Production and Operation Management Analysis - Case Study Example

PRODUCTION AND OPERATIONS MANAGEMENT Name: Course: Tutor: Institution: City and State: Date: Part 1 Summary Report from Mike Karmarck to Wendy Kouba briefing on existent objectives To: From: Subject: Date: Ref no: Wyeth pharmaceuticals’ competitive placing in the pharmaceutical industry is wanting and under threat. The company needs to implement certain structural changes to maintain its competitive position in the market and to continue generating revenue. Industry changes in patent policies have limited the production period of a drug and advanced competition in the industry. There exists a threat in loss of production life for a drug. Currently Wyeth’s top revenue drugs, Premarin, Protonix and Effexor are almost due to have no patent protection. The company anticipates pricing pressures in the near future when similar drugs enter the market. New regulations have also removed the two-year weaning post patent period that protected a company from the international pharmaceutical industry (Beede 2014, pg 2). From this, we anticipate an influx of international pharmaceutical drugs into our current market. The pre-FDA approval period for a new drug has also been lengthened meaning it will take more time for a new drug to enter the market. All this factors result in reduction of production time and an increase of competition towards the few market spaces in the industry. To retain and maintain a competitive position in the market, it was determined by the Technical and Supply sections of Wyeth that a reduction of 25% in operational cost had to be done (Beede 2014, 3). Wyeth Pharmaceuticals has already employed some operation strategy to meet this goal. The company has 25 independent global facilities. All these facilities employ different methods in the production process. To cut the operational cost, standardization of the 25 plants is in progress in terms of operability. The facilities were also built in a manner to facilitate bulk production. The facilities produce twice the projected output meaning at most times half of the facility is idle. This increases maintenance costs. Resizing of the plants and use of cost cutting technologies in the production process will assist in cost cut downs. The Wyeth Company has a number of 18000 employees. The number of employees has to be cut down without affecting the production process. This can be achieved through selective staffing and training of the current labor force. The manner in which the employees think and conduct in the workplace, either collectively or individually needs to change. Advisory firms suggest a six sigma and Lean methodology that is data driven. The Six Sigma is a methodology used to eliminate defects in products and processes. The Wyeth Company loses a lot of resources in overtime labor and finances in correcting defects. Six Sigma employs a DMAIC cycle of Define, Measure, Analyze, Improve and Control. The methodology is customer centered and aims at customer satisfaction. Each of the five stages of Six Sigma employs different tools in their specific paradigms. The methodology will highlight over 80% of defects arising from 20% functionality (Morgan& Jones 2012, pg15). Lean management focuses in producing a maximum number of products using minimal resources. The process also focuses on removal of waste processes. Mostly the lean process focuses in the timing of transition processes from one stage to another. The Lean process is suitable in cost reduction by use of cost cutting technology in production. The process cuts process complexities and process queue time in production. The labor qualities of the Lean process also provide a motivating environment for workers. Level payrolls, worker unions and interactive management are some of the factors applied to motivate workers using the Lean method. The Lean and Six Sigma methodologies are currently in place but do not effectively cut the cost operations by 25%. This is because the methodologies are not implemented on large scale. Large-scale implementation of the two methodologies is more suitable to the cost reduction process. The two methodologies were developed for big corporations and not for small institutions. Part 2 Directive Letter from Wendy Kouba to Site Leaders To: Site Leaders From: Vice President. Subject: directive Letter Date: Ref no: The Wyeth Company has come along way since it began the cost reductive measures. The cost reduction from the first wave site transformations and diagnostics stand at 20%. This is a great step in cost reduction, but still more steps have to be taken to attain the 25% minimum cost reduction. The current percentage in cost reduction is optimum to continue existence in the pharmaceutical industry but not enough to facilitate a competitive position. A competitive position results in greater revenue generation. Wyeth pharmaceutical has to implement a second wave in diagnostics and transformations to achieve minimum of 5% in cost reduction. It is vital for all Managing Directors and Quality Heads to ensure product quality is not affected by the second wave of cost reductions. Increasing product quality with the second cost reduction process is highly encouraged. The first wave of site transformations and diagnostics involved use of the Six Sigma and Lean methodologies to cut costs. Highly successful in their application, the second wave of cost reductions will reanalyze and re-evaluate the two production functions. The first wave was implemented in three phases and so will the second wave. The first phase centered on improvement in the operating systems to enable waste elimination, reduction in variability and increase flexibility of the production system. The first phase of the second wave will entail the same process. Further analysis on the operating system should be carried out on all sites. Improvements that will be acquired from the analysis should be input into the operating system to streamline it. Reanalysis of the operating system will increase accuracy and efficiency in the system. The latter improvements will be seen in the shortened queuing time in production processes in transition. Accuracy will minimize product