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  • 1. Biopharmaceuticals Operations and Planning @ Bayer Jörg Heidrich 17 Feb 2006
  • 2. Outline
    • Company Overview
    • Long Term Planning Issues
    • Short Term Planning Issues
    • Operational Excellence
    • Summary
  • 3. Company Overview : Bayer
    • Bayer AG is a diversified multinational conglomerate with businesses in Material Sciences, HealthCare and Crop Sciences
      • 2005 Annual Revenue of USD 30 Billion plus
      • 2005 EBIT growth of 50% over 2004
    • Bayer HealthCare is one of the prime drivers of future innovation and growth for Bayer AG accounting for more than 30% of 2005 Sales
      • Comprises of Pharmaceuticals, Consumer Care, Animal Health, Diagnostics and Diabetes Care
    • In 2006, Bayer Pharmaceuticals formed Hematology Cardiology as a strategic business unit
      • Headquartered in Berkeley, CA
      • 7% of BHC Sales, but significantly more in terms of EBIT
  • 4. Company Overview : HCBU Berkeley
    • Integrated Biopharmaceuticals site
    • Leading technology for continuous perfusion based fermentation and purification of proteins
    • 1400 employees
    • 11 Manufacturing facilities apart from state-of-the-art Clinical Manufacturing Facility
    • Currently manufactures Kogenate-FS, a second generation recombinant protein treatment for Hemophilia
  • 5. HCBU Operations Overview 2001-05: Consistently increasing output with decreasing cycle times Looks nice, but what were the basic challenges?
  • 6. Long Term Planning Issues
  • 7. Long Term Planning @ Bayer
    • An important aspect for Bayer in Berkeley over 2001-03 was facility strategy and capacity planning
      • Six new facilities in planning or commissioning state
      • Supply limited market
      • Short experience with the manufacturing of current product (launched in 1999-2000)
    • Key Challenges
      • Lack of detailed understanding of capacities and influencing factors
      • Lack of reliable data and assumptions on manufacturing and quality capacities
      • Lack of cohesive understanding of key uncertainties, decision points and interdependence of different projects
      • Lack of structured methodology to estimate, update and communicate the site capabilities
  • 8. Long Term Planning @ Bayer
    • Long term investment decisions need to be made without complete knowledge of the product and processes and with significant uncertainty on regulatory approvals
    6-12m 12-18m 12-18m Investment Decision 12-18m 4-6 Years Investment Process
  • 9. Long Term Planning @ Bayer
    • Hierarchical Modeling: Building a framework to understand what the site capabilities are, what are the key influencing factors and how they change over time
      • Process mapping and simulation models to understand individual manufacturing areas as well as composite business models to represent strategies and variability at corporate level
    • Blue Book: Creating a common page around key data and decision parameters
      • Defining the key parameters that impact site capabilities
      • Analyzing historical data to establish a base line and projecting future levels of key parameters based on projects and business goals
      • Incorporating the review and update in budgeting processes
    • Think Tank: Cohesive and comprehensive projects analysis to create the best possible projects plan
      • Identifying key projects (Picked 15 projects out of 150+)
      • Establishing business constraints (Regulatory, Financial, Resource-based) and opportunities to derive projects strategy (Bundling, Prioritization, Facility/Material allocation)
    • One site - One Voice: Single window communication of site capabilities and historical data with all stakeholders
  • 10. Long Term Planning @ Bayer
    • What did we learn? Uncertainties of long term plans
      • Market requirements (volumes and variety predictability, competitive landscape, changes in competitive factors)
      • Process performance (new facilities can idle if process improves beyond expectations, and you can also run into capacity shortages if the process deteriorates beyond expectations)
      • Industry environment (availability or lack of contract manufacturing capabilities, changes in industry standards on technologies and equipment)
      • Regulatory environment (Changes in regulatory requirements - from FDA, OSHA, EPA, SEC and so on)
      • Financial Capability (necessity to lock in large capital for prolonged time before realizing commercial return on investment is coupled with uncertainty of regulations, markets and technology)
    The capital investments that made perfect business sense in year 2000 might look redundant or insufficient in 2005, and the alternatives are …
  • 11. Short Term Planning Issues
  • 12. Short Term Planning @ Bayer
    • As we were mastering the production volumes, the next hurdle started to emerge in terms of short term planning
      • Internal challenges from weak development and transfer process
      • External challenges from changing market and regulatory paradigm
    • Development and Transfer Process Gaps: Weak development and transfer process implied limited understanding of the product and process behaviors and impact of operational parameters
      • Each weakness caused ‘add-on’ projects for process, material, equipment and facility changes
      • Each add-on contributed to product complexity at intermediate stage as well as in finished goods stage due to the extensive requirements of agency approvals for changes
      • Reproducibility of manufacturing performance became a heroic challenge
    The challenge was not only to produce the required volume, but to provide it at right time in right flavor to the right customer
