20 Sep 2016


Medicine makers face a dilemma.  Manufacturing plants are built around the concept of making products in batches.  As the overhead costs of quality control and assurance are considerable there is a driver to make ever larger batches.  Which is fine if you have a blockbuster that sold in billions of tablets a year.  However the trend is to medicines that focus on individuals, and better knowledge of genetics has led to diseases fragmenting into multiple variations each with its own genetic make up and thus seperate treatments.  So the market is for ever smaller quantities of specialised drugs.

Within manufacturing planst each manufacturing step is undertaken on seperate machines.  The products work their way through a maze of production centres.  Scheduling the work through the plant is not easy and and work in process is often stored awaiting teh next available machine.  The utilisation of capital plant is very poor.  Averages of 70% utilisation are often aimed at but frequently plants only work a single shift over 5 days of the week.  So the actual run time of equipment divided by the total time available is probably in single figures.

Large batch manufacture also has a cost in creating significant inventories because product is made in large batches at infrequent intervals rather than made in resposne to demand.  The stock turn in a pharmaceutical company can be as low as 4 or 5 turns in a year.  A retailer will have stock turn of 50-60 times a year.  This locks up working capital and encourages a sclerotic supply chain.

The industry has ignored lessons from other manufacturers and its own experimental work.

Better solutions exist.  A recent study showed that applying them to one UK multinational would yield a recurring savings in the order of $500m a year.

Last Modified: Tuesday 20 September 2016 11:34
Better economical Manufacturing Pharmaceutical savings

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