Integration of Technical Operations and Quality Teams
to Build Site Unification
By
Christina M. Williams
B.S. Biomedical Engineering, Texas A&M University, 2006
Submitted to the MIT Sloan School of Management and the Engineering Systems Division in partial
fulfillment of the requirements for the degrees of
MAASSiFs INSifTUW
Master of Business Administration
rwcLogy
and
Master of Science in Engineering Systems
JUN1 4 22
In conjunction with the Leaders for Global Operations Program at the
Massachusetts Institute of Technology
June 2012
ARCHIVES
© 2012 Christina Williams. All rights reserved.
The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic
copies of this thesis document in whole or in part in any mqium now known or herefer created
Signature of Author
Engineering Systedir .idaon
MIT Sloan School of Management
I May 11, 2012
Certified byNO
I
R>y Welsch, Thesis Supervisor
Professor of Management Science and Statistics
Certified by _______________________
___
Charles L. Coone, Thesis Supervisor
Professor of Chemical Engineering
Certified by
_
q__
Deborah4ightinde, ESD Thesis Reader
Professor of the Practice of Aqrnautics and, Astrohautics and Engineering Systems
Accepted by
Maura M. Herson, Director, MBA Program
MIT Sloan School of Management
Accepted by
Olivier de Weck, Chair, Engineering Systems Education Committee
Associate Professor of Aeronautics and Astronautics and Engineering Systems
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2
Integration of Technical Operations and Quality Teams
to Build Site Unification
By
Christina M. Williams
Submitted to the MIT Sloan School of Management and the Engineering Systems Division
on May 11P, 2012
in partial fulfillment of the requirements for the degrees of
Master of Business Administration
and
Master of Science in Engineering Systems
Abstract
Novartis International A.G. is well known for their effective research and development of life-changing
pharmaceuticals, and in 2006, Novartis bought Chiron Corporation, thereby diversifying their portfolio
with a vaccines and diagnostics division. Novartis Vaccines & Diagnostics (NV&D) is dedicated to
producing vaccines and diagnostics tools at the highest quality and lowest cost. This thesis is from a sixmonth internship that explores the Novartis Vaccine's Holly Springs, North Carolina flu-cell culture
facility to assist management in better understanding the Novartis' Innovation, Quality, and Productive
(IQP) system on the organization.
This particular site employs approximately 350 full-time individuals and 150 contractors. The Holly
Springs'facility is designed to manufacture and fill 50 million doses of seasonal influenza vaccine, and
150 million doses in the event of a pandemic (with the help of a dose sparing adjuvant). All processes,
from incoming raw materials to syringe fill and finish, must be conducted at this site in order to meet a
United States mandate for emergency readiness in the event of a pandemic.
The facility is well on its way to finalizing the manufacturing process, installing all the production
equipment, and hiring staff, however, all start ups experience difficulties and this is no different from
Novartis. The site, in particular is experiencing many difficulties in their raw material release process. .
NV&D management recognized the need to implement their IQP project improvement system to address
the disruptions that are impacting their scheduled readiness plan.
The approach for this project and thesis will be a mix of
Novartis' IQP department, quality management, and
technical operations methodologies in order to fully
understand the current state of the raw material release
process and identify gaps within the process. Combining the
raw material release project with the theories of system
dynamics, Novartis can better understand the impact of their
Innovation, Quality, and Productive system at varying
organizational levels. The Figure to the right demonstrates
the impact of process improvement on overall process
performance.
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ResourceDemandfor
ErrorRate
ErrorRate
Reso
Rat
rkSpeed
AvailbeReouce
Thesis Supervisor: Roy Welsch
Title: Professor of Management Science and Statistics
Figure 1: Causal Feedback Loop of Process
Improvement on Process Performance
Thesis Supervisor: Charles L. Cooney
Title: Professor of Chemical Engineering
3
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4
Acknowledgments
First and foremost, I would like to thank my family for providing continual support through all
the good times, as well as the tough times. To my parents, I want to thank you for always encouraging
me to never settle for anything but the best. Lia, Holli, and Oriana, thank you for all of your laughter and
tears and for helping me realize that no matter what I do, you will always be there; you three are my role
models!
Next, I would like to thank Novartis Vaccines & Diagnostics and the Holly Springs folks that
made my six months challenging, but also fun. I would specifically like to recognize Tod Marks, my
project supervisor, and Joi Viray, my project champion, for all the your time devoted in mentoring and
giving me sound advice; no matter how many questions I asked, you both were always there for me.
I would also like to thank the Leaders for Global Operations program and MIT for providing me
all the necessary resources and tools to successfully join the LGO Class of 2012 and prepare me for a
future of challenging opportunities. Special thanks goes to Roy Welsch and Charles Cooney for
providing critical guidance on my internship project and ensuring that changing the world in six months is
a little ambitious.