  • 13. Short Term Planning @ Bayer
    • Changing Market Paradigm: From Supply driven to demand driven
      • Changing demand parameters - (Quantities, Lead times, Prices)
      • Smaller lot sizes
      • Faster life cycle management requirements
    • Changing Regulatory Paradigm: Risk based Compliance and PAT
      • Building quality in the production processes
      • Reducing the assay lead times
      • Enhancing the accuracy and precision of assays
      • Increased focus on automation and IT enabled documentation
  • 14. Short Term Planning @ Bayer
    • Process Robustness Initiatives: Understanding the science and technology to create robust manufacturing processes for reproducibility and reliability
      • Organizational Focus: Strengthening of process engineering and QA technical services groups
      • Science/technology based process mapping: Understand the relationships between inputs and process performance
      • No Stone Unturned project: Comb through every existing practice and equipment specification to unearth causes of process and performance variability
      • Changed measurement and control technologies (PAT): In-line measurements, Better assays (shorter cycle times and improved precision)
    • Supply Chain Excellence: Creating organizational and technical capability to effectively address the operational volatility and to meet the changing market requirements
      • Organizational Restructuring: Bringing core supply chain related personnel under one umbrella, providing 24x7 staffing for warehouse, eliminating sub-stores
      • IT Infrastructure realignment: Better utilization of SAP for data, reports and MRP
      • Enhanced Planning Methodology: Commencement of planning projects to effectively address the complexities of product variety and process performance reliability (Demand Planning, Production Planning, Inventory Planning)
  • 15. Short Term Planning @ Bayer
    • What did we learn? Balance between short term and long term
      • Process robustness is imperative for long term success of operations, but we can’t wait till process robustness delivers the results…so, need to create organizational capabilities to address current challenges
      • The scientific and business process improvements have an important third leg… human capital, all changes require effective change management and implementation structure along with willing and able workforce of change agents
    Need to put organizational capabilities in place to address short term volatility due to inherent Biological variability resulting in a highly complex internal supply chain
  • 16. Operational Control
  • 17. Operational Control @ Bayer
    • As we are addressing the issues of short term planning, we are also facing the challenges of execution (Operational Robustness)
      • Significant part of deviations coming from operator errors and equipment reliability
    • Lean Initiatives: Challenging our way of execution and eliminating opportunities for errors from processes based on statistical analysis
      • Organizational Focus: Created a group of Operational Excellence with skills in Lean Manufacturing and 6-Sigma, Mandatory minimum number of lean projects per function
      • Training goal for 2006 of imparting basic operational excellence training to more than 700 employees
      • Creating awareness through process mapping from Lean perspective (identifying opportunities for errors) along with focused projects to address the burning issues (creating success)
  • 18. Operational Control @ Bayer
    • Human Capital Management: Imparting technical training and ‘inside-out’ leadership training to create the skilled first tier of supervision
      • Job curriculum attached with each position, Rollout of Bayer Leadership Principles, Visibility to training performance through KPIs (Key Performance Indicators) and MCRS (Management Control and Reporting System)
      • In 2006, plan to train ~120 supervisors for 10 work days per year with projected cost of USD 600,000+
    • Reliability Engineering: Increasing the performance of core equipment groups to ensure 100% availability for production
      • Setting reliability engineering program in motion (metrics, roadmap and organizational ownership)
      • Identification of core equipment groups and data analysis to establish base line and targets
      • Implementation through changes to equipment, processes and practices
  • 19. Operational Control @ Bayer
    • What are we learning? Importance of Total Employee Involvement
      • Processes and equipment are enablers, but real change agents are the employees
      • Sustainability of new tools and methods is critical and therefore, the organization can not rest on just successful launch and implementation
      • Execution is about continuous and incremental improvements through the lenses of lean techniques
    Sustaining Operational Excellence is imperative for success
  • 20. Summary
    • Long term investment challenges in the high margin Biopharmaceuticals business can be addressed effectively through risk analysis and business modeling
      • But, beware of the relationships of capacity growth and process performance enhancements
    • Short term planning implies predictability and reproducibility of manufacturing and product supply
      • But, make sure to put in place organizational capabilities and tools to deal with the highly complex internal supply chain
    • Execution needs a culture of continuous improvement and operational discipline
      • Given the inherent uncertainty in the biological processes, minimizing variability due to human and equipment related causes is an imperative for success
  • 21. Product Supply - Kogenate Jörg Heidrich