Quality as Foundation for OPEX and the possible role of big data. Prof. Dr. Thomas Friedli

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1 Quality as Foundation for OPEX and the possible role of big data Prof. Dr. Thomas Friedli San Francisco,

2 Structure Introduction Quality Management / FDA Quality Metrics Initiative Operational Excellence and Quality Systematizing Improvements using Data Summary and Outlook 2 ITEM HSG

3 10 Hot Topics in Pharma from an OPEX Perspective Quality Metrics Benchmarking the Quality. Org. Organizing OPEX OPEX Maturity Managing Complexity OPEX Leadership CI Culture Shift from Tool to Culture OPEX in Network Knowledge Management OM: Operations Management; CI: Continuous Improvement 3 ITEM HSG

4 A Definition of Operational Excellence The St.Gallen understanding The ITEM HSG defines Operational Excellence as a philosophy directing an organization towards continuous improvement! It is the balanced management of cost, quality and time focusing on the needs of the customer It comprises structural & behavioural changes to support the needed activities the best way possible To be sustainable it has to be pushed by Top Management and to be designed to engage every single employee Operational Excellence is not only about performance, it is also about the way an organization achieves superior performance and about how it continuously improves itself! Source: Friedli et.al. (2013), Leading Pharmaceutical Operational Excellence 4 ITEM HSG

5 The St.Gallen OPEX and the Sand Cone Model Source: Friedli et.al. (2013), Leading Pharmaceutical Operational Excellence Source: Ferdows/DeMeyer (1990), Journal of Operations Management 5 ITEM HSG

6 The St.Gallen Pharma OPEX Database Industry Number of Production Sites Number of Companies Content Scope Content Modules Pharmaceutical 299 (Total) 217 (Formulation & Packaging) 58 (API) 24 (Biotech) 124 (Total) including eleven companies of the Top 20* Enabler Implementation and Performance Metrics (KPIs) Total Productive Maintenance (TPM) Total Quality Management (TQM) Just-In-Time (JIT) Effective Management System (EMS) 6 ITEM HSG

7 Total Productive Maintenance (TPM) TPM enabler TPM performance We emphasize good maintenance as a strategy for increasing quality & planning We continuously optimize our maintenance program based on a dedicated failure analysis +25% +17% Overall Equipment Effectiveness (OEE) % Today 55% +53% We rely on vendors for all of our equipment -33% Unplanned Maintenance We have a housekeeping checklist to constantly monitor the condition and cleanness of our machines and equipment +13% 2003 Today 18% 25% -30% Conclusion The implementation of the TPM enabler category has only slightly increased over the last decade However, key components like Preventive Maintenance and Housekeeping did have a significant positive impact on the overall TPM performance Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 7 ITEM HSG

8 Total Quality Management (TQM) TQM enabler TQM performance A large percentage of equipment on the shop floor is currently under Statistical Process Control (SPC) +50% Complaint Rate Supplier % +100% We regularly survey our customer s requirements +33% Today 2% Quality is our number one criterion in selecting suppliers +13% Complaint Rate Customer % We use mostly suppliers that we have validated +25% Today 0.57% -43% Conclusion Over the last decade pharmaceutical companies have made significant efforts to intensify business practices impacting the quality of output This explains the performance improvements pharmaceutical companies have achieved in the field of TQM Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 8 ITEM HSG

9 Just In Time (JIT) JIT enabler JIT performance We are continuously working to lower set-up and cleaning times in our plant We have managed to schedule a big portion of our set-ups so that the regular up-time of our machines is not effected +33% +17% Raw Material Turns 2003 Today % We use a pull system (Kanban squares, containers or signals) for production control We deliver to our customers in a demandoriented JIT way instead of a stock-oriented approach +200% +50% Service Level - Delivery 2003 Today 95% 97% +3% Conclusion The OPEX benchmarking database exhibits an increasing emphasis on JIT activities as a result from companies higher JIT awareness Looking at the performance of the overall sample, a significant improvement with regard to the continuous reduction of overproduction, unnecessary inventory and inconsistencies by creating a pull production can be measured Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 9 ITEM HSG

10 Effective Management System (EMS) EMS enabler Our production site has an exposed vision and strategy that is closely related to our corporate mission statement Our manufacturing managers know exactly what the most important criteria for manufacturing jobs are +25% +25% EMS performance Training Days 2003 Today 3.0 days +157% 7.7 days Our employees continuously strive to reduce any kind of waste in every process We have implemented tools and methods to deploy a continuous improvement process -13% -13% Unskilled Employees 2003 Today 4% 10% -60% Conclusion A deeper look at the EMS enabler category reveals that only little efforts have been made to improve EMS The St.Gallen Operational Excellence Model also uses KPIs to operationalize the EMS performance. Although several improvements have already been achieved, there is still big room for improvement Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 10 ITEM HSG

11 Structure Introduction Quality Management / FDA Quality Metrics Initiative Operational Excellence and Quality Systematizing Improvements using Data Summary and Outlook 11 ITEM HSG

