By Ananth Krishnamurthy and Gerald Finken
Pharmaceutical and biotech industries are under enormous pressure to improve quality, increase efficiency, and cut costs of their preclinical research and clinical development processes. However, the manufacturing of APIs and investigational medicinal products (IMPs) and the preparation of clinical supplies in the pharmaceutical and biotech industries present significant challenges in terms of finalizing the process designs, establishing and maintaining cGMP to meet FDA regulations, and optimizing processes for commercial scale production.
Typically, the process takes many years (see Figure 1), requires significant investments in capital and human resources, and involves a high risk of failure. Variability of yields and product stability issues at different stages result in a complex manufacturing process with a high degree of inconsistency and limited repeatability, especially for biologics. As a result, pharmaceutical supply chains have seen timelines grow and costs spiral outward over the last several decades. Preclinical research and the different phases of clinical development of pharmaceuticals are notorious for their complexity with many unknowns and inherent variability. These studies are also plagued by significant requirements for documentation and approval at different stages, resulting in extended timelines.
Spurred by the success of Lean Six Sigma-based efforts in commercial manufacturing, many pharmaceutical and biotech industries have tried to extend these initiatives into their preclinical research and clinical development processes. The limited success of these initiatives suggest that Lean Six Sigma alone might not provide the sophistication required to address the inherent complexity and variability in the pharmaceutical development supply chain. A time-based approach called quick response manufacturing (QRM) developed by researchers at the University of Wisconsin-Madison might enable pharmaceutical industries to take the improvements obtained from Lean Six Sigma to the next level.
Going Beyond Lean Six Sigma With Quick Response
QRM is a companywide strategy to cut lead times in all phases of a company’s operations — from product conceptualization to large-scale manufacturing, including documentation, approvals, and other related office operations involved in the entire process. Quick response principles have been specifically developed and applied for more than 15 years in a variety of industries that specialize in highly engineered, high-mix custom products. In these complex manufacturing environments, QRM has helped companies reduce lead times for product launch, quoting, order processing, engineering, manufacturing, and assembly by up to 90%. These dramatic lead-time reductions have led to cost reductions of more than 30%, on-time delivery improvements to over 99%, productivity and capacity improvements of over 50%, and overhead cost reduction by 20%. If pharmaceutical and biotech industries could gain similar benefits using QRM, there is no doubt the business impact would be significant. So, why does QRM lead to these impressive improvements?
Uncover The Hidden Wastes Due To Long Lead Times
Like the Lean philosophy, QRM also focuses on the systematic elimination of waste in a value stream. Lean improvement efforts focus on eliminating waste and establishing flow by implementing the 5Ss (sorting, setting in order, shining, standardizing, sustaining), managing constraints, level loading (takt time), establishing pull (kanban), and reducing production lot sizes. However, QRM differs from Lean in the way in which it looks for waste in a process and the ways to eliminate it. In QRM, the entire process is examined through the microscope of lead time, and this helps to uncover additional forms of waste and new opportunities to improve operations.
QRM calls this concept as recognizing the “power of time.” Let’s reexamine the processes in preclinical research and clinical development described in Figure 1 from the perspective of lead time. If one were to identify the value-added time (gray space; see Figure 2) and nonvalue-added time (white space) in the process, one would find that in most organizations, 95% to 99% of the overall lead time is composed of nonvalue-added time. Throughout preclinical research and clinical development, significant time is lost at hold steps, in preparing documentation, and waiting for approval at various stages. These nonvalue-added times pose a massive strain on the organization, which lead to significant wastes that often go unaccounted for in traditional Lean Six Sigma improvement efforts. Imagine the time and resources dedicated throughout the organization to manage the long, nonvalue-added portion of the process. Organizations spend considerable amounts of time and money expediting, managing quality errors, conducting meetings to coordinate activities due to delays, scheduling overtime production, justifying delays, and tempering expectations; managing obsolescence, order changes, and scope creep; and storing excess inventory for contingencies. All of these wastes contribute to significant costs in terms of material, labor, and overhead. QRM implementations to reduce lead times have helped to simplify processes, reduce supermarket inventories, simplify planning and scheduling, and free up personnel time. Unfortunately, most traditional cost-based improvement efforts focus on reducing the value-added times while completely ignoring the opportunity presented by eliminating the wastes due to nonvalue-added times.