A special thanks goes to Tacy Napillilo, Angela Thedinga and Drew Hill who were my sounding
boards while at Novartis. You each personally provided vital advice when it came to my project, the
LGO program, my classes, and most importantly, my career.
Lastly, I want to say thank you to Carol Van Ryzin, Jonathan Wang, Brandon Rowan, Limor
Zehavi, and Jeremy Lieberman. Each of you helped me realize not to sweat the small stuff, but be
thankful that I only have the small stuff to sweat.
5
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6
Table of Contents
A bstract.........................................................................................................................................................3
A cknow ledgm ents.........................................................................................................................................5
Table of Contents..........................................................................................................................................7
List of Figures...............................................................................................................................................9
List of Tables...............................................................................................................................................10
List of Abbreviations and Definitions .........................................................................................................
11
Chapter 1:Introduction ................................................................................................................................
12
1.1
Novartis International A .G . Corporate Overview ......................................................
13
1.2
M otivation for System -w ide Im provem ent .................................................................
14
1.3
Hypothesis.......................................................................................................................14
1.4
Organization of the Thesis .........................................................................................
15
Chapter 2:Current State Observations.....................................................................................................
17
2.1
The Raw Material Release Process and the Holly Springs Site .................
17
2.2
General Organizational Processes A ssessm ent ..........................................................
21
2.3
Chapter Sum mary............................................................................................................27
Chapter 3:A pproach ....................................................................................................................................
3.1
General Approach............................................................................................................29
3.2
Chapter Sum mary............................................................................................................36
Chapter 4:The 4-Phase Approach: Benefits and Challenges.................................................................
29
38
4.1
Data Collection: Current State Metrics versus Future State Metrics..........................
38
4.2
Challenges .......................................................................................................................
41
4.3
Chapter Summ ary............................................................................................................42
Chapter 5:System Dynam ics M odeling .................................................................................................
5.1
System Dynam ics ........................................................................................................
7
43
43
5.2
Supply Chain Causal Loop..........................................................................................
44
5.3
Sum m ary of M odeling Results...................................................................................
48
5.4
Chapter Sum m ary............................................................................................................49
Conclusion and Recom mendations .............................................................................................................
51
Novartis V &D and the Holly Springs, N C Site......................................................................
51
Novartis A .G . International..................................................................................................
55
Final Considerations...................................................................................................................55
Appendix 1: Current State Raw M aterial Release Process .....................................................................
57
Appendix 1 Continued: Current State Raw M aterial Release Process...................................................
58
Appendix 2: Current State Flow chart Analysis of Value-add Activities ................................................
59
Appendix 3: Project Task Tracker.......................................................................................................
60
Appendix 4: Future State Flow chart Analysis of V alue-add Activities .................................................
61
Appendix 5: Johnson Transform ation Equation.....................................................................................
62
Bibliography ................................................................................................................................................
63
8
List of Figures
Figure 1: Novartis Vaccine & Diagnostic Facilities Around the Globe.................................................
12
Figure 2: Holly Springs Raw Material Release Process Flow ................................................................
18
Figure 3: Current State Raw Material Release Process Map ................................................................
18
Figure 4: NV&D Holly Springs' Supplier Relationship Feedback Loop...............................................
21
Figure 5: Raw Material Release Stakeholder Analysis ..........................................................................
26
Figure 6: The 4-Step Appraoch ...................................................................................................................
29
Figure 7: Current State Process Mapping Exercise.................................................................................32
Figure 8: Future State Process Map ............................................................................................................
33
Figure 9: Solution Blossoms for Communication Pain Points...............................................................
34
Figure 10: Digital Temperature D ata .....................................................................................................
35
Figure 11: Total Release Time of Incoming Raw Materials ...................................................................
38
Figure 12: Propability Plot of Time to Release (Pre Improvement) ......................................................
39
Figure 13: Propability Plot of Time to Release (Post Improvement) ......................................................
39
Figure 14: Johnson Transformation: Pre-Improvement Data.................................................................
40
Figure 15: Process Capability of Time to Release (Pre Improvement).................................................
41
Figure 16: Process Capability of Time to Release (Post Improvement) .................................................
41
Figure 17: Causal Loop (Feedback Loop) Diagram...............................................................................
43
Figure 18: Stock and Flow Diagram ...........................................................................................................
43
Figure 19: Common Supply Chain Reaction..........................................................................................
44
Figure 20: Synergy Among Lead Time Reduction Policies....................................................................46
Figure 21: Lead Time Reductions in Raw Material Release Process....................................................
47
Figure 22: Organizational Improvement Theory...................................................................................
48
Figure 23: The Capability Trap (Repenning and Sterman, 2002)..........................................................
49
9
List of Tables
Table 1: Abbreviations and Definitions ......................................................................................................
