Operation and Supply Chain Management - Case Study Example

Operation and Supply Chain Management Name Institution Date Introduction According to Lubar (2012), operation and supply management involve designing and improving the systems responsible for the production and distribution of the primary goods and services of a company. Operations and supply management is a result of a relationship between three departments within a company. They include production operations department which entails conversion of capital resources into final products or output. Capital resources include the physical capital, the human resource, raw materials and technology. The department will be able to produce excellent results if the management team is equipped with knowledge on the production process and with managerial skills. The supply chain department is charged with the responsibility of distributing the final goods and services from the manufacturing firm to respective customers in different destinations. This process involves developing the appropriate supply designs, planning and executing them. The business process department on the other hand involves an analysis of the various business processes involved in operations and supply management. The business department sets out to define the processes involved, lay out responsibilities of the process, process sponsorship, process measures, process alignment with the operations and supply, process awareness, the technology used as well as the methodology in the process (Blanchard, 2010). Summary Report from Mike Kamarck to Wendy Kouba briefing the Objectives at Hand Background Information In the third quarter of the financial year 2007 the Wyeth Pharmaceuticals Company, among other companies in the pharmaceutical industry, faced many challenges with regards to operating costs and these challenges caused decreases in profit margins, rampant consolidations drying up of product pipelines and need for increased investment in the pharmaceutical industry among other challenges. The industry also lost their international patent protection because of not meeting the expected rate of profitability (Beede, 2009). Pharmaceutical companies make profits by introducing new drugs into the market. This is because they charge extreme prices for these new drugs and they can continue charging the extreme prices under the protection of international patents. Patents in the United States of America ran for as long as 20 years and during this period of time the pharmaceutical companies under the umbrella of the patent holder are able to complete the development of the drug, perform the necessary conduct tests, acquire the required approvals from the FDA, increase the capacity in the production. However after introduction of more strict regulations the patent period was reduced from 20 years to 12 and 14 years which will require more investments if the same things are still to be achieved and acquired in a shorter span of time (Tenant 2001). Before the challenges began pharmaceutical companies were given a two year weaning period after their patents had expired and in these two years the companies were able to make generic versions of the drugs and thus increase production capacity. However, after the implementation of the strict rules and loss of patents in the United States of America the only facilities that could produce generics faster and have approval to release the drugs intothe international markets were India and China. According to Beede (2009), this is because the facilities in these areas had already been developed and the soft time lag does not exist there. This has led to a reduction in the total production and supply of drugs in the international market for the company leading to reduced losses. The loss of patents for the pharmaceutical companies in the United States of America has resultedin some pharmaceutical companies trying to work around the patents. This is evidenced by pharmaceutical companies conducting research and making innovations on the works or inventions of other pharmaceutical companies (Lubar, 2012). This practice was not seen before the revocation of patents, the founding company would get exclusive patents to conduct research and produce the new drugs and another company can get exclusive patents to improve the drug and release it into the market ass a new and distinct drug. This means the founding company just created a product and the other company or companies are competitors to the founding pharmaceutical company. Another challenge that faces the pharmaceutical companies in the United States of America is the issue of shortages on the drug inventory. However, with the increase in costs per dose of medicine led to a large increase in the total costs of developing the invented drugs and also an increased cost in preparing the drugs for their sale into the international markets. Analysts in the United States of America have discovered that due to the large increase involved in costs in producing the drugs and preparing those drugs for sale in the international market have led many production facilities to become idle as the pharmaceutical companies strived to align the demand of the drugs with their production capacity. These challenges that pharmaceuticals companiesfaced forced many pharmaceuticals to change the business models. This means that they shifted from their traditional approach of making tablets to medicine. According to Beede, (2009), the medicine they used involved using biological material retrieved from human beings and these include tissue, blood and lymph among other materials which are being used to treat many conditions and some of the conditions treated with the medicine are those that require a long term treatment. Possible Strategies to Achieve the Company’s Desired Goals One of the goals of Wyeth Pharmaceuticals is to be the best supplier of exceptional quality of medicine in the world so as to improve the lives of people. This can be achieved through; maintaining a workforce that has exceptional skills and also who are committed to their work, the workforce should also be well diversified at all levels of the organization. According to Beede (2009), the workforce is also expected to be disciplined that means doing the right things at the right time in the right way from the first time to achieve the best results. The management of the Wyeth Pharmaceuticals should ensure that they maximize on the supply networks from procurement, production and also distribution of the medicine. A good supply network increases the competitiveness of the company. To achieve the desired goals of the company the management should ensure that the company follows processes and systems that are