Growing market pressures poised to crush pharma's rigid manufacturing processes

According to Forrester, a convergence of conditions is driving the industry to re-think and re-tool many of its traditional business practices:

By Editor on Mar 15, 2001

According to Forrester, a convergence of conditions is driving the industry to re-think and re-tool many of its traditional business practices:


  • An aging world population is fueling demand for more drugs. As a result, global drug sales are expected to expand from $337 billion in 1999 to $506 billion in 2004.
  • Dwindling market exclusivity of products and pressures from Wall Street have drugmakers scrambling to maintain a pipeline full of promising leads, driving companies like Pfizer to spend 20% of its revenues on R&D.
  • To gain R&D assets and production capacity, many in the industry are turning to mergers and acquisitions (M&A). But most find the high price of culture clashes and incongruent business strategies sap the value of M&A.
  • Product life cycles are shrinking, with long periods of market exclusivity quickly becoming a thing of the past. Take for instance, CELEBREX, which enjoyed only a three-month head start on competitor VIOXX.

And although drugmakers have begun to employ some adaptive new R&D and sales and marketing strategies to address these challenges, the report reveals that pharmaceutical manufacturing remains largely uninformed and inflexible in the face of a pending onslaught of unconventional new drug products.

According to the 16 senior pharmaceutical executives participating in the study, drug manufacturers face a number of obstacles, including:


  • Inflexibility stemming from nonstandard production equipment, stringent regulatory requirements and long lead times for raw materials;
  • Limited demand visibility because the drugmakers surveyed do not use up-to-date demand forecasts to drive production planning; and
  • Poor trading partner integration.

For example, one executive from a U.S. drugmaker said: The changeovers from one product to another are the most difficult problems. On the one hand, different formulations, products and chemicals all need cleanup. And lead-times for raw materials can be as much as six months.

We share our production schedules manually, another from a European manufacturer said. And we schedule by using a spreadsheet, which we email or fax to our suppliers.

While another participant admitted: Or forecast is based on a bunch of different inputs, such as market research, sales force data and wholesaler information. Right now, everything is calculated mentally. We'sve definitely made some blanket assumptions to fix aspects of production.

The report also outlines a number of additional hurdles that contribute to manufacturing inflexibility, including:


  • The inheritance, as a result of M&A activity, of disparate production computing infrastructures, requiring extensive integration of applications and business systems;
  • A lack of coordination between R&D and operations to ensure formulations are fit for large-scale production. Data related to new products isn'st shared electronically between R&D, production sites and suppliers; and
  • Manual compliance with the requirements of regulatory agencies.

Unless their manufacturing operations are optimized and processes rethought, growing demand and smaller batches will overwhelm aging business processes and applications, predicts Forrester. To gain flexibility, they must invest in apps that create asset transparency, automate links between manufacturing and R&D and set up online collaboration with trading partners.

Forrester believes that flexible operating networks, which it defines as operations that use configurable assets across departments and trading partners, will result in three benefits: speedier time-to-market, production agility and flexible supply and distribution.

According to the report, to accelerate time-to-market with improved manufacturing readiness, drugmakers must improve coordination between manufacturing and two major touchpoints: R&D and marketing. In particular, Forrester recommends the use of Net-enabled tools that:


  • Link development and manufacturing processes;
  • Electronically document process from cradle to grave, automatically capturing each successive change to production processes; and
  • Improve collaboration with customer-facing departments.

And Forrester contends for firms to improve production agility, they must:


  • Wrap automated controls around plant processes to maintain uniform output over successive production runs and across multiple sites through the use of manufacturing execution systems;
  • Use integration software, such as EAI tools, to view global operations; and
  • Make production planning continuous through the use of constraint-based production planning applications.

With enhanced plant performance and improved internal collaboration between manufacturing and its touchpoints, manufacturers can then begin to:


  • Tighten integration with MRO and direct materials suppliers;
  • Use true demand to drive production, through the capture of point-of-sale and point-of-care data in real time; and
  • Eliminate information latency across the entire supply network by giving suppliers real-time visibility into production plans and demand signals.

Forrester predicts that drugmakers will transform into flexible operating networks in three phases. During the next three years, firms will focus on improving their existing make-to-stock environment. But in 2005, they will start testing configure-to-order initiatives. By 2008, today's legacy processes will be transformed as custom batches of one finally become a reality.

But pharma can'st make the transformation alone, Forrester predicts vendors will rise to the challenge by creating an open IP standard for the shop floor; launching development portal partnerships that allow drugmakers to use operational constraints and demand changes to continuously optimize their R&D portfolios; and cutting order-to-delivery cycles to support make-to-order and mix-in-transit strategies.

The Forrester team recommends several actions for pharma manufacturers to establish a foundation for flexible operating networks, including:


  • Pressing the FDA for clear guidelines for interpreting its 21 CFR Part 11, including when drugmakers should capture process changes and setting a deadline for making manufacturing systems compliant given the long lead-times for upgrading legacy apps that lack full audit control;
  • Training R&D teams on design for supply chain techniques, addressing manufacturability and serviceability issues upfront;
  • Aligning functional areas within manufacturing first, including manufacturing, engineering, quality and maintenance; and
  • Optimizing distribution for parcels not pallets, by tapping end-to-end logistics providers.

For more information, visit the Forrester Web site at (forrester.com) or contact Navi Radjou at (nradjou@forrester.com).