Biopharmaceuticals Operations and Planning Bayer

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Biopharmaceuticals Operations and Planning _at_
Bayer

• Jörg Heidrich
• 17 Feb 2006

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Outline

• Company Overview
• Long Term Planning Issues
• Short Term Planning Issues
• Operational Excellence
• Summary

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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

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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

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HCBU Operations Overview 2001-05 Consistently
increasing output with decreasing cycle times
Looks nice, but what were the basic challenges?
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Long Term Planning Issues
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Long Term Planning _at_ 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

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Long Term Planning _at_ Bayer

• Long term investment decisions need to be made
  without complete knowledge of the product and
  processes and with significant uncertainty on
  regulatory approvals

Investment Decision
4-6 Years Investment Process
6-12m
12-18m
12-18m
12-18m
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Long Term Planning _at_ 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

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Long Term Planning _at_ 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

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Short Term Planning Issues
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Short Term Planning _at_ 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
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Short Term Planning _at_ 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

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Short Term Planning _at_ 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)

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Short Term Planning _at_ Bayer

• What did we learn? Balance between short term and
  long term
• Process robustness is imperative for long term
  success of operations, but we cant wait till
  process robustness delivers the resultsso, 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
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Operational Control
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Operational Control _at_ 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)

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Operational Control _at_ 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

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Operational Control _at_ 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
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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

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Product Supply - Kogenate

• Jörg Heidrich