standard, stable as well as flexible across the network. The standardized, stable and flexible work processes ensure a continuous increase in the return on the company’s assets as well as on the overall cost of goods. Directive Letter from Wendy Kouba to Site Leaders Summary of the challenges at hand in Wyeth Pharmaceuticals Production Sites Wyeth Pharmaceuticals has 25 production facilities which are very diverse in terms of culture, leadership and also their capability in technology to handle different products. To ensure maximum productivity of Wyeth pharmaceuticals operational excellence programs were installed in all sites. The operational excellence programs were installed so as to assess improvement activities that were being conducted across the sites; however they lacked strategies that united all the sites. The sites lacked coordination among themselves because they were competing against each other. Each site was broad and managed by different managers as independent entities which created the grounds for competition for new drugs that would be blockbuster drugs in the market. The lack of coordination between the various sites was a challenge to the growth of the company and its pursuit to achieve the goals of the company. According to Beede (2009), another challenge facing our sites is the lack of consistency in the mandate from the management for process improvement. The site managers were asked to play their roles without anyone pushing for process improvement in their strategies. There is clearly no relationship between the site managers and the corporate managers of the company and that means that there is a gap in the overall management of the company. The corporate managers just expected the site managers to ensure that drugs were being created and after that they were to be sent to them for sale. The corporate management team did not cooperate with the site managers. The company is working on reducing its operating costs and at the same time it is using external expertise to help improve their processes. The outsourced employees cost the company more money thus increasing company expenses which is against the effortsof cutting or reducing the costs (Beede, 2009). Other challenges facing the company include the increased costs of raw materials used in the production of the drugs and the preparation of the drugs for sale. Given the closing down of certain production facilities because of the increased production and distribution costs there has been a reduction in supply of drugs leading to a shortage in satisfying customer demands. There have also been challenges of drops in sales and also the company’s profitability. The company also faced stiff competition from other pharmaceuticals as well as competition within the company against other production sites. Competition is meant to encourage companies to work harder knowing that a drop in performance would make it lose its customers hence its profitability. The company also faces a challenge in the ability to produce new products; this is because of the loss of patents in the country of United States of America which would have given the pharmaceutical company the chance to invent a drug, develop it and test it and thereafter prepare for production and distribute it to the market for sale. Beede (2009) points out that the lack of patents for the pharmaceutical companies in the United States of America has also enabled intense competition from other pharmaceutical companies that use the inventions of other pharmaceutical companies to conduct research and produce similar products and register them as distinct medicines or drugs. This means that pharmaceutical companies research the inventions of other pharmaceutical companies and make generic products which are then released into the market and become the original drugs’ competitors. Directives to achieve Desired Goals The goals of Wyeth Pharmaceutical as determined are to become the best producer and supplier of pharmaceutical products that aims to improve the quality of life of their customers by providing them with excellent quality of drugs and medicine. There are various ways in which these goals can be achieved and some of them include improving the quality of supply networks form the procurement to the production process and eventually the distribution process by the site managers. The management team at the sites of Wyeth Pharmaceuticals should ensure that Wyeth Pharmaceuticals has a team of staff that is highly skilled, that is also committed to excellence and his or her work, the workforce should also be diverse at all the levels of the organization. The workforce should also be consistent in their work and performance to ensure that the company attains its goals. The management team at both corporate and site levels should also work together to ensure that the company uses standardized, flexible as well as stable work processes that will enhance continuous improvement in the return in the assets or investments and also an improvement in the cost of goods sold. Another way in which the site managers can ensure that the overall objectives of the company are achieved is by improving the supply networks from the procurement to production and the distribution of the medicine produced. The operational excellence programs installed in the various sites of Wyeth Pharmaceuticals across the regions should be designed in such a way that they can assess project based improvement activities so that they can be in alignment with the goals and objectives of the company. The current operational excellence programs installed have not been coordinated with the company’s strategic site wide vision because the vision for the all the sites of Wyeth Pharmaceuticals does not exist. Therefore the company has to establish strategic goals or visions that will be shared across their sites and this can be achieved by ensuring that the visions are implemented and coordinated with the project based activities assessment in the operational excellence programs. It is therefore evident that despite of the challenges that site managers face in ensuring that their activities are in alignment with the company’s strategic objectives. Recommendation Report from site Managing Directors to Wendy Kouba Operational Transformations The Leadership Coalition The site team managing directors appreciates the concern shown by the management as far as the performance of the production sites and their correlation to the strategic goals of the company are concerned. However, there are a number of recommendations that we would like to raise to ensure that the goals of the various production sites are in alignment with the company’s overall objectives. Some of these issues