Operational Excellence with Compliant Manufacturing ...

1 Operational Excellence withCompliant ManufacturingOperations for PharmaceuticalsHussain Mooraj and Wayne McDonnellAMR ResearchAndy D ,Senior Director Industry SolutionsSAP for Life SciencesHussain Mooraj and Wayne McDonnellAMR ResearchTrends and Key Metrics enablingOperations Performance ManagementSummaryTrends and Key Metrics enablingOperations Performance ManagementAchieving Superior Performance withCompliant Manufacturing in Life SciencesOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11% of Responses. N=1002 weeks11%Days13%1-2 weeks6%3- 4 weeks38%4- 5 weeks32%Time to Sense Changesin Customer DemandSupply Network operations Average 22 Sites40+ Manufacturing sites30%11-20 Manufacturing sites15%2-5 manufacturingsites17%6-10 Manufacturing sites17%21-40 Manufacturing sites19%1 Manufacturing site2%Evolving Global Manufacturing Environment the ChallengesInsight:complexity is increasing.

2 Need a new operating modelOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Evolving Global Manufacturing Environment the Drivers More Product Variants Shorter New Product Development & Launch Regulatory Compliance Cost Reduction Better Short Term Demand Visibility More Dynamic Supply NetworksDemandSupplyProductDemand Driven Manufacturing :The synchronized execution of compliantmanufacturing and logistics processes acrossa dynamically reconfigurable supply network,to profitably meet :today s business environment requires move to DDM modelOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Manufacturing Architecture Integrated andGoverned with Enterprise SystemsMultiple Point SolutionsAutonomously DeployedIT StrategyVP Supply Network operations , Plant ManagerVP Manufacturing , Plant ManagerManagementCapability, Profitable To PromiseInventory, Available To PromiseOrder PromisingHigh Volume, High MixHigh Volume, Low MixProduct FlexibilityOutside-In Metrics: Right First Time, ScheduleAdherence, Supply Chain Cost, Profit VelocitySet by Manufacturing .

3 Material &Capacity Utilization, OEEKPIsVMI, SMI, CPFR - Networked and Real TimeSMI - SlowCollaborationReal Time WIP, Schedules, Costs and CapabilityCompleted Orders, FG InventoryManufacturing VisibilityEvent Driven S&OP, Closed Loop SchedulingMaster Production SchedulingPlanningIn-house/Outsourced, DynamicIn-houseCapacityDynamic Re-sequencingCampaignsOrder ExecutionPull, Lean ReplenishmentPush, RM/FG Buffer InventoriesInventory PhilosophyRapid, In-house/Contracted R&D, Time To ValueInfrequent, In-house R&DNPD&LSupply & DemandSupplyManaged VariabilityETO, MTO, ATO, CTO, Outsourced/ContractedMTSM anufacturing PhilosophyDemand Driven ManufacturingTraditional ManufacturingCharacteristicsDemand-Drive n ManufacturingSource: Demand-Driven Manufacturing , AMR Research, 2007 Insight:think outside-in, execute inside-outOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Life Sciences Product Supply Strategies% of Responses.

4 N=986%5%13%5%5%8%7%8%7%4%7%10%13%15%12%1 7%7%7%9%8%7%6%2%1%3%4%Improve collaboration in your enterprise with internal partnersacross R&D/Man/Supply Chain/Sales & MktManufacturing outsourcing as an opportunity to boostproductivity and efficiencyImprove efficiencies and lower costs across the enterpriseIncreased insight into dow nstream demand using near real-time data from distributors and other intermediariesImprove Manufacturing performance visibility acrossmanufacturing sitesReplicating best practices across the enterprise usingoperational Excellence programsStandardize Manufacturing processes and systemsRedesign of your supply chain netw orksImprove collaboration w ith your external partners such asContract Manufacturers, 3rd Party LogisticsProduct authentication, track and trace, integrity of supplychainImprove compliance across financial, Manufacturing andquality processesDetailed production scheduling, and adherenceIdentify and eliminate w aste in Manufacturing using leanmanufacturing practices20072012 Future FocusCurrent FocusInsight.

5 Focus is shiftingfrom cost & compliance tovelocity, agility, profitabilityOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Life Sciences Product Supply Strategies62%64%67%62%62%62%64%55%62%60% 57%57%41%44%51%47%48%50%41%49%48%47%47%4 7%Leverage contract manufacturers for new product launch and agileresponse to demandAbility to forecast demandAchieving Compliant , predictable product supply by manufacturingright-first-timeManaging the cost of compliance while achieving the desired levelsof complianceAbility to respond to changes in demandA balanced S&OP processes which profitably matches demand andconstrained supplyAligning Manufacturing , supply chain, sales & marketing, regulatoryinteraction for successful new product launchesLeveraging global opportunities in sourcingPlanning and implementing master data management processesacross the organizationReliable drug track and trace, authentication, reduce counterfeitingand fraud monitoringManage contract Manufacturing relationships, compliance andproduct qualityAccessing existing unstructured information in manufacturingImportancePerformance-10%-1 2%-10%-13%-14%-14%-14%-15%-15%-16%-20%-2 1%Gap% of Responses.

