April 1, 2006 (Vol. 26, No. 7)
Angelo DePalma Ph.D. Writer GEN
Pharma and Biotech Firms See Value of Operational Excellence Strategies
The successes of Six Sigma, Lean, and similar operational excellence strategies are legendary in heavy manufacturing. Pharmaceutical and biotech companies were slow to catch on, but today, nearly every company has jumped on the bandwagon. “Most firms have entire departments dedicated to continuous improvement, of which Lean and Six Sigma are just two approaches,“ says Jan Paul Zonnenberg, a partner with consulting firm PRTM (www.prtm.com).
Outsourcing, competition within therapeutic areas and from generic products, and depleted pipelines are forcing drug companies to seek out efficiencies wherever they find them. “While the implementation of Lean and Six Sigma may be different in biotech and auto-making, the principles of continuous improvement apply to all industries,“ Zonnenberg observes.
Managers operating in a Six Sigma culture use the same vocabulary when discussing operations and efficiency. “Within Motorola, any division head can call any other one and they know what each is talking about,“ observes David Dilts, Ph.D., professor of operations management at Vanderbilt’s Owen Graduate School of Management.
Dr. Dilts describes Six Sigma as a way to “clean out the underbrush“ in a process. Once defects are identified, they can be measured and tracked. Almost without any extra effort, other inefficiencies also come to light.
Following the Lead
Several years ago Dowpharma (www.dowpharma.com) followed parent company Dow’s lead and adopted Six Sigma. Initial deployments in manufacturing eventually spread to other operations. “At this point,“ says business manufacturing director, Jeff Dudley, “we are not so concerned with tracking, auditing, and making sure we’re applying Six Sigma. We just do it. It’s gone from being a priority to part of our culture.“
Dow follows the standard Six Sigma drill that involves AMIC—analyze, measure, implement, and control. Each of those operations contains a number of sub-tools like data collection and root cause analysis, which uncovers why data is what it is, what needs to change, and how to implement that change. After deployment, Six Sigma experts adopt a control plan to maintain productivity gains.
Many companies adopt the elements of Six Sigma and achieve the expected improvement, but fail to check ongoing results against the control plan. In one situation at Dowpharma, gains achieved over nine months evaporated because workers were executing just two of the nine elements of the control plan. By re-dedicating resources to the plan, Dowpharma was able to recover its previous gains and maintain them for the last seven months.
Dudley achieved his Green Belt Six Sigma certification by managing a project that involved determining the cost of unplanned events, or one-off occurrences that cannot be traced to systemic problems. For example, misloading a batch, temperature controls drifting out of range, or someone accidentally turning off process machinery during operation.
Since it is impossible to reconfigure or re-blend a batch, significant unplanned events are always very costly in pharmaceutical manufacturing. As part of his analysis, Dudley determined a way to assign costs to unplanned events, then applied root cost analysis and developed a control plan. The result was reducing the cost impact of unplanned events by 91%.
In other successful Six Sigma projects Dowpharma improved a yield from 40% to 87% by more tightly controlling two process variables and increased the capacity of a plant by a factor of 7.5 through an add-on investment, amounting to just 3% of the cost of the facility.
Other firms report similar efficiency breakthroughs, and according to Zonnenberg, the average cycle time for manufacturing, including formulation, packaging, and quality activities, is about 60 days and average inventory turns are currently less than two per year. Zonnenberg believes cycle time can be reduced by 75% in many cases to the two-three week range and inventory turns increased to four. The combination of reduced inventory and the tremendous efficiency gains in manufacturing justify running a process more frequently.
Formulation and quality operations are two areas ripe for Lean/Six Sigma improvement. Currently, these activities take about two months per batch, but according to Zonnenberg, 90% of that time is wasted waiting for a piece of equipment to free up for signatures on various records or for changing the status of a computer from working to completed. Streamlining these noncore operations through strategies as simple as better scheduling makes a huge dent in cycle time. And it is no accident, Zonnenberg states, that companies with the shortest cycle times provide the best customer service.
Across Business Units
Narendra Soman, Ph.D., a mechanical engineer, came into GE Healthcare’s (www.gehealthcare.com) Six Sigma efforts circuitously, from GE’s Global Research Center having worked with GE Aircraft Engines and GE Power System businesses. Now a Master Black Belt for DFSS (Design For Six Sigma) at GE Healthcare, Soman is eager to transfer knowledge gained in GE’s engineering and manufacturing business segments into the company’s bioscience efforts.
