Magazine Article | March 1, 2009

Maximize Performance And Profitability By Minimizing Cost And Cycle Time

Source: Life Science Leader

By Pedram Alaedini and Adri Osman

Business process improvement and redesign (BPIR) is an investigative approach for improving workflows and processes within and between functional groups, organizations, and companies. BPIR utilizes a systematic, methodical, and disciplined philosophy to reexamine and redesign an organization’s critical business processes. The main goal of BPIR is to achieve dramatic performance improvements, which translate into reduced transactional costs across key functional areas from product development, quality assurance, and manufacturing to regulatory affairs, marketing, and finance.

BPIR should not be confused with business process reengineering, which is a term often used by software firms to describe their all-in-one IT solutions. BPIR leverages a firm’s existing information technology to structure and sustain process improvement initiatives.

BPIR in The Pharmaceutical Industry
Although BPIR has been applied in different capacities and in different industries during the past two decades, the pharmaceutical industry has not yet fully utilized the benefits offered by this approach. This perhaps has been primarily due to the regulated nature of the business. In addition, the high profitability and large margins realized by the drug companies have allowed industry leaders to look outside of their internal operations and focus more on M&A opportunities and penetrating prospective new markets.

However, the pharmaceutical industry is changing. Rapid globalization, patent expirations, pricing and regulatory pressures, thin late-stage pipelines, and recent legal issues are forcing major drug companies to rethink their cost-cutting approaches. The balance of managing these issues while maintaining a high level of regulatory compliance and bringing new products to market faster is a challenge the industry continues to face. In addition, a weakening economy has forced consumers to cut back on prescription and OTC drug purchases, which has negatively affected the outlook for U.S. pharmaceutical sales in 2009.

In light of these industry challenges, drug companies must reconsider the way they structure internal business practices in order to maintain and improve profitability. The time is right for the pharmaceutical industry to take a serious look at the quality of current business processes. Improving quality by reducing process cycle times, eliminating non-value-added process activities and maximizing throughput, while minimizing resources greatly improves performance and increases profitability. The BPIR methodology maximizes the efficiency and effectiveness of an organization’s key business processes resulting in best-in-class workflows. Utilizing robust yet streamlined business processes translates into products and services of the highest quality and compliance. BPIR can be applied to any functional group in the pharmaceutical industry from drug candidate selection to product design, from launch to commercialization.

Benefits of BPIR
Implementing BPIR provides a synergy and consistency among stakeholders, ensuring and supporting common business goals and objectives. It provides repeatable, sustainable business processes across the organization despite differences in geography or culture. BPIR guarantees a lean environment as non-value-added process steps are eliminated and cycle times minimized. As throughput is improved, transactional costs are reduced and resources are consolidated and reassigned to more productive functions and tasks.

The BPIR Methodology
It is important to note that processes are defined by their beginning and end points, their functional interfaces, and the organizational units they engage. Examples of business processes in the pharmaceutical industry include developing a new product, ordering material from a supplier, creating a marketing plan, producing a product, transferring a technology, and conducting an OOS (out-of-specification) investigation.
In general, processes are defined by the following:
1. Entities
Processes connect business entities. These connections are interorganizational, interfunctional, or interpersonal.
2. Objects
Process execution is the management and manipulation of objects. These objects could be either physical (i.e. receiving direct material, transferring a product) or informational (i.e. releasing a batch, approving dissolution experiments).
3. Activities
Processes could involve two activity categories:
a. Managerial (e.g. strategy, planning, budgeting) or
b. Operational (e.g. fulfillment, validation, packaging, recruiting).
As mentioned previously, it is important to use a systematic approach that will address key processes across the organization. This systematic approach includes the following:

Phase 1 – Business Vision
BPIR is driven by a business vision which defines the scope, specific business objectives, and project deliverables that support the corporate strategy, including minimizing cycle time, quality enhancement, and cost reduction. During the initial assessment in phase 1, senior management consensus and agreement is necessary prior to moving onto phase 2.