Eliminate Dysfunctional Variability, Exploit Strategic Variability
In addition to identifying the wastes due to long lead times, QRM provides specific methodologies and tools to eliminate these wastes. However, there are differences in the approaches of Lean Six Sigma and QRM. A strong component of Lean Six Sigma strategies is the elimination of variability to implement flow. The Six Sigma process improvement methodology is based on the principle that variability hinders the ability to deliver high-quality products and services. Consequently, through the DMAIC (define, measure, analyze, improve, control) process, Six Sigma develops a comprehensive set of practices to identify and eliminate defects, where a defect is broadly classified as any process output that does not meet customer specifications.
QRM takes a different approach to variability that is arguably a better fit for the complex environments of the pharmaceutical industry. QRM argues that complex supply chains making highly engineered, one-of-a-kind products need to deal with two types of variability: dysfunctional variability and strategic variability. Dysfunctional variability occurs due to a variety of reasons including the lack of standard work, quality problems, machine failures, and inconsistent operator training. QRM concurs with Lean Six Sigma in that dysfunctional variability leads to waste and needs to be eliminated. However, many organizations also need to deal with a second kind of variability, called strategic variability, which arises because of diverse product mix, customized product offerings, complex operations and processes, uncertain yields, and fluctuating and unpredictable demand patterns. In fact, although these types of variabilities are prevalent in preclinical research, clinical development, and operational processes of pharmaceutical organizations, these processes form the core competencies of the business. This kind of variability cannot be simply eliminated. Instead it must be dealt with efficiently. QRM recommends that a strong understanding of organizational and system dynamic principles will help an organization to not just deal with strategic variability, but also exploit it to provide a competitive advantage and grow market share.
Structure The Organization To Reduce Lead Times
To reduce the nonvalue-added time and associated waste across the enterprise, QRM recommends reexamining the organizational structure and current operating policies. Most organizations, including the pharmaceutical and biotech industry, have been set up based on principles outlined by manufacturing pioneers like Henry Ford, which were suited to compete in markets of the last century. To compete in markets of the 21st century, pharmaceutical and biotech industries would need to reexamine the organization of the different functions involved in both their manufacturing and office operations, to create product focused units called cells. These cells should include multiple resources from different functional areas that would be dedicated to a family of products/services with the primary objective of finishing tasks needed to satisfy customer requirements within the cell. From a staffing and management point of view, this would imply that the cell has multifunctional and cross-trained personnel with a greater responsibility, ownership, and accountability to make decisions to improve quality and reduce lead time. As many successful QRM implementations have demonstrated, this organizational change is essential to provide an organization with the horsepower needed to compete in the markets of the 21st century.
Establish Operating Policies Based On System Dynamic Principles
After restructuring the organization into cells, management needs to support this structure with suitable operating policies based on a sound understanding of system dynamics. One of the key system dynamic principles at the heart of the QRM philosophy is the tradeoff between capacity utilization and lead times. As resources (key equipment and/or personnel) get utilized close to their capacity, queues and delays build up at various processes causing lead times to increase. Therefore, in order to be responsive, an organization must strategically invest in spare capacity. While this goes against conventional wisdom of keeping resources busy to improve asset utilization, it is a typical case of being “penny wise and pound foolish.” One often forgets that as waiting times of resources increase and lead times spiral outward, significant resources are spent expediting late orders, replanning, and rescheduling activities to retain customers. Investing in spare capacity also does not necessarily imply buying additional equipment or increasing staffing levels. Many organizations today waste available capacity. One example is the use of capacity to build products ahead of time that get stored in a warehouse only to be written off as obsolete at a future date. Further, a focus on lead times forces one to question other policies including production lot sizes at various manufacturing steps and on-time delivery metrics used across the supply chain. Understanding system dynamics is a cornerstone of QRM and is essential to eliminating dysfunctional variability and exploiting strategic variability.
