Balancing cost and value with TCO

Optimising TCO in the pharma sector demands a holistic approach 

Rajendra B Chunodkar, President – Manufacturing Operations, Lupin

Optimising TCO without compromising on quality and compliance requires a multifaceted approach, often involving: Contract Development and Manufacturing Organizations (CDMOs): 

CDMOs offer specialised expertise and state-of-the-art facilities for drug product development and manufacturing. By leveraging CDMO partnerships, companies can reduce capital expenditure, minimise operational costs, and gain access to advanced technologies and processes, without incurring the high costs associated with maintaining in-house capabilities.

• Leveraging technology: Continuously improving operating processes to increase yield, batch size, and capacity, and reduce cycle times and changeovers is crucial for cost optimisation. Adopting advanced manufacturing technologies like continuous manufacturing, automation, and process analytical technology (PAT) can greatly improve efficiencies and product quality and reduce costs. 
• Quality focus: By integrating quality throughout the process, companies can minimise non-compliance risk and expensive recalls. This involves identifying critical quality attributes and process parameters and implementing strong controls for consistent product quality. This approach enhances reliability, streamlines regulatory approval, reduces time-to-market, and lowers costs.
• Supply chain management: Pharmaceutical companies should focus on building resilient and flexible supply chains capable of adapting to market fluctuations and disruptions. Leveraging digital supply chain solutions can enhance visibility and coordination across the supply chain, reducing inefficiencies and ensuring timely product delivery. 
• Continuous improvement: Companies should invest in training and development programs to equip their workforce with the skills needed to implement and sustain improvement initiatives. Tools such as Lean Manufacturing and Six Sigma can be instrumental in driving continuous improvement and achieving operational excellence.
• Ensuring stringent compliance: Companies must establish robust quality management systems (QMS) to ensure adherence to Good Manufacturing Practices (GMP) and other regulatory requirements. Regular audits, both internal and external, can help identify areas for improvement and ensure continuous compliance.
• Harnessing the power of data: By leveraging big data and advanced analytics, pharma companies can gain insights into their operations, identify inefficiencies, and make informed decisions to improve performance. Real-time data monitoring can enhance quality control and compliance, ensuring that products consistently meet regulatory standards. Optimising TCO in the pharma sector demands a holistic approach that balances cost efficiency with quality and compliance while enabling continuous operational excellence and sustainable growth.

Harmonisation of systems and practices across sites can improve efficiency

Sanjay Sharma, Sr VP & Head MS&T, Zydus   

The Pharma industry is facing significant challenges related to persistent cost inflation and pricing pressures leading to profit erosion which makes Total Cost of Ownership (TCO) very crucial for business sustenance. 

The operational cost to the company grows year on year majorly attributed to rising input cost of raw materials, labour, machinery CAPEX and investments related to regulatory compliances which in turn squeeze the profit margin along with an intensifying market competition. Having said that, it is imperative to look at avenues to reduce the cost of goods to sustain in the competition. Some of the initiatives that pharma organisations can take are:

• Efficient procurement and supply chain by developing alternate and cheaper sources for key intermediates and other raw/packing materials without any quality compromise.
• Embrace lean manufacturing by applying concepts of Kaizen, 5S, Focus PDCA and value stream mapping to identify redundancy in the processes and eliminate them. 
• Improve plant efficiency without investing in new plants to increase throughput from the existing plant to make it more cost-efficient.
• Reevaluate legacy products to identify the scope of any reformulation to make it more cost-efficient 
• Shift from manual processes to automation to optimise manpower cost
• Harmonisation and simplification of systems and practices across sites can improve efficiency 
• Focus on product robustness to minimise the failure cost and loss of market opportunity. 
• Invest in technological advancements related to process analytical tools (PAT) and continuous manufacturing which reduces operational and testing costs and also improves process understanding and quality 
• Stay regulatory compliant to avoid rework and remediations By adopting the above measures organisations can become more agile and efficient and ready to adapt to ever-changing market dynamics

Establish KPIs to monitor TCO and identify areas for improvement 

Naresh Gaur, Sr VP- Manufacturing, Amneal Pharmaceuticals   

Total Cost of Ownership is not only the asset’s purchase price, but it also includes, costs incurred on its maintenance, upgrades, wastes and rejects, operational cost etc incurred over its life span. 