defects. Overall, the production function will increase under the same amount of time. The second phase of the first wave involved making improvements in the manner in which the various sites were managed. The second wave of cost reductions will apply the same phase. This phase will center on changing the mindset of the site heads. Wyeth Company wants leaders to manage sites and not exclusive bosses. It is vital to note the difference between a leader and a boss. A leader inspires and rules his subjects through respect. A boss drives his subjects and rules by fear. The impact the two have on the workforce of a company is different. It is also vital for the site heads to comprehend scenarios where he/she will be required to be a boss and leader simultaneously. The main goal of the cost reduction process is to increase productivity at minimal costs. Productivity is increased under favorable work conditions for the workers. This means a shift from the traditional view of being a boss to becoming a leader. Mike Karmack states, “Success was almost 100% correlated with the personal commitment of the Managing Director.” (Alhammadi 2014, pg 16) The final phase involved training of the workers to change their thinking and to improve their skills. Further training on the employees should be carried out. Re-evaluation of the employee structure and the manner of working should be done. More time saving and accuracy improving manner of work should be suggested and implemented. This is all in an effort to lower the defects rate and to increase efficiency. Trimming on the head count should also be done to facilitate further cut downs in the production cost. This means lesser employees with increased functionalities. The Company needs to in source most of the jobs that are currently out sourced in an effort to reduce costs and time of delivery. Site leaders will be rated by the success of their respective sites. Success for Wyeth Pharmaceuticals will be based on maximum productivity under minimal operation cost. Precedent Vice President Mike in a meeting with managing directors states, “Some people in the room will not make it and will not be with us in the future.”(Beede 2014, pg 5) This was a reminder that this is a real life scenario and a leader must deliver. Wyeth Company in implementing the head cuts will include MDs who do not deliver as compared to others. Part 3 Recommendation Report from Site MD to Wendy Kouba To: Vice President From: John Smith Subject: Recommendation Report Date: Ref no: The Montreal pharmaceutical industry is steep with the presence of bigger pharmaceutical companies like Pfizer and Quebec. The steep competition in the industry will overshadow Wyeth if further improvements are not made. The first wave of improvements was successful in cost reduction. Pfizer and Quebec form the two largest research based pharmaceuticals in the world. The Montreal site needs to employ a new production system such as the Spear and Bover System of Toyota. To increase output and minimize inputs, the site requires specifying each process by content, timing and sequence. The time involved in carrying out a process to completion. There is a well-developed list of events for each particular job. An account of the processes to highlight which processes follows the other. The method will indicate where an employee deviates from detail. The manner of communication between the consumer and the company needs to be direct. No intermediary should exist and the manner of communication should be a brief and simple way. An example would be a yes-or-no mode of communication. Intermediaries cost the company more and may not present the intended image of the company to the public. Improvements in the sites should be done under supervision of qualified scientists in the respective fields. Guidance in the improvements should be done at the lowest possible level. Certain holes in the production cannot be identified without the guidance of a qualified professional. Connections between workers and the machines in terms of positioning should also be carried out by a professional. Currently the positioning function is carried out by managing directors and quality heads. The two leadership figures do not possess the required qualification to position objects in the production process. Application of the method will go into counter checking whether a person is fully capable of performing a specific task correctly and if the performed task generates the expected outcome. Streamlining of the work force by dismissing incompetent employees will form a rightful base for work termination. Manufacturing pathways in Wyeth Pharmaceuticals needs to be introduced. A pathway is an algorithm applied to comprehend the risks and uncertainties in manufacturing. The algorithm includes factors of technology, production and system integration to come up with the total underlying risks and uncertainties. The pathway algorithm enables an institution to come up with a framework that highlights the timing and location most suitable to address a risk or uncertainty. The algorithm involves identification of production challenges, management of laboratory technology and development of a strategy framework. The pathway is a powerful tool in policy establishment and technology development. Wyeth researchers can best implement the strategic tool in research of new forms of treatment by slowly deducting defects in the drugs. Risk management through the pathway system will also enable defect reduction facilitating the cost reduction process. Wyeth pharmaceutical needs to shift to modern forms of treatment and move out from the traditional methods. The traditional form of manufacturing tablets for short-term treatments is slowly fading. Long-term forms of treatment should be researched on like the use of nymphs. Long-term treatments generate more revenue and modern methods of treatment are more accurate than traditional methods. Ninety one percent of the correspondents on an interview done by Helios Orthopedics prefer modern methods of medicine to traditional forms of medicine. (Adamu 2013). Another recommendation goes into the centralization of major departments. Researchers and quality inspectors