Merck's Lean Mission

Jan. 5, 2006
Merck's Arecibo, Puerto Rico facility was the proving ground for a new corporate operational excellence strategy, which has already reduced plant cycle times by 50%.
By Agnes Shanley, Editor in Chief
The past year has challenged many drug companies, but few have faced as much turmoil as Merck. Late in 2004, the company withdrew its blockbuster drug, Vioxx, from the market. It has since seen a change in top management and is working through a mountain of liability lawsuits.
Lean is not all about automation. Here, Arecibo operators insert leaflets into drug packages.

Two months ago, the company announced plans to close or sell off five of its manufacturing sites and lay off 7,000 people, many of them in manufacturing. “Merck has been a bastion of stability for so long, but it’s now taking after the rest of the industry,” says Cheryl Buxton, managing director, life sciences for the staffing firm Korn/Ferry International.Issues with Vioxx may have dealt a blow to Merck’s reputation, but the company is taking quick and decisive steps to restore the public’s trust and to improve quality and performance. During the fourth quarter of 2004, Merck’s senior management first articulated a new supply strategy with the modest goal of becoming “the most trusted and competitive supplier of medicines and vaccines in the world.”Helping Merck get there, company management believes, will be the Merck Production System (MPS), an operational excellence strategy that combines elements of Lean Manufacturing, Six Sigma and Overall Equipment Effectiveness (OEE). At the core of MPS are the Lean principles of customer value, demand pull, continuous flow of product and information, waste elimination and the pursuit of excellence, explains Martin Khun, global leader for MPS at Merck.“Through the MPS operating model, we will create a competitive, customer-focused supply chain,” says Sue Capps Morris, vice president of pharmaceutical operations, the Americas, and the program’s executive sponsor. “Our customers will receive what they want, when they want it, and we will provide value at every step,” she says.Merck selected its 800-employee manufacturing facility in Arecibo, Puerto Rico, as the pilot site for its MPS strategy. Not only is Arecibo strategically important, but it encompasses a diverse set of business models, including toll processing and contract finishing operations as well as Merck’s own drug manufacturing lines, explains Daneris Fernandez, vice president of Merck’s operations in Puerto Rico. “Our plan needed to be as comprehensive as possible, to cover all possible business models,” she says.MPS is now being rolled out in Merck’s Wilson, N.C., facility and at one of its plants in the U.K. The strategy will also be implemented at the company’s other plants in Puerto Rico in 2007, starting with Barceloneta, where Value Stream Mapping and preliminary data gathering have already begun, Fernandez says. The complexity of Arecibo’s operations should help make the lessons learned there easier to transfer to other Merck facilities.A cross-functional team of 30 people, led by site MPS manager Herminio Bosques, drove the effort at the facility. Members of the team came from various parts of the organization: business departments, including planning and procurement; quality assurance and control; human resources; and production.Some team managers had experience outside of pharma, and outside consultants were brought in to introduce best-in-class concepts and Lean transformational capabilities. Together with local management and executive sponsors, the team laid the foundation for MPS, developing the overall design and implementation.Managing the transition to Lean required a strategic plan for communication and training, one that would account for needs at all levels of the organization. At Arecibo, communications began from the top down, Fernandez says. Efforts first focused on ensuring that all executives understood the challenges ahead and why change was needed so that they could model the behavior required. “Hearing management theories is one thing, but real understanding is essential to ensuring buy-in,” Fernandez says. “We didn’t want to, simply, impose a new process.”Bosques’ team developed a communications plan tailored for different levels within the facility — one for executives, another for technical staff, and yet another for hourly employees. Engaging operators was every bit as important as reaching out to management. “We needed to have an impact at the manufacturing-floor level that would flow from the organization to the site, to the division,” Bosques says. Team member Jose Murali and his colleagues developed training videos, which were played during lunchtime in the company cafeteria, explaining the need for change.Establishing the right tone was important. Without being condescending, the message had to come through clearly. Hourly employees might be able to understand the concepts of cash flow and inventory, but the language of the Annual Report might not resonate as well with some of them as practical examples from every day life, Fernandez says. To communicate the idea of excess inventory, for example, one video for hourly workers used the example of someone stocking up on Aspirin, depleting the household budget, and holding on to material that would reach its expiration date before it could be used, a simple but effective demonstration of a problem that many drug manufacturing facilities face today.
Bulk analysis teamwork at Arecibo: Edwin Sepulveda sets up HPLC equipment for bulk, while Yamilette Feliciano reviews data required for bulk analysis.

