India can continue to be number one in generic pharma business

When it comes to the supply of generic medicines, India is ranked number one in the world. However, of late, Indian generic pharma companies have been confronted with a few challenges. The most daunting of them is the quick price erosion of generic drugs after launch, mainly because of increased competition. Pressure on margins has made it necessary for companies to check out ways to increase productivity, reduce capacity wastage, etc., without adding to their costs. However, this is not an easy task owing to the stringent regulatory environment within which this industry has to function.

One of the unique challenges this poses for capacity utilisation of plants in generic pharma manufacturing is that each drug has to be processed on a pre-approved set of machines. The manufacturing route cannot be changed to other unapproved workstations even if they are similar in nature. So, there is no flexibility for plant managers in case a particular machine/set of machines are overloaded.

Planning for a month, failing every month
Because of this unique challenge in this environment, planning to ensure both capacity utilisation and on-time delivery of orders is not easy. In spite of detailed monthly production plans, capacity is often underutilised, and firefighting and expediting are often needed to meet delivery deadlines. Since planning managers cannot predict and accommodate all possible ‘Murphys’ and deviations that can happen during the manufacturing process, overloading and underutilisation of machines is a norm in plants leading to capacity wastage, increased lead time and missed on-time delivery commitments.

Tactics that never succeed
Typically, managers use these two tactics to ensure on-time delivery, while also protecting capacity.

Early release of orders on to shop floor: In order to give orders more lead time to complete, managers release orders as soon as they see that the initial work centres are free. However, instead of helping, this aggravates the problem by overloading some routes downstream.

Clubbing of orders: Planners try to cherry-pick and club available orders to try and save on set-up times (very high in this environment) and release them as a big batch (called “campaigns”). The problem here is that many of these orders cannot be dispatched immediately after production, increasing inventory, while some other orders that were needed for urgent dispatch get delayed. This situation of frequent expediting of delayed orders misleads companies to believe that they don’t have the required capacity- triggering unnecessary CAPEX investments.

Daily scheduling, dynamic dispensing- a new solution
The writing is on the wall – monthly planning just does not work here. However, there is a better way. Scheduling, if done on a daily basis after taking into consideration the load on each manufacturing route (not just the first workstation), can protect the plant from traffic jams. This is similar to the railway track management system, where trains are only routed onto tracks that are available.

Tactics to support daily dispensing
However, for daily dynamic dispensing to work, other departments need to support the process. Raw materials, for example, should not be procured simply based on sales orders, but as per changes in actual consumption. So, the system of maintaining and replenishing raw material buffers also has to be dynamic. A similar mechanism has to operate in the quality control department to ensure that cleared material is readily available for dispensing. Ideally, a separate team should be given the responsibility to ensure that a bank of orders is always fully ready for dispensing. And, to ensure that all stakeholders are working on the right set of orders, a simple colour-coding mechanism can be used to indicate what is truly urgent (red colour), what will need attention soon, but not right away (yellow), and what is not on priority right now (green).

Increased profits, reduced costs, and, no, not a pipe dream
Implement these steps while also focussing on further reducing capacity wastage (e.g., projects to reduce setup time), and see how output can increase by up to 30 per cent and lead times can reduce by 30 per cent. What’s more, you can also reduce costs because of inventory write-offs due to hold time deviations, and can eliminate other ad-hoc expenses such as penalties for delayed delivery of goods or having to expedite delivery through expensive means (air freights, for example). And, no, this is not a pipe dream. Many companies have already benefitted from this.