What Toyota" s Setback Can Teach Pharma About Going Lean
There are important lessons pharma can learn from Toyota's quality mishaps.
Recently, this car manufacturer, which has been considered the Gold standard for the implementation of Lean Manufacturing
programs, faced the worst crisis in its history, when 8.5 million cars were withdrawn due to safety issues.
Suddenly, client loyalty was in peril for this brand, which had always been associated with the highest quality. Sales
decreased, fines were paid, and liability suits faced; and all of this will cost the company more than $5 billion.
Toyota's CEO apologized and acknowledged that they had drifted from their original mission to offer product quality and
customer satisfaction to center on growth; and he admitted they had grown too fast.
Nevertheless, the company reacted promptly and formed a senior management team headed by the CEO to refocus its mission.
The case has been extensively analyzed and many theories have surfaced. Some have proposed that Lean manufacturing has
flaws in itself and that applying Lean principles means compromising product quality; however, this is false.
Toyota's production system and Lean processes didn't cause the problem; it started when the company strayed from its system
by answering customer concerns too late and over focusing on growth.
Still, the President of PharmaTech Associates, Bikash Chatterjee, agrees that Toyota's TPS and product development systems
remain whole.
Pharma eventually accepted Toyota's operational excellence example and now can learn from its setbacks. The industry's
biggest challenge is to maintain quality as it handles escalating complexity. The car manufacturer has taught everyone the
importance of managing risk in a more systematic way.
In the past, pharma companies have examined compliance at their own sites, even though more than 50% of their cost of goods
sold comes from external sources, and they don not have the same type of risk detection and management tools for contract partners.
Another problem is the managing of growth in emerging markets, because they have to figure out how to create organizations
that back growth of 10-20% yearly in some emerging markets while controlling the risks involved.
Toyota's case has confirmed the importance of creating a continuous improvement and focus-on-quality culture, and pharma is
at a very early stage here. There is no focus on product quality at a high management level, and this is transmitted to the
rest of the company, resulting in the irregular quality we know.
The drug industry is still very divided in regards to who is applying TPS concepts. The journey towards Lean is just
beginning, companies have pockets of Lean, and that is the problem.
While pharma companies have taken control over their previously very low asset utilization and have improved quality, these
are still far away from having a "continuous flow", efficient production scheduling, or tailored manufacturing.
Basically, pharma is happy with Lean, which is accessible and likeable, as long as Six Sigma, which is very complex, stays
out of the way. The real root causes of the most important inefficiencies are not being tackled. Redundant capacity and
intermediate stocks are still there.
Most definitely, Lean Six Sigma is not being used to its full potential. Pharma has taken some TPS practices and has
implemented them without examining the general philosophy, and this will not work.
Toyota first gets the product right, then it gets the quality of the product right, and then, it optimizes the processes
required. Pharma leaves the product as it is because it is already there, and starts analyzing how efficient the
development or lab process is, focusing primarily in development. Manufacturing is nailed at the end, when it is this area
that essentially incorporates product quality and makes it a reality.
Some think pharma could learn some knowledge management from Toyota, especially on the importance of incorporating previous
manufacturing knowledge throughout the product life cycle; this would allow manufacturing to move upstream in terms of their
participation.
This will only happen when manufacturing is considered as an integral part of the whole pharmaceutical product value chain,
as it happens within the automotive and other industries.
As any professional life sciences consulting firm will tell you, Toyota was able to face this crisis because management
focused on quality, which is something the pharma industry is not good at. The customer must be heard attentively, and this
attention must come from the top level.
Recently, this car manufacturer, which has been considered the Gold standard for the implementation of Lean Manufacturing
programs, faced the worst crisis in its history, when 8.5 million cars were withdrawn due to safety issues.
Suddenly, client loyalty was in peril for this brand, which had always been associated with the highest quality. Sales
decreased, fines were paid, and liability suits faced; and all of this will cost the company more than $5 billion.
Toyota's CEO apologized and acknowledged that they had drifted from their original mission to offer product quality and
customer satisfaction to center on growth; and he admitted they had grown too fast.
Nevertheless, the company reacted promptly and formed a senior management team headed by the CEO to refocus its mission.
The case has been extensively analyzed and many theories have surfaced. Some have proposed that Lean manufacturing has
flaws in itself and that applying Lean principles means compromising product quality; however, this is false.
Toyota's production system and Lean processes didn't cause the problem; it started when the company strayed from its system
by answering customer concerns too late and over focusing on growth.
Still, the President of PharmaTech Associates, Bikash Chatterjee, agrees that Toyota's TPS and product development systems
remain whole.
Pharma eventually accepted Toyota's operational excellence example and now can learn from its setbacks. The industry's
biggest challenge is to maintain quality as it handles escalating complexity. The car manufacturer has taught everyone the
importance of managing risk in a more systematic way.
In the past, pharma companies have examined compliance at their own sites, even though more than 50% of their cost of goods
sold comes from external sources, and they don not have the same type of risk detection and management tools for contract partners.
Another problem is the managing of growth in emerging markets, because they have to figure out how to create organizations
that back growth of 10-20% yearly in some emerging markets while controlling the risks involved.
Toyota's case has confirmed the importance of creating a continuous improvement and focus-on-quality culture, and pharma is
at a very early stage here. There is no focus on product quality at a high management level, and this is transmitted to the
rest of the company, resulting in the irregular quality we know.
The drug industry is still very divided in regards to who is applying TPS concepts. The journey towards Lean is just
beginning, companies have pockets of Lean, and that is the problem.
While pharma companies have taken control over their previously very low asset utilization and have improved quality, these
are still far away from having a "continuous flow", efficient production scheduling, or tailored manufacturing.
Basically, pharma is happy with Lean, which is accessible and likeable, as long as Six Sigma, which is very complex, stays
out of the way. The real root causes of the most important inefficiencies are not being tackled. Redundant capacity and
intermediate stocks are still there.
Most definitely, Lean Six Sigma is not being used to its full potential. Pharma has taken some TPS practices and has
implemented them without examining the general philosophy, and this will not work.
Toyota first gets the product right, then it gets the quality of the product right, and then, it optimizes the processes
required. Pharma leaves the product as it is because it is already there, and starts analyzing how efficient the
development or lab process is, focusing primarily in development. Manufacturing is nailed at the end, when it is this area
that essentially incorporates product quality and makes it a reality.
Some think pharma could learn some knowledge management from Toyota, especially on the importance of incorporating previous
manufacturing knowledge throughout the product life cycle; this would allow manufacturing to move upstream in terms of their
participation.
This will only happen when manufacturing is considered as an integral part of the whole pharmaceutical product value chain,
as it happens within the automotive and other industries.
As any professional life sciences consulting firm will tell you, Toyota was able to face this crisis because management
focused on quality, which is something the pharma industry is not good at. The customer must be heard attentively, and this
attention must come from the top level.