Never mind the IT, what about the OEE?
CEO Simon Lowth stated that the impact on the full year revenues is likely to be ~1% of revenues – equating to over $300m. This is clearly a very significant hit.
The nature of Pharma manufacturing frequently results in individual plants being responsible for the entire production of the product. The value of the output is frequently in the $100Ms. One might therefore expect, given what is at stake, that companies would ensure that their operations are at the forefront of efficiency and reliablility. Efficient facilities reduce costs, increase on time delivery, de-risk security of supply and raise compliance levels.
Without data it is impossible to comment on the AstraZeneca site, however, the Oakland Consulting team have many pharmaceutical companies and therefore have seen first-hand that operational efficiencies are typically very poor, especially when compared to other industries (Food, Electronics, FMCGs, etc).
A particularly revealing way to assess manufacturing effectiveness is to measure the OEE (Overall Equipment Effectiveness). OEE is a % figure that represents the actual vs the theoretical maximum output. For example, if a line is designed to produce 1,000 units an hour, and (naturally) 100% quality is desired, then the theoretical capacity is 1,000 x 100% x 24hrs = 24,000 units per day. If the actual output is 12,000 the OEE is 50%.
In simple terms there are three types of loss:
- Availability – not scheduled to run, changeovers, breakdowns
- Speed loses – the equipment is not running at the maximum speed is was designed to
- Quality loses – all product lost throughout the process, including final testing
In our experience manufacturing and packaging lines typically operate at 15 – 40% OEE. By way of comparison in other industries, 80%+ is generally considered world class (although it does depend on the nature of the industry), 60% is decent level, 40% poor. Yet in Pharma 40% is seen as good. Consequently, there is usually considerable scope for Pharma companies to significantly improve their output, often with minimal capital investment.
So why haven’t pharma companies done so already? Usually the root cause is a combination of a lack of prioritisation of operations, a poor historical understanding of the drivers of manufacturing costs, a belief that the industry is different from others and therefore can’t improve, tight regulation that does make it harder, and a lack of a Continuous Improvement culture.
While incidents such as the interruption in supply at AstraZeneca may be high profile, for many Pharma companies it is the less obvious but ultimately more damaging, day to day loses that need the spotlight shining on them.
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