But communication was only one part of the MPS' spadework. “Because the new process turned traditional operations upside down,” Bosques says, “we had to design training programs based on the impact that each [individual’s] position would have on the process.”Bosques and his colleagues also had to design new processes and positions, select people to fill those positions, and develop training materials that would retrain people in how to handle the key processes that were changing. To advance this effort, the team developed a matrix, establishing the level of knowledge that each group would require. It then designed training modules that would allow employees to get up to speed on their new roles within three weeks.Arecibo is now starting a Lean certification program for its operations staff, and seven staff members are now in the process of being certified, Fernandez says. Next year, the site will introduce formal Six Sigma Yellow and Green Belt training programs.Supporting the transition was important, and the team designated a core subgroup to focus on these efforts. Flexibility was ensured by coming up with backup plans for many of the original designs, just in case a problem or issue came up. To assist with Six Sigma-related efforts, two Six Sigma black belts are currently helping on some key MPS projects.Diversity drives successInstead of hindering efforts, the diversity of staff at the facility was a great plus. “The number of ideas flowing through the system has been unbelievable,” Fernandez says, “and we captured those ideas during the design process.”Operators are critical to the process, Bosques says. For example, operator Luis Otero was recently appointed to the new position of Visual Factory Technician. “MPS stresses the importance of having every employee involved in eliminating activities that don’t add value,” he says. “Once we understood the concepts, we became very creative and started searching for work that could be eliminated.”A year and a half after the bare outlines of MPS were first sketched, its results are already visible at Arecibo. 5S efforts have already reduced laboratory cycle times dramatically and will be implemented on the manufacturing floor next year, Bosques says.Value Stream Mapping, and MPS initiatives involving Lean, Six Sigma and OEE have also led to dramatic improvements. For example:
  • The number of days required for quality testing at the site has been reduced by 60%, by eliminating handoffs and redundant work and synchronizing process steps more closely.

  • The lead time for atypical investigations has shrunk by 70% by eliminating redundancies, signatures and co-locating the people involved in the work.

  • Monthly schedules for manufacturing and packaging have been replaced by a five-day Rhythm Sequence that pre-establishes the order for production, ensuring that manufacturing output reflects only what has been requested by customers.

  • Cross-functional integrated production teams have been formed to run the processes from manufacturing to packaging.
Incentives and cross-trainingArecibo already includes peer review as part of its 360-degree performance evaluation process. The site’s Human Resources department is currently evaluating a new incentive and recognition program. HR also plans to give operators an opportunity to rotate on different functional teams, Fernandez says, a process that will give each operator more insight into different facets of manufacturing.Bosques says the process has been eye-opening: “It has changed my career.” His team has already been advising other Merck sites remotely, and he may travel to some sites this year to provide hands-on support. To ensure complete knowledge transfer, a representative from Merck’s North Carolina plant worked closely with the Arecibo design team from the start of the process.“This process has been a roller coaster,” Bosques says. “We had to put in a lot of effort to gain momentum, but MPS is now rolling and our spirit is unstoppable.”Of course, the pilot was only the first step in an ongoing and continuous process. “There’s no start or end point,” he says.Arecibo’s team has already accomplished what some local managers had considered out of reach. Whatever the future holds for Merck, you’ll find optimism at Arecibo. “The attitude at the site is great,” Bosques says. Fernandez agrees. “We’re working together like we never have before,” she says.