include; cooperation with the corporate managers of the Wyeth Pharmaceuticals. There is a gap in communication between the site managing directors and the corporate managers of the company that should be addressed. The gap in communication has resulted in the differences in the desired goals of the company. The corporate managers ask for the medicine so that they can sell them even if they have to sell them at very low prices while the site managing directors are left with the responsibility of procuring the raw materials, producing the medicine, testing the medicine according to the standards of FDA and thus getting their approval and thereafter starting the distribution process from the production sites to the company warehouses where they are prepared for sale (Beede, 2009). Following the first wave of operational transformation which included the leadership coalition, communication with the sites and dealing with the quality management of the company. The leadership coalition transformation involved creating groups of 12 of the most senior employees in the technical operations and product supply and putting them in a leadership coalition that is expected to be comprehensive and also effective so that they can guide a cultural change in the implementation of the operational improvement system of the company. Although using a team of senior employees will help in to make them feel part and parcel of the operations of the company and they will also pass down their wealth of experience gained in their time working for the company. The team of the senior employees was also to be used to implement cultural changes which also include saving 25% of the company’s expenses. However, the problem is that some of the members of the 12 senior employees chosen for leadership coalition may not be in agreement with the intended achievements to be of the company. Their main concern was not the guidelines of the coalition but their depth. Among the coalition guidelines formulated by the company required that no compromises were to be made on the high levels of customer services, the quality as well as compliance. The guidelines also expected that there should be consistency and coordination in the approaches used across all sites. For there to be improvement in the processes, the company has to fully integrate the improvements across its functions. The guidelines also included an explicit emphasis on the engagement of the employees through capacity building and attempting to change the mindsets and characteristics of the employees to embrace enhance and also sustainability. The coalition guidelines also place an emphasis on sharing and the development of the company’s best practices. The company also intends on establishing standard processes that will be applicable across all the 25 sites of the Wyeth Pharmaceuticals company. Finally, the guidelines were advocating for tolerance for ambiguity, a bias for action and also a willingness to make corrections mid-course (Beede, 2009). Communication with Sites This phase of operational transformations involved bringing all the managing directors and the quality managers from the various sites. The team implementing the first wave of operational transformation visited the various managers and explained the goal of cutting 25% of the total costs and they explained the business point of understanding which many of the managers were not in agreement with. Therefore the team had to use a different approach to try and explain to the managers the importance of saving 25% for the entire company and challenged them to find reasons as to why they should not implement the guidelines. Most site managing directors did not agree with the guidelinespresented because they did not see how they could be achieved and therefore the team had to gather data and statistics to prove to the site managing directors and the quality managers across the regions that the guidelines were achievable. Quality Management Concerns The sites for Wyeth Pharmaceuticals were allocated two managers to oversee the company operations and these were the managing director and the quality manager. The quality manager was in charge of ensuring that the company’s site complied with all the rules and regulations including the approval of the FDA among other regulations. However, the quality management team had concerns with the approaches that were being suggested and the reason was because they did not understand some of the concepts being suggested. Some of these concepts include using lean methods. They interpreted that lean meant letting go of some employees and did not consider that it meant cutting down costs to increase savings (25%) (Lubar, 2012). Recommendations The managing directors of the sites of Wyeth Pharmaceuticals have noted the problems that are being encountered by the company such as drops in the profit margins, rampant consolidations, drying up of product pipelines and lack of investment to develop and crate new drugs and would like to make the following recommendations to Ms. Wendy Kouba; focus the marketing strategy on promoting change for the company which will ensure tangible success for the business and this will encourage more investors to invest and enhance confidence in all stakeholders in the company. The marketing strategy should involve the site managers as the situation in all sites was different, this will ensure a common vision as well as a road map for the site managers to follow. Each location requires its own set of strategies. The use of games is also recommended during the training programs to ensure active learning. This is because adults’ way of learning should be a two way that is as knowledge is acquired it should be implemented immediately to ensure that they do not forget them. The management should also focus more on the transition and ensure that employers and employees learn more about lean transformation and lean implementation. Ms. Wendy should focus on developing important skills such as prioritization of time, problem solving, coaching and also the gemba walk among other skills to both leaders and employees. The Goals of Operational Transformational The transformations in the department of operations and supply management was targeting to reduce the costs that were being incurred by the company to a rate of 25% of the total expenses and in the process improve performance and coordination between the various sites across the regions. Recommendation Reports from Site Quality Heads to Wendy Kouba To ensure that quality standards of the company are in compliance with the law and will ensure that the objectives of the company of the company are met the company has to identify ways of determining what is wasteful for the organization