require a centralized environment far from the noise of the production line. The two departments also require a team environment to brainstorm and fasten the innovative process. A standardized form of evaluation should be put in place as the final recommendation. A frame model formulated to test production hypotheses should be implemented. The frame model should vary between departments but be similar in same departments. The frame model will record the physical improvements in production. It will also be used as a comparative tool for similar departments in different locations. A head count of factory workers should be recorded. The head count should be minimized and the salary of the remaining workers be increased. The optimum ratio between man and machine for maximum productivity is 1:4 given most machines are independent (Adamu 2013). Reducing the work force is a cost reductive measure and increasing the salaries of the remaining work force is a quality management measure. Part 4 Recommendation Report from Site QH to Wendy Kouba To: Vice President From: Jane Doe Subject: Recommendation Report Date: Ref No: Quality is an important aspect in the production function. From the success of the first wave of improvements, the cost reduction process can move from evaluation control to analytical control. Analytical control shortens designs and ensures results are consistent, accurate and precise. Analytical control stems actions from multiple actions to one action. It centers on the attainment of a goal using the least number of steps. The tool uses no approximations and bass its results on past results. Analytical control in the pharmaceutical industry is used to determine the purpose of a drug with minimal test thus reducing the cost of testing. The framework is data driven and is a statistical approach to accuracy. The quality framework also collates with the quality assurance policy of ISO 9001:2008 (Doyle 2009, pg 108). Quality assurance refers to a mechanism for defect reduction in the manufacturing process by elicitation of relevant solutions that are customer oriented. The pharmaceutical site in Montréal is productive but lags a lot from time wasted in material and labor movements. The site requires a full redesign in station positioning to facilitate flow of processes. For example, if a tablet should move from a tray to a packet, the factory design should have the packet station following the tray station. The designing of the factory centering on the flow of processes will reduce lag time. Time is the major resource in the production function. To attain maximum productivity and quality, processes have to flow in order in the factory line. Factory and managerial functions need to be scheduled. Scheduling will highlight work that was not completed in time or work that was not done at all. This will go far in streamlining employee and employee functionalities. Re-evaluation of the storage and transit facilities also has to be carried out to promote synchronizing of the two functions. The transit system should be next to the storage facilities. This is all in an effort in reducing time taken to move products from the factory to the consumer. Managerial changes should be at a minimum until maximum cost reduction is attained. Changes in the management structure threaten product quality. A change in management brings about changes in the work environment as each individual manager has his/her own set of characteristics. These changes affect the workers and the workers affect the product quality. A constant and consistent work place is most conducive in facilitating growth. Maintenance of Wyeth machines should take a preventive approach. By preventive approach, the meaning is that servicing and repairs of factory machines should be done with an aim of the machine not becoming functionless. Many resources are spent in repairs and faulty machines compromise quality. Resources are also spent in modification of faulty products gotten from faulty machines. Wyeth Pharmaceuticals can remove one of the quality costs. There are four quality costs: External failure, internal failures, and inspection and prevention costs. External failures are discovered by the consumer after shipping of the product. Internal failures occur when the company disposes off products that do not conform to quality. Inspection failures are found through tests when the product does not meet customer requirements. Prevention costs occur when the company employs mechanisms to avoid production of non-conforming products. (Domingo 1997, pg 1). Inspection costs can be fully removed through strong customer elicitation techniques that are customer centered. An example of such a technique is spiral DLC. The technique will also remove bulk of the prevention cost. The final recommendation is in the automation of the inspection process. Automation in the manufacturing process eliminates defects up to a percentage ninety percent (Sharma 2011, pg 31). Automation in the inspection process makes use of infrared, motion sensors and frequencies to make statistical calculations. Automation is a key option during job lay offs. The process increases productivity and minimizes operation costs. Implementation of the process facilitates a labor force reduction of 33% on average (Sharma 2011, pg 32). Automation is an exclusive option as it reduces defects to a level that the normal human inspector cannot achieve. References ADAMU, U. F. (2013). Modern and traditional medicine: conflicts and reconciliation. BEEDE,P. (2014). Production Operations Management. Dubai, United Arab Emirates. DOMINGO, R. T. (1997). Quality means survival: caveat vendidor, let the seller beware. Singapore, Prentice Hall. HOYLE, D. (2009). ISO 9000 quality systems handbook using the standards as a framework for business improvement. Amsterdam, Butterworth-Heinemann. http://www.engineeringvillage.com/controller/servlet/OpenURL?genre=book&isbn=9781856176842 MORGAN, J., & BRENIG-JONES, M. (2012). Lean six sigma for dummies. Chichester, Wiley. SHARMA, K. L. S. (2011). Overview of industrial process automation. [S.l.], Elsevier. http://www.engineeringvillage.com/controller/servlet/OpenURL?genre=book&isbn=9780124157798. Read More