11
Table 2: Raw M aterial M etrics....................................................................................................................19
Table 3: Value-add Percentage Change ..................................................................................................
10
35
List of Abbreviations and Definitions
Table 1: Abbreviations and Definitions
NVD/NV&D
HS
HHS
CoE
RMR
FCC
PFM
FDA
Novartis Vaccines and Diagnostics
Holly Springs
Health and Human Services
Center of Excellence
-Raw Material Release
Flu-Cell Culture
Process Flow Map
Food and Drug Administration
QbD
Quality-by-Design
GDP
cGMP
Good Documentation Practice
Current Good Manufacturing Practice
CDM
Chemically Defined Media
PFM
BOM
Protein Free Media
Build of Material
11
Chapter 1: Introduction
Novartis Vaccines & Diagnostics is one of six divisions within Novartis International A.G. with
production and administrative facilities around the world. Figure 1, Novartis Vaccine & Diagnostic
Facilities around the Globe, illustrates NV&D's vast presence throughout the world. Due to cultural and
manufacturing differences (established during pre-acquisition days), the division is working to increase
their sharing of best practices between the production facilities. The small volume of knowledge transfer
is affecting each site's ability to efficiently develop control systems and monitor their day-to-day
activities.
The Novartis Vaccines & Diagnostics' Holly Springs' (HS) site one of the youngest facilities in
the NV&D network, and this location is the focus of this thesis. NV&D HS opened its doors in August
2009, and it successfully completed its first process validation influenza vaccine campaign December of
2012. Unlike previous Novartis vaccine facilities, the Holly Springs site was commissioned by the
United States Health and Human Service governmental agency for pandemic readiness, meaning Holly
Springs must produce up to 150M doses of non-seasonal influenza vaccine within six-months after a
pandemic strain is identified. Also, the HS site will be Novartis' center of excellence for vaccine
production using the flu-cell culture methodology.
~1i~u
Elf:;
Figure 1: Novartis Vaccine & Diagnostic Facilities Around the Globe
12
1.1
Novartis InternationalA.G. Corporate Overview
Novartis International A.G. is a multinational corporation headquartered in Basel, Switzerland
that focuses on offering medicines that protect health, cure diseases and improve well-being. It was
created in 1996 through the merger of Ciba-Geigy, a chemical company that later focused on eye care,
and Sandoz, a chemical and pharmaceutical company, giving Novartis over 250 years of rich history.
Throughout the years, Novartis and its predecessor companies have discovered and developed many
innovative products for patients and consumers worldwide (About Novartis, 2011).
Novartis A.G. is segmented into six unique industry areas giving it a leg-up over many of its
competitors. Novartis holds leading positions in five industries helping them maintain a diverse portfolio
around their corporate strategy of providing healthcare solutions that address the evolving needs of
patients and societies worldwide (About Novartis, 2011):
Pharmaceuticals: innovative patent-protected medicines
Alcon: global leader in eye care with surgical, ophthalmology and consumer products
Sandoz: affordable, high-quality generic medicines and biosimilars
Consumer Health: self-medication products and treatments for animals
Vaccines and Diagnostics: vaccines and diagnostic tools to protect against life-threatening
diseases
1.1.1
Novartis Vaccines & Diagnostics Overview
Nothing prevents viral or bacterial infections quite as well as a vaccine (About Novartis
Vaccines, 2011). With Novartis A.G. understanding this concept, the Novartis Vaccines & Diagnostics
division was created through the acquisition of Chiron Corporation in 2006. NV&D is headquartered in
Cambridge, MA with more than ten locations (and growing) spread over the globe.
As the youngest division in Novartis, it is still developing global control systems. Currently, each
site works in a silo environment and creates control systems as they see fit. With increasing regulatory
13
pressure in the vaccine industry, NVD global management recognizes the need to create a robust process
improvement system that can be rolled out across their network. This thesis focuses on how Novartis
Pharmaceuticals' Innovation, Quality, Productivity (IQP) lean six sigma system impacts various decisions
at the Holly Springs, NC site.
1.2 Motivation for System-wide Improvement
Novartis Vaccines is the world's fifth largest manufacturer of vaccines and the second largest
producer of influenza vaccine and is committed to the fulfillment of this highest of medical ideals (About
Novartis Vaccines, 2011). In order to increase its market capitalization and annual revenue, NV&D can
improve the operational systems that control each site, and ideally, standardize the processes within the
network.
While Novartis Vaccines' annual revenue is small in comparison to other Novartis business units'
revenue, NVD is large enough to benefit from standardized quality and operational systems. Since Holly
Springs is the youngest site and the systems at the site are still being developed and implemented,
Novartis Vaccine global management deemed Holly Springs to be the ideal candidate in creating and
piloting a systematic process improvement methodology that would also instill a quality mindset within
the organization.