Six Sigma practices emerged out of Motorola about a decade ago. Forward-looking companies like GE picked up on and improved Six Sigma, with great results. “Six Sigma began as a manufacturing tool but is now used everywhere in businesses,“ says Soman. At GE the practice is called Lean Six Sigma to reflect its inclusion of Lean practices as well.
Soman explains the difference: “Six Sigma is traditionally a mechanism for reducing defects during discrete manufacturing through the use of analytical methods and statistics.“ GE adapted these practices and extended them to nonmanufacturing operations, including engineering, marketing, and financial services. “Six Sigma evolved at GE into a general-purpose toolbox for operational efficiency and developing innovative products.“
Lean, by contrast, aims to drive down cycle times and retaining processes and sub-processes that add value while trimming or eliminating those that do not. “Both practices are customer-focused and engage all job functions within an organization,“ Soman explains. “And depending on the situation, they can be complementary.“
Six Sigma uses martial arts structure for naming its practitioners. Quality leaders top the Six Sigma organization charts, followed by Master Black Belts, Black Belts, and Green Belts. Quality leaders align strategy and operations, Master Black Belts lead major Lean/Six Sigma efforts, mentor Black Belts, and train coworkers. Black Belts are domain experts, trained in an underlying scientific or engineering discipline, as well as Six Sigma statistical tools. Everyone else at GE eventually earns a Green Belt, which requires up to three days of training and continuous Six Sigma application to their jobs.
Managers concoct all sorts of pretexts for not adopting or, in some cases, even investigating Six Sigma practices. One major pharm/biotech company, when asked about participating in this article, responded almost defiantly, “we’re not a Six-Sigma culture.“ R&D organizations are prone to think that Six Sigma does not apply to research, highly regulated industries, or biological systems. “None of those excuses are ever valid,“ says Soman.
“I have applied Lean and/or Six Sigma to operations involving complex mechanical systems, all the way to very soft products, and it has worked every time. GE has claimed billions of dollars in savings by implementing these tools in very disparate business segments.“
It is a mistake to view Six Sigma and Lean as exclusive to “hard“ manufacturing, says Dr. Dilts. Much of science involves protocols. Six Sigma can help organizations discover which aspects or components of a protocol add value to the overall experiment. When applied correctly, Six Sigma will also help identify fast failures, indicators that a research program is on the wrong track. “Six Sigma doesn’t inhibit creativity, it frees creative activity for more productive work,“ he says.
According to Soman, any end result that can be quantified will benefit from Six Sigma. “It doesn’t matter if you’re streamlining manufacturing or inventing a new molecule. If you can define what you’re going after and quantify those factors that are critical to quality, you can apply Lean Six Sigma.“
Typical manufacturing metrics are defect rate and cycle time. In drug discovery, the metric may be the number of molecules advanced per thousand screened compounds or the percentage of compounds from medicinal chemistry or combinatorial libraries meeting specific pharmacokinetic or toxicology criteria. “No matter what you’re doing, it’s possible to complement scientific knowledge and experimentation with analytical and statistical methods to weed out practices that get you where you want to go faster.“
Like GE Healthcare, West Pharmaceutical Services (www.westpharma.com) has adopted a Lean/Six Sigma approach which, says resident Black Belt Tom Capitanio, helps achieve performance and efficiency breakthroughs more quickly than with Six Sigma alone.
West is more of a discrete manufacturer than GE Healthcare or most biotech firms, supplying vials, stoppers, seals, closures, and containers for sterile pharmaceutical products. The company applies Lean/Six Sigma to many of its manufacturing operations, as well as to paperwork, customer service, and corporate business.
To Capitanio, the biggest challenge to implementing a Lean/Six Sigma program is to integrate it into day-to-day operations and further develop it around Rapid Improvement Events, projects that achieve immediate, short-term resolution and are followed by exposure to more organic, longer-term improvement.
West’s components must meet mechanical, safety, and regulatory requirements. Unexpected, sporadic defects may cause a disruption to the customer’s manufacturing line. West views these events as more than simple opportunities to satisfy one customer. The company’s Six Sigma experts analyze the cost of such incidents to determine how extensively, beyond fixing the immediate problem, they need to go.
In some situations the component cost plus the time handling the complaint and similar problems in the future dictate a thorough Six Sigma treatment.
When that project is completed and its results applied to the manufacture of other closure systems, that problem’s resolution often leads to improvements on subsequent projects.
With Lean/Six Sigma firmly entrenched among pharmaceutical and biotech manufacturers, the next frontier is likely to be pure research organizations. It is only a matter of time, says Dr. Dilts, before they see the light or risk extinction. “Companies that ignore Lean and Six Sigma risk going the way of the Oldsmobile,“ he says.