12 The History of Quality Management Ancient time Medieval time Beginning of 20th century World War II 1960s 1970s 1980s 1990s until 2000 Antiquity "Guilds" Taylorism, management Shewhart et al. Quality assurance Integrated quality assurance, companywide quality control, quality circles System norms (ISO), TQM (awards) Awards, IQM Integrated, sustainable management Egypt, pyramids, measurement Norms, masters, companions Work sharing, quality control Random test plans Precaution, defect avoidance in production Other areas (R&D, Sales) improvements Quality management, general management Top management integration, integration in management Global reach, integration in society and environment Technically oriented perspective Customer- & Stakeholder oriented perspective ISO 9000 (2008): Quality of a unit is the degree to which a set of inherent characteristics fulfils requirements. Short form: Quality are the properties as measured against needs and expectations. Source: Seghezzi (2003) 12 ITEM HSG

13 Quality and Manufacturing today The independence of quality control from production is considered fundamental. WHO GMP for Pharmaceutical Preparations* **Situation in Pharma Plant: both department rather work against each other than cooperating in order to attain their individual targets and KPIs Manufacturing Department Quality Department Without manufacturing there is no quality to control or assure statement of a manufacturing department representative On-time-delivery and other manufacturing KPIs are not my business statement of a quality representative *Source: WHO Expert Committee on Specifications for Pharmaceutical Preparations Section WHO technical report series; 908, 2001: Geneva, Switzerland **Source: Project Example from ITEM HSG

14 Do we measure the right things? Airline Operations Room Cleaning Operations Production Typical Metrics On-Time departure Minutes/m2 OEE Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 14 ITEM HSG

15 Questions to ask! Do you measure and manage the system including business or single dimensions? Has your metrics been designed as sum of all KPI s used somewhere anyway or was there a guiding logic? Do you take into account both main dimensions: «doing the right things» = efficacy / added value «doing the things right» = efficiency Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 15 ITEM HSG

16 FDA Draft Guideline Suggested Metrics Lot Acceptance Rate Product Quality Complaint Rate Invalidated OOS Rate APR or PQR on Time Rate Source: Draft Gudiance Request for Quality Metrics from July ITEM HSG

17 Structure Introduction Quality Management / FDA Quality Metrics Initiative Operational Excellence and Quality Systematizing Improvements using Data Summary and Outlook 17 ITEM HSG

18 Quality as foundation for Operational Excellence Quality Management System is based on OPEX and structured along different levers Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 18 ITEM HSG

19 OPEX and Quality A high OPEX performance indicates a high overall Quality system performance 19 ITEM HSG

20 OPEX and Quality OPEX high performers have a high Quality Effectiveness, Efficiency and a very good Quality Culture Source: Institute of Technology Management (ITEM HSG), University of St.Gallen 20 ITEM HSG

21 Structure Introduction Quality Management / FDA Quality Metrics Initiative Operational Excellence and Quality Systematizing Improvements using Data Summary and Outlook 21 ITEM HSG

22 Project Example I/III Objectives Semi automated benchmarking procedure for site priority setting Operationalisation of Production System and St.Gallen OPEX DB fields Identification of required site priorities based on data analysis 22 ITEM HSG

23 Project Example II/III Mapping of PS against DB Data Fields from OPEX BM Production System Components 23 ITEM HSG

24 Project Example IIII/III Impact Analysis Pr 1 Pr 2 Pr 3 Pr 4 Pr 5 Pr 6 Pr 7 Pr 8 Pr 9 Pr 10 Pr 11 Pr 12 Pr 13 Pr 14 Pr 15 Pr 16 Pr 17 Pr 18 Pr 19 Pr ITEM HSG

25 Example Smart Services Definition Definition Smart Services are offered as a combination of physical and digital services on the basis of connected products... are data based, i.e. there must be a component of data use in the delivery of the service... are also known as and include remote services, remote support, tele services, e services, condition monitoring etc. 25 ITEM HSG

26 Example Smart Service Impact Results: Performance Percentile of companies Percentile of companies 100% 75% 50% 25% 0% % 75% 50% 25% 0% 120 Without smart services With smart services Without smart services With smart services h 20 Reaction time [h] 60 Solution time [h] 48h h 8h 0 0 Insights Service provider Value Proposition Value Creation Value Capture Customer Reaction time Thanks to smart services, the reaction time has been decreased significantly. This is especially true for previously long reaction times. In the 25 th percentile, reaction time has been reduced from 24h to 3h. Solution time The average solution time to problems has been even more drastically reduced In the 25 th percentile, solution time has been reduced from 48h to 8h 26 ITEM HSG

27 Structure Introduction Quality Management / FDA Quality Metrics Initiative Operational Excellence and Quality Systematizing Improvements using Data Summary and Outlook 27 ITEM HSG

28 Summary & Outlook Quality Organizations have to be analysed using a systemic approach. The evaluation on individual KPI level has to be avoided Current initiatives like FDA Quality Metrics brings Quality and OPEX closer together The research of the University is showing the positive impact of Quality on overall OPEX performance Data becomes more and more mandatory for informed decisions about improvements on all levels of the organization Quality is the foundation for superior OPEX performance! Data can drive the next generation of systematized improvements! 28 ITEM HSG

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