6 N=98 Operational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Life Sciences Product Supply Strategies62%64%67%62%62%62%64%55%62%60% 57%57%41%44%51%47%48%50%41%49%48%47%47%4 7%Leverage contract manufacturers for new product launch and agileresponse to demandAbility to forecast demandAchieving Compliant , predictable product supply by manufacturingright-first-timeManaging the cost of compliance while achieving the desired levelsof complianceAbility to respond to changes in demandA balanced S&OP processes which profitably matches demand andconstrained supplyAligning Manufacturing , supply chain, sales & marketing, regulatoryinteraction for successful new product launchesLeveraging global opportunities in sourcingPlanning and implementing master data management processesacross the organizationReliable drug track and trace, authentication, reduce counterfeitingand fraud monitoringManage contract Manufacturing relationships, compliance andproduct qualityAccessing existing unstructured information in manufacturingImportancePerformance-10%-1 2%-10%-13%-14%-14%-14%-15%-15%-16%-20%-2 1%Gap% of Responses.

7 N=98 Insight:Gaps are in leveraging 3rdparty capabilities, demand forecasting,right first time manufacturingOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11An Hierarchy of Manufacturing MetricsWhat it isWhat it tells youOperationalExcellenceDemandVolatility RightFirstTimeMfgCostRM, WIP +FGInventoryRightFirstTimeDetailMfgCostD etailSupplierQualitySupplierOn-TimeSched uleCycleVariancesAssetPerformance(OEE+)S cheduleAdherenceComplexity(COs vsMix)ScheduleChangesFirstPassYieldReq. RMTo ProdCycle TimesRMInspectStageTimesFGInspectSched ToDispatchProduction ContractComplexitySupply NetworkInvestment Responsiveness CostsPerformanceConstraintsMfg Cycle Times Manufacturing Complexity Manufacturing Agility Root Cause Analysis Surgical InterventionInsight:becoming Demand Driven requiresRight First Time Manufacturing capabilitiesOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -112006 Manufacturing Metrics Study AMR Research examined 100 Manufacturing firmsto prioritize, segment, and assess theimportance/impact of Manufacturing metrics.

8 The research sample was split between processand discrete manufacturers to enable side-by-sidecomparisons. The sample distribution also enabled comparisonsby company size (under 10,000 employees vs. over10,000 employees), and by job function/role (IT Management vs. ManufacturingManagement). Process industries included:Pharma, CPG, Chem, Pulp andPaper, Oil and Gas, andPrimary Metals Discrete industries included:Auto, High Tech, A&D, andFabricated Metals Respondent titles includedCorporate executives (36%),IT (23%), Ops/Production (27%) The average responding firmhad over 22 manufacturingfacilitiesOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Manufacturing Metrics Tracked Today% of Responses. N=100 Mfg quality metricsSupplier qualitymetricsMfg costs metricsMfg responsivenessmetricsSchedule adherencemetricsMfg flexibilitymetricsMeasuringdemand metricsInsight:metrics are driving performance toward quality, compliance and costOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Key Research Findings: Manufacturing Metrics The typical Manufacturing organization only tracks 9different performance metrics.

9 Of the nearly 20 different Manufacturing metricsexamined, only 6 were used by more than 60% of therespondents. None were used by all. Most Manufacturing firms rely on static metrics suchas inventory levels, fixed cost measures, and averageproduction or cycle time. Very few rely on predictivemeasures such as asset availability, varianceanalyses, or supplier-related metrics. Between 30% and 60% of responding firms believestheir management ability and their agility is impactedby a lack of into performancelevels are moderately highin some areas, but thesystems, tools, and opticsprovided tend not to focuson Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Manufacturing Metrics Gap Analysis:Importance vs. Perceived Performance% of Responses indicating a 4 or 5 on a 5-point scaleInsight:measurement strategy must align with business & manufacturingOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Key Research Takeaways: Metrics & Performance Among the vast array of metrics examined, quality-related issues ranked as the most important, followedby cost metrics, and agility/flexibility/responsiveness.

10 Respondents stated that their lack of optics intosupplier quality, demand measurement, andmanufacturing costs were their most criticalvulnerabilities. Visibility into performance metrics is impacted byinaccurate reporting/forecasting processes, disparatesystems, lack of participation by key stakeholders, andinadequate research clearlyshows that respondentsare both aware anddeeply concerned aboutthe lack of performanceoptics and metrics acrosstheir Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 CapabilitiesGap Analysis: Importance vs. PerceivedPerformance%of Responses indicating a 4 or 5 on a 5-point scaleInsight:end-to-end visibility is keyOperational Excellence with Compliant Manufacturing operations in Pharmaceuticals -11 Key Research Findings: SupportingCapabilities A multi-site view of performance is perceived asimportant; respondents are beginning to connect corecapabilities with that desired outcome.