Phase 2 – Current State
The current state is captured as the baseline for the improvement effort. Once captured, inefficiencies, non-value-added process activities, and bottlenecks are identified. The current state is integral for tracking and measuring performance improvements throughout implementation.

Phase 3 – Future State
The evolution of the future state starts with the foundation of the current state. Process obstacles observed in phase 2 are eliminated from the current state, creating a lean and efficient design as the future state is realized. The delta between the two designs yields the gap analysis, which ultimately governs the implementation effort.

Phase 4 – Implementation
The implementation plan is developed by sectioning the resulting gap analysis into manageable implementation iterations that are more easily adopted by the organization. The iterations are defined by a set of deliverables and milestones. The success of each iteration implementation is ensured by performing a process design capability exercise.

Phase 5 – Sustainability
New tasks, activities, trigger points, handoffs, rules, and procedures tend to gravitate toward familiar and more comfortable habits if not properly sustained. Therefore, effective change management is imperative throughout phases 4 and 5. Proven sustainability includes the proper use of IT, creating functional SOPs, and effectively transferring process ownership and knowledge from SMEs (subject matter experts) to the appropriate organizational resources.

Keys To A Successful BPIR Project
Up-front planning, training, and communication to senior management and functional managers and employees are the keys to a successful BPIR project. In addition, the project must have complete buy-in and support from senior management; be fully defined and agreed upon, properly funded, and adequately resourced; and must align with corporate strategy. The goals and objectives, scope, deliverables, and expectations of the BPIR initiative must be defined and communicated across the organization. Finally, during any project involving process or organizational improvement, resistance from within the organization is to be expected. If resistance is encountered during the project, functional leaders must work with employees to effectively drive and manage change.

Recommendations For A Successful BPIR Project
1. BPIR must be sponsored by senior management and support the organization’s strategic plan.
2. The customer, internal and external, must be the center of the improvement and redesign effort.
3. Critical organizational processes must have process owners who manage and lead the activities.
4. BPIR teams must be diversified and include both managers and staff.
5. Appropriate metrics such as cycle time and throughput must be monitored.
6. Senior management must instill a sense of urgency and emphasize the importance of the effort.

Are Your Pharma Operations Efficient?
A common observation at every major pharmaceutical firm is that most of the key operational business processes are inefficient. These inefficient processes result in an increase in transactional costs, increased cycle times, and ultimately, ineffectiveness of the organization to adequately achieve the goals it has defined. This exists in every functional group: product development, sales and marketing, manufacturing, compliance, and quality. During the past few decades, there has been little or no effort focused on optimizing business processes. These inherent inefficiencies have rarely been addressed in SWOT, S&OP, and/or strategy sessions. In most cases, however, there have been no significant repercussions, since profitability targets are continually met as high drug prices successfully offset the internal costs associated with the inefficiencies.

Political pressure on drug prices combined with increased regulatory requirements, aggressive generic drug companies, and the rise of new pharmaceutical powerhouses in India and China are inevitably forcing drug companies to explore new and innovative ways to maintain and increase profits. To achieve these profitability goals, while ensuring a healthy new product pipeline and continuing to comply with regulatory requirements, drug companies either need to increase revenues or decrease expenses. BPIR is the most powerful approach for decreasing transactional costs by improving the way work activities are performed. BPIR provides a robust, comprehensive solution to inefficient and outmoded business processes, achieving breakthrough results needed to shift the paradigm of the high cost of ownership.

About the Authors
Pedram Alaedini is president and CEO of Primapax Biopharma Partners. Primapax specializes in the integration of technical, process, and organizational skills to boost the performance of biopharmaceutical development, manufacturing, and service firms.

Adri Osman is president and CEO of Osman Inc. His company specializes in business process improvement & redesign for the biopharmaceutical industry in the areas of product development, manufacturing, supply chain, quality, and regulatory affairs.