and what activities can be trimmed down. There are standards that do not add value to the company and by getting rid of them will help to improve the overall performance of the company. Some of the reductions include headcount reductionsthrough processes such as value stream mapping and simplifications of the production line. The quality heads at each site are supposed to offer efficient leadership at the site. This can be achieved by quality heads ensuring that each site is examined thoroughly and the right tools are used to enable process improvement which include the gemba walks, 5S assessments, value stream mapping workshops and also operating equipment effectiveness benchmarking comparisons. The quality heads should develop new skills that will ensure that they can observe wastage better. A benchmark has to be created to be able to assess the success of the new processes and the procedures used. There are also techniques that Wendy Kouba could implement to improve the quality of the medicine and also the processes and this could include the six sigma qualities. The six sigma qualities involve philosophies and methods that can be used to reduce defects and loopholes in the production of the medicine and the production process respectively. The methods seek to decrease the levels of variations in the production processes that could lead to potential product defects (Tenant, 2001). Six sigma measures the number of defected productsin the products manufactured. The common method used is the defects per million opportunities (DPMO) which involves dividing the number of defects by the number of opportunities for errors for every unit multiplied by the total number of units produced and then multiplying the result by a million (Tenant, 2001). DPMO = number of defects * 1,000,000 Number of opportunities for error per unit * number of units Quality heads should be able to create a united group that can develop the right themes for each of the sites of the company. The groups are to work on the mini projects that will add up to the total transformation of the company in the various regions where the sites are located. The mini projects took a while before their results could be visible to the public in the form of work activities, their way of thinking as well as the behavior of their personnel and also the leaders in the specified regions where the sites are located. Various sites of the company required specific plans for them to be successful. This is because of the differences in cultures, their ways of operating and also their capabilities. Wendy Kouba Wendy Kouba need to take charge of the operations of the Wyeth Pharmaceuticals as the vice president of the operations management because the champion of the cost reduction program Mike Karmack has decided to step back in the active role that is associated with the program. She is supposed implement operating strategies across all the sites of Wyeth pharmaceuticals (Beede, 2009). As the new vice president of the operations management she will be able to improve communications within the company because she has worked in the communications department for 23 years and communications is a department that has failed within the company. There is no communication among managers especially between site managing directors and the corporate managers causing a breakdown in the communication of the overall strategies of the company. Wendy Kouba has great interpersonal skills which will enable her to develop a good working relationship which is genuine and mutually respectful with the various site managers as well as the various site quality heads or managers (Beede, 2009). Wendy has also proven that she can persuade people within the company to support the strategies developed or created to enhance growth and productivity within the company. She has been able to achieve that by building strong and solid relationships which are based on trust and respect for each party at all the sites of the company. Due to her qualifications and the massive work experience she is best suited to take the position of the vice president of operations management. Therefore as a team of site managing directors we endorse Wendy her for the position (Beede, 2009). A mini Plan that will contribute towards the Operational Goal with Wyeth Pharmaceuticals Wyeth Pharmaceuticals intends to reduce the total expenses by 25% and therefore it is important for the company to make the necessary plans to ensure that it achieves those goals. Below is a plan that can help the company in achieving its goals; The company can increase the costs of the products by reducing the total costs incurred in the production process and this can be achieved by looking for cheaper suppliers with similar quality of goods or raw materials. The company can also invest in training the employees on certain production processes among other strategies and technicalities instead of outsourcing employees every time the company wants to implement a new strategy. Managers especially the corporate managers could handle more than one task instead of hiring new employees every time they wish to implement new projects or launch new products. With the lack of patents in the United States of America the companies will require more investments if they are to achieve the same levels of productivity and satisfy their customers but the company can form mergers with other pharmaceutical companies to invent and manufacture new drugs or medicine. The merger will help the company save on costs as they will share costs with the merging pharmaceutical company. Conclusion The Wyeth Pharmaceuticals Company is a company that has been successful in its endeavors however; it has not been spared from challenges such as increased production costs, increased or stiffer competition and challenges in the operational and supply management strategies among others. Financial challenges can be solved by cutting down costs by 25% thus increasing its savings, increased competition or stiff competition can be met with introduction of blockbuster drugs into the market. Another challenge is the operations and supply management which can be solved by outsourcing expert skills or hiring a new operations and supply manager as Wyeth Pharmaceuticals is doing. List of References Beede, P., 2009, Wyeth Pharmaceuticals in 2009: Operational Transformation, pp. 1-22. Tenant, G., 2001, Six Sigma: SPC and TQM in Manufacturing and Services, Farnham: Gower Publishing Ltd. Lubar, S., 2012, Supply Chain and Operations Management, Retrieved on 15th May, 2014 from https://www4.uwm.edu/business/programs/bba/major/bbascom.cfm Blanchard, D., 2010, Supply Chain Management Best Practices, John Wiley &Sons, New Jersey. Read More