To effectively optimise TCO in the pharma industry, companies should focus on the following strategies: 

1. Data-driven decision making 

• Performance metrics: Establish key performance indicators (KPIs) to monitor TCO and identify areas for improvement. These KPIs have to be reviewed periodically for monitoring the health and course correction to achieve the set goals. 
• Asset and equipment selection: while bringing in any new piece of asset, one should dive deeper to understand the overall lifecycle cost and not just the one-time procurement expenses. It’s like buying an insurance scheme with periodic payment of instalments or investing once to get the insurance cover and regular paybacks as well. 
• Though initially it may look like high cost then the consistent realisation of quality output, improved regulatory compliance with authentic & accurate data, lower repairs and maintenance costs, low wear and tear, bare minimal reject generation, improved yields, lower wastages, less resource utilisation, lower power or utility consumption, ease of operation etc. quite often justify the initial high price. And this is the only way, one should calculate TCO for any asset. 

2. Supply chain optimisation: (Assuming supplier relationship management for better terms and quality in place along with mitigation of any risk on supply chain disruption, agility to turn around with robust input supplies and customer service levels) 

• Inventory management: Implement efficient inventory control systems to reduce not only holding costs but also stockouts. With the interest rates going up drastically, it makes more sense to control inventories at all levels. 3. Process improvement and automation 
• Lean manufacturing: Eliminate waste and inefficiencies in production processes. This includes reducing cycle times, improving yield rates, and minimizing energy consumption, measuring equipment OEE, having an autonomous maintenance process in place for the upkeep of plant and machinery. 
• Quality by Design (QbD): Incorporate quality into the product development process to minimise quality events happening on the shop floor and there are no market complaints, rework and/ or rejections.

4. Technology adoption

• IoT: Using technology to monitor equipment performance and optimise maintenance schedules (adopting predictive maintenance,) and Leverage digital technologies to streamline operations and reduce costs. In pharma, capturing data directly from the machines may save time and resources and improve regulatory compliance due to digital oversight of the entire shop floor and quality. 

5. Sustainability and energy efficiency: 

• Green initiatives: Use of technology to monitor energy consumption patterns and optimise the same. Implement practices to reduce energy consumption, use alternate greener sources of energy like solar or wind and reduce waste generation at all levels. 
• Cost-benefit analysis: Implementation of various sustainability initiatives will not only reduce the operational costs, but will reduce carbon footprint, fetch in better investments, and improve market penetration. By implementing these strategies, pharmaceutical companies can achieve significant TCO reductions while maintaining the highest standards of quality and compliance.

A multifaceted approach to TCO can foster innovation, sustainability, and continuous improvement

Dr Girish Dixit, Executive Director, Eisai Pharma  

Key strategies for optimising TCO include: 

Streamlining procurement processes 

• Vendor management: Building long-term partnerships with reliable suppliers to secure bulk discounts and favourable terms 
• Just-in-time inventory: Reducing holding costs and waste by ensuring materials are available as needed

Enhancing production efficiency 

• Lean manufacturing: Adopting principles like value stream mapping and continuous improvement to eliminate waste and enhance productivity. 
• Automation and technology integration: Investing in advanced automation and data analytics to optimise workflows and reduce errors. 

Optimising logistics and distribution 

• Efficient supply chain management: Implementing robust practices to minimise transportation costs and ensure timely delivery. 
• Cold chain optimisation: Utilising IoT-enabled temperature monitoring and advanced refrigeration for temperature-sensitive products.

Focusing on quality and compliance 

• Regulatory adherence: Ensuring strict compliance to avoid costly penalties and recalls. 
• Quality assurance programs: Implementing Good Manufacturing Practices (GMP) and quality management systems to maintain high standards.

Sustainability initiatives 

• Green manufacturing practices: Reducing environmental footprint and costs through energy-efficient processes and waste minimisation. 
• Recycling and waste management: Developing efficient systems to repurpose waste and optimise resource utilisation. By adopting a multifaceted approach to TCO, pharma companies can achieve significant cost savings, enhance profitability, and maintain high-quality, affordable medications. This holistic strategy fosters innovation, sustainability, and continuous improvement, driving long-term success in a competitive market.