QRM: A Unifying Competitive Strategy To Improve Quality And Lower Costs
Successful implementation of QRM positions an organization to offer unique, customized products and services to its customers, faster than its competitors, at better quality, and at lower costs. If a pharmaceutical company could reduce its lead times for preclinical research and clinical development by 50%, it could enter into the market with products based on new technology significantly ahead of its competition. By the time the competition catches up, the company could leapfrog ahead with a newer product. In addition, due to the elimination of nonvalue-added times and associated wastes, each product offering takes less time and fewer resources, leaving no room in the market for the competition. One might wonder whether the focus on shorter lead times leads an organization to compromise on quality. QRM implementations have shown that lead-time reductions, in fact, help realize manifold improvements in quality. By eliminating the various wastes in the organization, QRM frees resources that are currently tied up in expediting and firefighting activities. These resources can now “discover” opportunities to improve quality and devote time to address these opportunities. The product-focused nature of the organization makes it easier to identify quality improvements that have direct impact on the final customer. Shorter lead times also mean that jobs are moving more quickly through the organization, implying employees are juggling fewer things at one time, reducing the chances of one of them dropping the ball. From a personnel point of view, this leads to happier employees who are able to contribute their full potential to the organization. Further, since the concepts of QRM apply across the extended supply chain, it sends a simple, consistent, and unifying message across the enterprise, encouraging them to build on their Lean Six Sigma initiatives and grow market share.
QRM Applications In The Pharmaceutical Industry: Clinical Supplies
In a very raw form, the QRM principles have been applied to the packaging and labeling of clinical supplies in the pharmaceutical and biotech industries, and the entire clinical supply chain process is now being retooled, reorganized, and rethought. By focusing on the time associated with each packaged and labeled unit instead of the cost of each unit, timelines for packaging and labeling have been reduced from 8 to 12 weeks down to 3 to 5 weeks. Continued adaptation of the QRM principles to the clinical supply chain process could further reduce packaging and labeling timelines down to less than two to three weeks.
Extending QRM Across The Pharmaceutical Industry
Lead-time reduction opportunities in preclinical research and clinical development are significant. By applying QRM principles, one could restructure processes to significantly reduce the nonvalue-added time and shorten lead times for documentation and approval processes. These shortened timelines would allow staff to wait until they have a better understanding of yield and quality during the development process. The improved yield, better stability, and shorter hold times would further reduce lead times in the different phases of preclinical research and clinical development. This also implies the possibility that lead times to IND review and NDA review could be significantly reduced. These reduced lead times would also free up personnel currently occupied in nonvalue-added activities (revising and updating approval documents) during the course of a study and be available for more valuable clinical research efforts. In addition, significant savings could be realized when it comes to the inventory of bulk drugs, APIs, and IMPs (investigational medicinal product). As more and more pharmaceutical companies recognize the value of speed to market and seek a suitable steroid to accelerate their preclinical and clinical processes, they might realize that the answer lies in quick response manufacturing.
About The Authors
Gerald Finken is CEO of CSM. He has almost 30 years of clinical supplies experience in the biotechnology and pharmaceutical industries. He has held key leadership positions with Bristol-Myers Squibb Company and PRACS Institute, Ltd. prior to founding CSM.
Ananth Krishnamurthy is the director of the Center for Quick Response Manufacturing and serves as an associate professor in the Department of Industrial and Systems Engineering at the University of Wisconsin-Madison. His research targets the design and analysis of manufacturing systems and supply chains with emphasis on product variety, customization, and lead-time reduction.