Op Ex & Lean Six Sigma

Is It Time for Biopharma OpEx to Grow Up?

New research indicates that biopharma manufacturers have a desire for operational excellence but are not using sophisticated methods that are commonplace in other industries.

By Paul Thomas, Senior Editor

Biopharma is usually looked at as a progressive industry, with innovative companies pushing the envelope in pursuit of the next big drug or technology. There may be one area, however, where bio is lagging behind—operational excellence. Early results from surveys of biopharmaceutical professionals taken by the newly formed UC Berkeley Initiative for Research in Biopharmaceutical Operations suggest that biopharma is, for example, preoccupied with risk, but has not yet developed analytical, data-driven means to assess and manage that risk.

The Berkeley Initiative was launched last summer with funding from the university, three founding members—Bayer, Genentech, and BioMarin—and the National Science Foundation. The impetus for the effort is to develop collective, “precompetitive” research and intelligence for the industry regarding its operations, said Phil Kaminsky, a Berkeley professor and director of the program.

“When you look at the progression of this industry, it’s similar to progression of the semiconductor industry, offset by 20 or 25 years,” said Kaminsky, speaking February 28 at the Biopharmaceutical Development & Production Week in San Diego. “There were big players in that industry and they were making lots of money, then the realization dawned that production control, inventory control, efficiency, supply chain management, and so on were going to be important.”

The semiconductor industry developed consortium called Sematech. Likewise, the Berkeley Initiative has been launched at a time when, Kaminsky believes, the industry is just beginning to get serious about operational excellence.

“Everyone is facing the same problems,” he noted. Thus the need for “precompetitve” OpEx work to address all manufacturers’ issues, which will in turn facilitate the competitive work that they all must do.

At present, everyone in the industry, he noted, needs improved tools, techniques, and approaches for:

  • strategic decision-making
  • measuring, managing, and hedging risk
  • valuing, planning, and implementing operational flexibility
  • measuring operational inefficiencies, and prioritizing and assessing Operational Excellence efforts

These tools must account for the unique characteristics of biopharma, such as great variability in processes and QC/QA, uncertainty in long-term demand, expansion of capacity, regulatory issues, and more.

Are these characteristics really unique to biopharma? Individually, no, said Kaminsky. But the totality of challenges and characteristics present the industry with a “daunting list” of issues to deal with. “Other industries usually face a subset of these challenges,” he said.

Early Survey Returns: Misguided Concerns?

Kaminsky and his graduate assistants are just beginning to churn out data from the some 300 industry members that have provided input thus far. Some of the noteworthy trends and conclusions that he has deciphered so far include:

General Risk Assessment: The industry respondents cited contamination, manufacturing reliability, and raw material supply as their major concerns. These “far dominated concerns about outsourcing risk, forecasting, and catastrophic events,” said Kaminsky. “I was surprised that some of these things didn’t seem like priorities to the industry.”

When it comes to assessing risk, the industry tends to focus on FMEA, but it has “very little focus” on data and analytical tools such as discrete simulation, Monte Carlo simulation and other means of quantifying uncertainty. “If you go to any other industry, everybody’s talking about risk analytics,” he said. Other industries excel at “measuring and collecting big, unstructured data and optimizing systems to mitigate risk.”

“This is certainly an industry that has vast amounts of data, but you don’t see the same focus on managing the supply chain and to mitigate risk in the supply chain. To me that sounds like the next step to take.”

Supply Chain Design to Minimize Risks: Kaminsky noted that one of the biggest observations he has noted is that biopharma risk management has room to improve. “Even those companies who say they’re progressive in addressing risk said that risk was being managed in silos.”

Raw Material and Supply: Single-sourcing is the dominant concern among manufacturers, Kaminsky said. Some of the comments from respondents:

  • “It would be nice to dual source, but who has time?”
  • “Regulatory/cost issues preclude qualifying multiple suppliers.”

Thus, while single-sourcing is a major concern, dual sourcing is seen as costly and something to avoid. If it is done, noted Kaminsky, dual sourcing is often seen as an “alternative” to building close relationships with solution providers.

“Other industries are optimizing buffer size, inventory positioning, capacity expansion, and flexibility, and building close relationships to enhance ‘sensing and responding’,” practices which are in-line with just-in-time principals. “Biopharma has less emphasis on long-term relationships with suppliers.”

Manufacturing Reliability: Contamination and human resources were the major concerns cited by participants. “Contamination was by far the dominant concern,” said Kaminsky. “HR caught me by surprise—they were worried about losing people, about finding well-trained people.”

Outsourcing: Major concerns included compliance and quality, but there was little concern about issues such as reliability, visibility into suppliers, and supply chain control.

In terms of working with and overseeing suppliers, Kaminsky noted a focus on practices such as audits, weekly meetings, and FMEA, “but not so much on things like KPI monitoring, automated information sharing, and contract design.”

Forecasting: More than half of respondents cited forecasting as a major issue. “On the other hand, there is very little rigorous modeling done,” Kaminsky said. Fewer than 20% of respondents develop probability distribution for demand. “Risks are mainly managed with inventory. This seems like a huge opportunity—why are simple approaches used?”

Disposables: Major concerns include scale-up comparability and availability of supplies; respondents were less concerned about cost and validation issues.

Catastrophic Risk: This was not generally a significant concern of respondents, many of whom said that there are people in their company charged with “business continuity” who handle issues of potential catastrophic disruptions. Companies should not, Kaminsky said, leave these responsibilities to a separate team. “This seems to me a little old-fashioned,” he said. “Approaches are typically not integrated, in contrast to most other industries, where risks are seen to be on a continuum.” In other industries, he said, there is great visibility and enhanced sensing of the entire supply chain. There is redundancy in facilities, suppliers, and storage.

Tools for Supply Chain Analysis

Kaminsky and the Initiative members are just beginning to formulate specific tools which can be used to facilitate supply chain excellence in biopharma. The steps the group is recommending include:

Step 1: Develop high-speed simulations of the firm’s supply chain.
Step 2: Gather detailed cost, demand, and customer service data.
Step 3: Develop a novel retrospective-optimization based approach for optimal operational supply chain decision making. (Kaminsky sees this as “a new set of mathematical tools that will let us optimize the supply chain in ways we’ve never done before.”)
Step 4: Characterize and model triage strategies for risk events.
Step 5: Utilize our modeling and optimization tools to develop three-dimensional surfaces of customer service vs. event duration vs. operating cost.