Lean, Fit and Ready to take on the Global Generic
By Mr.Jayanth Murthy
Opportunity – It is often said that the rate at which innovations and improvements happen in the world of personal computers, if the same rate were to be applied to the auto industry we would have cars costing a few thousand rupees, giving 200 KM to a litre of petrol and emitting 99% less obnoxious gases!
The question is, why this spirit of continual innovation and improvements not seen in other industries? Be it automotive, steel or in this case the Pharma Industry. If one sits back and calmly recollects the formulation manufacturing paradigms and concepts existing say two/ three decades ago and compare it with today, one may not find any drastic changes, in most pharma companies. The drugs have tremendously improved, the drug delivery has improved, but the paradigms and process of manufacturing has hardly kept up. It probably takes 30‐40 days (or more) in terms of TPT ‐ Through Put Time for a batch to come out from start to finish, today it remains the same in many cases.
At this point I would like to highlight that a lot of revolutions through innovations have happened as regards Pharma machinery and equipments per say, again I am not referring to how to compress faster or better or how to granulate faster or better, I am talking of Through Put Time – the total time for a batch to move through all the process. The focus is on the entire value chain from dispensing of raw material all the way upto finished goods being packed.
At this stage, let me introduce 3 terms and concepts:
- TPT ‐ Time from Start to Finish. It is the sum total of both value adding and wasteful activities/ time.
- VAA ‐ Value Adding Activities. Anything that converts (Physical or Chemical conversion) Raw Material towards Finished Goods. It is what the customer is willing to pay for.
- NVA ‐ Non Value Adding Activities – also called Waste or Muda. These are activities that consume costs and add no value to any one – activities like waiting, rework, change‐over, cleaning, rework, staging, inspection, etc. As mentioned before, with improvements of machinery we have seen VAA / cycle time reduction and quality improvements. But the NVA have reined. NVA’s take 90% more of the TPT!
Which means, improving VAA is hardly the point, one need to cut the NVA’s, if TPT has to be cut drastically! Here lies the crux in terms of challenge for Indian Pharma sector.
Crashing the TPT by half or even 75 to 90% is not possible, unless the paradigm of the senior management changes. This happens if a clear understanding of concepts like TPT, VAA and NVA are understood. Sadly, in many formulation units improvement has anything to do with TPT reduction or process improvements is met with resistance. The regulatory requirements are used as a ‘shield’ to prevent ideas on improvements. This may sound too generic a statement, but one has to understand the 80‐20 principle. Probably only 20% of the top formulation units in the country actively pursue TPT reduction across the value chain in an integrated fashion. The rest of the 80%, which form the majority of Indian industry are blissfully unaware of the potential that Lean or Kaizen offers across the value stream!
The challenge today is not about driving a few improvements at a few places through few people. The real challenge is how do you attack the TPT in formulation say by 50%, say in 5 months? That sounds exciting and challenging! Reducing TPT has immediate magical effect on the inventory across the pipeline. As the Through Put Time reduces, the inventory reduces, and this would mean less working capital, faster deliveries and greater flexibility. As India grows and grabs the huge global generic market one has to remember that labor cost advantage is going southwards. It is more of an efficiency and productivity game today. And this game can’t be understood and played unless one understands it from end to end value chain perspective and applies the concept of TPT, Waste and Value Add optimization across.
There are eight types of waste one can encounter in a business. Going into the formulation units here are a few one needs to watch out for and attack. These wastes have been defined which helps in identifying and attacking them without beating around the bush.
Below are the critical wastes in a typical formulation business…;
Movement related to material can be termed as waste/ Muda of Transportation. Traditional formulation unit have very restrictive and complex layouts where rooms are built within rooms with one door leading to another door! All this is done, keeping in mind the hygiene requirements.
This results in a lot of material handling and transportation, where people often seen pushing material on trolleys or often conveyors are used. Manual or automated transportation should be looked as waste and one should strive to minimize the same. This doesn’t happen unless the importance of flow management, pull manufacturing and internal logistics are understood and implemented. In fact, once the layout has been designed to address flow issue, various other issues are sorted out as a by‐product! But a change in basics manufacturing layout needs a huge shift in paradigm and management has to take courageous leaps of faith in Lean to do this. Upto 50% reduction in this type of waste is quite easily possible! W impacts costs almost immediately.
Any kind of waiting in the operations is classified as Waste/ Muda of Waiting. For example, material or machine waiting for Quality Approvals, approvals waiting for results which in turn are waiting for observations. Material waiting for machines, machines waiting for materials, people waiting for approvals, material waiting for change over etc. Easily 1‐20% of times goes in some form of waiting! Causing inventory blockage, waste of capacity, delays etc. It is because of this reason that layouts have to be designed without ‘staging’ room, which is made to ‘manage’ material that is waiting!
Although, it is considered as taboo, many plants engage in this activity. It deteriorates quality, creates delay and consumes resources. Of course in formulation, in many a times, no rework or reprocessing is possible and one is left with only the option of scrapping the lot which is a costly affair. Why?‐Why? analysis is the starting point of rework analysis. Rework also applies to rework of change over, maintenance jobs, reports, analysis, anything that is not done ‘first time right’.
Defined as producing more or faster than the requirement of the immediate next process or customer. For instance, dispensing before all material required for the lot is available or before granulation is ready. This may continue through granulation, drying, blending, compression, coating till packing. Overproduction is huge disease which can be attributed to poor line balancing, when capacities are not matched or equipments run on differential speeds. It results in buildup of huge work in process (WIP) inventory. Inventory is money and lead to other headaches !
Finally, inventories parked across the value steam, starting from raw materials, WIP and finished goods, is a killer! Inventory comprises 50 – 60% of the total costs in a manufacturing unit. Excess (shortage is also a danger, not discussed here) of incoming inventory including the packing material results in blockage of money, space and risk of obsolescence. WIP is a resultant of poor flow and overproduction and no use of systems like Kanban. Inventory occupies space, requires additional handling and management, has to be accounted for, labeled etc, all of which again consumes resources and time.
Finished goods inventory, especially relating to domestic markets is a big issue which needs to be managed through waste elimination across the distribution chain. Certain practice, like having centralized warehouses , month end syndrome and the bull whip effect are other common phenomenon in the Indian Pharma sales and distribution space. This results in direct losses , including discounts on near to expiry goods.
Kaizen / Lean is ready and here… are you says Mr.Jayanth Murthy (Director – KAIZEN Institute India/Africa/Middle East)