Benchmarking: Measuring Up

June 24, 2008
The industry is adopting benchmarking with a vengeance, to good effect.

Competition is a great harbinger of change. As more pharmaceutical and biotech companies embrace the principles of operational excellence and continuous improvement, we begin to see signs that our industry is becoming more competitive.

Even the FDA recognizes it must evolve if it is to succeed in its mission to sustain the concepts laid out in its 2004 guidance, advocating a risk-based approach to cGMPs. Recently, the Agency indicated it would be hiring new investigators for the first time in many years to bolster its current cadre which has been stretched in too many directions. Fresh recruits with new thinking will be necessary if the FDA is to convert the industry to its way of thinking.

Whether imposed by Wall Street or shareholders, measuring performance is a prerequisite to remaining viable in today’s global economy. The emergence of a skilled and experienced marketplace in Asia is pushing established market players to be more competitive to stay ahead of the curve. Integrating Voice of the Customer and Critical to Quality metrics is becoming more commonplace in the lexicon of product development.

While the application of the tools and principles of Six Sigma and Lean offer us the potential for enhanced productivity and efficiency, there is more to be gained from understanding how the best-in-class operations approach their challenges. Historically, we as an industry have always fallen back on the premise that we cannot be overly aggressive in implementing our improvement initiatives because we are constrained by the requirements and expectations of the FDA.

While regulatory commitments must be central to any improvement initiatives, I believe it is possible to learn from best-in-class performers and profit from their experience. There is potential for pushing organizational performance to the next level and beyond. Benchmarking as a strategic tool has been practiced by high-tech and heavy industry for years.

It involves establishing a structured methodology in a focused effort to leverage the learning of more efficient operations. Benchmarking activities typically go through several evolutions as the organization begins its journey towards world class performance. Multinational operations may begin their benchmarking journey by looking at the operations within their own organizations that have demonstrated excellence in key functional areas.

This is often an excellent initial step as it allows you to form a foundation of understanding across your organization in terms of capability and performance. From here, as market pressures increase, benchmarking activities shift to looking at best in class performers among your competitors. As understanding builds, benchmarking may expand to include industry bestin- class performers that are non-competitors or in different industries.

Fed-Ex’s global supply chain management practices or Intel’s product development and innovation management system can offer us best-in-class solutions for organizations that are open to outside-the-box thinking. From there it is a short leap to leveraging the best practices across business units from world class operations outside our industry. The foundation for benchmarking activities is already present in many pharmaceutical companies today.

Measuring key performance indicators such as Overall Equipment Effectiveness, Cycle Erosion and Cost of Poor Quality are becoming more commonplace in running operations. The trend toward embracing operational excellence as a strategy for deploying Quality by Design is also well underway. With this, I believe the opportunity we have for jump starting benchmarking as a strategic tool is to leverage our indigenous scientific horsepower.

Innovation remains the cornerstone of our industry. If you look at the challenges facing our marketplace, the greatest impediment to maximizing business performance is the drug development process itself. With an average investment of $1.3 billion required to bring a product to market and a process often requiring eight to 10 years before benefits can be realized, we are shackled to the risk implicit in choosing the wrong horse. Imagine the competitive edge an organization would achieve if we could streamline the drug discovery process, identify winning molecules sooner and abandon losers earlier.

For example, studying development incubators whose central business model revolves around cultivating innovation for the sole purpose of spinning off a new business can teach us a great deal about creating the right environment for breakthrough discovery rapidly. Learning from businesses outside our industry, which are challenged to keep ahead of the innovation power curve while operating within a much lower margin buffer, offers us the chance to leapfrog over the competition regardless of the marketplace.

Classical benchmarking activities have been hamstrung by the quality of the data and the ability to establish benchmarking partners. Today there are solutions available which can seamlessly gather and analyze data as part of our normal Lean or Six Sigma deployments. For example, if you were to evaluate key performance metrics—such as OEE or asset utilization—across the pharmaceutical and consumer goods industry you would find that the best-in-class pharmaceutical performers mirror the laggard performers in the consumer goods industry. This is an interesting observation given the similarity in product types. However, the business models are different as are the margins.

Drilling down into this data may reveal performance metrics such as setup and changeover time which explain the differences in performance. While today we rarely integrate this type of information as part of our strategic planning, it represents an opportunity to align our tactical and strategic capabilities in the best possible way. While it is true we have been slow to accept the principles of risk management and QbD, this is changing.

As we tailor these initiatives to meet our own organizations’ culture and expertise, benchmarking represents a chance to leverage this movement as a catalyst for true business performance. If we can do this, then the result will be new and better therapies delivered more quickly, effectively, and more profitably to the marketplace.

About the Author

Bikash Chatterjee | President