation team must develop a comprehensive strategy that provides training
opportunities at multiple points in the transformation as a means of achieving h4er organisational buy-in
and competence from both management and the ranks.
The IT factor
IT factors heavily in the transition to a Lean Six Sigma enterprise and the subsequent journey of
continuous improvement. Because of the complexity of the pharmaceutical manufacturing environment,
organisations require flexible and interoperable IT systems that provide information, not just data,
across the enterprise. In a Lean Six Sigma environment, information flows must complement and keep
pace with physical flows to deliver the information needed (Figure 2).

The ability to mine data and interpret it efficiently, quickly and seamlessly is also very important. Using
the data and turning it into information quickly enables pharmaceutical manufacturers to outperform their
competition. Having the right data readily available when it’s needed also makes it easier to respond to
FDA inquiries.
IT supports several tenets essential to the implementation of a Lean Six Sigma environment, including:
Ensuring the integrity of data
Organisations require good data to make wise decisions. Most pharmaceutical manufacturers have IT
environments with solutions from multiple IT vendors. These systems are often siloed, precluding the
exchange of information. In addition, manufacturers often have multiple instances of applications across
their various production facilities. For example, it is not unusual for pharmaceutical manufacturers to
have separate data files for products and customers in different IT systems at different sites. This
approach also precludes a comprehensive view of the enterprise, which is essential to a quality-by-
design focus.
To obtain the end-to-end visibility needed in a Lean Six Sigma environment, pharma manufacturers
must have an integration strategy for linking heterogeneous systems, creating a single source of trusted
information that provides a complete picture of the operations.
A Lean Sigma Six environment requires complete confidence in the integrity of an enterprise’s supply
chain, manufacturing and distribution-related data. As such, a single source of information is essential. It
eliminates duplication and outdated information, driving informed decision-making and lower
administrative costs. This approach also provides a streamlined audit trail in the event that a regulatory
agency raises a product safety issue. For example, if a bad lot of drug compound is released into the
market, a pharmaceutical manufacturer can quickly establish where the lot was manufactured, which
equipment was used, the source of the ingredients, and the locations to which the compound was
distributed. A single version of truth, which is helpful in all industries, is especially critical in regulated
industries because it eliminates the need to synchronise multiple sources of redundant data and
manage a host of different technologies—which increase risk and complexity.
Building quality into the manufacturing process
Process and workflow automation—which allow organisations to build quality into the process—may be
IT’s single greatest contribution to enabling a Lean Six Sigma environment. Integrated IT infrastructures
allow pharmaceutical manufacturers to rely less on manual checks, which present greater risk and
variability, and more on automated checks that are built-in, enforced going forward, and can easily be
audited by the FDA and other regulatory agencies. For instance, automation enables manufacturers to
enforce electronic signature checkpoints during the processing of a production batch order and
automatically notify key personnel of nonconformances, so that reviews and action can be undertaken
quickly.
The capture and processing of in-line data is critical to a Lean Six Sigma environment—as well as PAT
—because manufacturers must understand all sources of product variability. This understanding cannot
be achieved without collecting data from every part of the supply chain and manufacturing process. For
example, a manufacturer’s probe sensor might sample the particle size of a batch of product during a
granulation process. To make adjustments that would improve product quality or consistency, the
manufacturer must determine how the particle size compares to previous batches and standards—a
process that depends on the capture and analysis of in-line and benchmarked data—and understand
how various possible process adjustments will impact all critical technical attributes of the material. An
integrated IT infrastructure is essential to enabling manufacturers to capture the secure, analysable and
actionable data needed to transform their operations.
Electronic record keeping plays an important role in helping pharmaceutical manufacturers build quality
into the process. Paper records are cumbersome and expensive to circulate for review and approval
when there are multiple staff members or departments involved in the process. This challenge is
compounded in a global
enterprise. Faster and cheaper product development, manufacturing and quality assurance turnaround
is possible with electronic routing of signature requests anywhere, virtually and instantly. Electronic
records also improve accuracy. There are limited means to prevent users from entering invalid data on
paper forms beyond rigorous and time-consuming manual checking. Sophisticated electronic record
systems, however, are adept at reducing data errors by providing users with lists of appropriate values
from which to choose, and by validating data formats prior to accepting or saving the data into files or
tables.
Enabling rapid analysis and modelling to respond to change
Pharmaceutical manufacturers possess massive quantities of data on processes as far ranging as
purchasing of office supplies and analysis of data from gas hromatographs. Many, however, cannot
analyse or interpret paper-based or siloed information to identify important trends and drive improved
manufacturing practices.
A single source of truth, coupled with advanced analytics, enables pharmaceutical manufacturers to run
real-time analysis that yield the kind of business intelligence that reduces risk, helps to improve
operating efficiency and agility, and streamlines compliance. For example, a manufacturer can use
advanced analytics to conduct quality analysis, risk assessments, yield analysis, on-time production
tracking, scrap reason analysis, cost comparisons by job, and comparisons of manufacturing plans and
efficiencies between sites, to name just a few of the endless possibilities.
Instituting and controlling businesses processes and standard operating
procedures
Removing variability in processes and materials is fundamental to a Lean Six Sigma environment. IT
systems provide the information necessary to establish an environment that supports risk-based
decisions. IT serves as a lens through which processes can be observed, monitored and measured.
Only then, can manufacturers enable greater control over variability.
Process automation further enhances operational efficiencies. On the materials management front, an
integrated IT infrastructure drives automation that enables manufacturers to enforce business rules that
require materials to go through certain quality tests before they reach a customer, as opposed to relying
on a paper document to confirm a test has been completed. Automating controls also reduces ongoing
complexity, redundancy, the potential for operator error and, ultimately, waste.
Leading IT vendors, such as Oracle, are removing the complexity from process integration by leveraging
Business Process Execution Language (BPEL), which allows manufacturers to build a process once
and then apply it throughout the environment. BPEL is emerging as the standard for assembling a set of
discrete services into an end-to-end process flow, radically reducing the cost and complexity of process
integration initiatives.
Enabling a real-time demand-driven sales and operations planning process
A demand-driven model, which supports Lean Six Sigma principles, allows pharma manufacturers to
postpone inventory build-up and reduce inventory carrying costs and the risk of a product expiring
before sale. The transition from a make-to-stock approach to a demand-driven environment, however,
has not been an easy one for many manufacturers.
Most companies today have a fragmented process for Sales and Operations Planning (S&OP). Each
department tends to have its own process with critical company data stored on spreadsheets.
Departmental plans are not aligned, and there is misalignment between how departments are measured
and overall company objectives. For example, sales management is often measured on meeting a sales
quota that may be achieved by selling products that the supply chain is unable to produce. This tends to
lead to a very time-consuming and manual process of trying to come to agreement on “the forecast.”
This painful exercise typically yields an inaccurate forecast. The forecast is then “tossed over the wall”
to the supply chain to figure out how to expedite processes to meet the demand with no thought given to
the profitability of the decisions. Further complicating the process is the fact that the “approved” plans,
which may exist on spreadsheets, are often filed away, and have little relation to the actual plans being
executed.
New IT solutions can help manufacturers address their complex S&OP needs by enabling them to bring
all business areas together for the purpose of aligning supply with demand and delivering an operational
plan designed to achieve a defined corporate business strategy. Some systems, for example, allow a
direct linkage between sales orders and production batches, allowing users to create a batch
reservation for a sales order. When the batch is completed, the reservation for the order line is
converted into an inventory allocation and can then be confirmed and shipped. Alternatively, if there are
no existing batches planned or in process for the required product, a user can initiate a request to create
a batch specifically for that order. Automated workflow notifications keep the order entry personnel
apprised of any changes to the production schedule that may impact their order.
Pharmaceutical manufacturers often have multiple manufacturing plants, warehouses, distribution
centres, and transportation lanes and modes. Determining the best manufacturing, distribution and
logistics choice becomes an exercise in selecting from among thousands of combinations. Dynamic
inputs to the network design process—such as fuel prices, currency exchange rates, real labour rates
and seasonal demand—further complicate the process. Advanced Strategic Network Optimisation
(SNO) solutions can help manufacturers optimise choices and combinations. SNO solutions perform two
distinct functions, simulating and optimising different supply chain configurations and creating dynamic
sourcing rules to be used by downstream planning processes. These solutions, which combine a flexible
supply chain modelling environment with highly tuned solver algorithms and visualisation capabilities,
allow users to define, simulate and evaluate complex manufacturing, distribution and transportation
supply chain problems—before making costly mistakes.
Ensuring compliance and security
It is very difficult to determine corrective and preventative actions without a sound understanding of
variability sources and estimates. The information required for a corrective and preventative action
includes appropriate details of the event, the time and date of the nonconformance, the phase of the
batch in which the nonconformance occurred, details of the incident or observation, level of criticality,
and required follow up, as well as the signatures of various operator(s) and / or supervisors. This
process, which is essential to both quality improvement and regulatory compliance, is costly and time
consuming when completed manually.
It also presents many opportunities for data omission or the recording of incorrect data. Corrective and
Preventive Action (CAPA) solutions manage issues to closure through an automated workflow, and
provide appropriate documentation required for regulatory compliance.
Pharmaceutical manufacturers are on the cusp of realising the benefits that Lean Six Sigma practices
can deliver to their organisations and the industry as a whole. To successfully transform their
organisations, however, pharmaceutical manufacturers require greater visibility into their end-to-end
operations—an objective that cannot readily be achieved through paper-based processes or disparate
IT systems. To this end, pharmaceutical manufacturers increasingly look to integrated IT infrastructures
to help them execute Lean Six Sigma paradigms and, ultimately, achieve new levels of operational
efficiency, quality and corporate performance.
References
• Benson, R.S. and D.J. MacCabe. “From Good Manufacturing Practice to Good Manufacturing
Performance.” Pharmaceutical Engineering, July/August 2004.
• “New Prescription for Drug Makers: Update the Plants,” The Wall Street Journal, September 3,
2003.