1.3
Hypothesis
This thesis explores a highly regulated environment with high volume, low product mix
manufacturing and examines the ability of a lean six sigma program to change the mindset of a culture.
The approach for this project uses a mixture of methodologies from Novartis' IQP department, quality
management, and technical operations departments in order to fully understand the current state of the
raw material release process and identify gaps within the process.
The IQP project incorporates analytical and organizational analyses. This thesis will establish
statistical process controls for monitoring and comparing the original raw material release (RMR) process
14
state (pre-improvement) to the current RMR state (post-improvement). Combining the statistical data
with a full assessment of the organizational processes through an in-depth stakeholder analysis and
system dynamics, Novartis can better understand the impact of their Innovation, Quality, and Productive
system at varying organizational levels.
Novartis can use this learned knowledge to gain a holistic view of their IQP process, but more
importantly, accurately predict the resources necessary to not only identify and implement solutions to
problems, but also sustain the high level of quality and productivity after improvements have been
applied.
1.4
Organization of the Thesis
In Chapter 1, the raw material release process and current issue in the process were introduced, as
well as, some basic information about Novartis Corporate and the Vaccine and Diagnostics' division.
Chapter 2 focuses on current state observations throughout the Novartis V&D division with the
majority of emphasis on Holly Springs, NC site. This section gives an introspective look at certain site
structures and centers on organizational composition through the three lenses of organizational processes:
strategic design, political, and cultural.
Chapter 3 gives an in-depth look at the IQP approach taken in this 6-month internship. This
section gives a step-by-step description of the plan as it relates to the raw material release process and
Novartis' current process improvement systems.
Chapter 4 shifts focus to measurements, metrics, and modeling. It will explore the beneficial
aspects associated with the raw material release process improvements and address the challenges
experienced by the team.
Chapter 5 takes the information from chapters 3 and 4 and ties the results of the project to system
dynamics modeling. The chapter brings forth research in the field of system dynamics, including
common pit falls around process improvement projects.
15
The last chapter sums up final observations and recommendations that have not been mentioned
earlier. Next step recommendations are described in this chapter.
16
Chapter 2: Current State Observations
Novartis and their Vaccines & Diagnostics division were created through many mergers and
acquisitions. While this is a common corporate strategy, the history of NV&D goes back to the year of
1890 when Emil von Behring discovered diphtheria and tetanus antitoxins. With 120 years of rich
historic events, the individual sites across the world were created for specific purposes in the company's
portfolio; and therefore, each site shaped their own processes to meet their operational objectives (About
Novartis, 2011).
While communication between the sites is increasing, the facilities run as silos with small
amounts of knowledge sharing or information transfer between their sister sites. This observation is
demonstrated best through NV&D's centers of excellence (CoEs) in Germany, Italy, UK, and soon in
Holly Springs. Novartis named these sites CoEs based on the products they produce; the individual sites
mastered the production, through years of practice, of how to best manufacture their flagship products.
Novartis management generated these sites with good intentions, but due to the geographic distance
separation, V&D struggled sharing best practices between the sites. An example of this struggle is the
raw material release process at the Holly Springs site.
2.1
The Raw Material Release Process and the Holly Springs Site
As with most new production facilities, Novartis Vaccines Holly Springs is no exception when it
comes to experiencing start-up challenges. The high-level vaccine production supply chain loop involves
four steps: procure, manufacture, distribute, and sell; the first three steps take place at Holly Springs, NC
with the last step takes place at their headquarters in Cambridge, MA. The largest bottleneck is currently
the raw material release process; this is a critical step between the procuring and manufacturing steps.
17
Figure 2 illustrates the five steps of the raw material release process:
The Raw Material Release Process
RM Decision
Order RM
Receive RM
Test RM
Release RM
Figure 2: Holly Springs Raw Material Release Process Flow
2.1.1
The Raw Material Release Challenge
The raw material release process appears harmless from Figure 2's perspective. However, upon
further speaking with HS management and staff, a common theme emerged about RMR: only one
individual knows the entire process, but even he was unaware of the full resource needs for the process.
A cross-functional team, including RMR process stakeholders, was formed to understand the complexity
of the process. The team executed a process mapping exercise to understand the current RMR process
steps; this undertaking identifies the severity of the issue to the team, site, and division. Figure 3 is the
result from the exercise.
Figure 3: Current State Raw Material Release Process Map
18
Through the activity, the team recognized that variations exist within the process due to different
incoming raw material products, the quantity of product being order, as well as, the need for quality
control laboratory testing. Combing all of these issues led to many rework challenges and bottlenecks as
seen in Figure 3. Lastly, additional actions and decisions with the raw material supplier had to take place
resulting in longer lead times and increased costs.
The raw material release process is the first step of influenza vaccine production, and therefore,
each issue that arises puts more stress on everyone from the RMR team to downstream production to fillfinish, in order to meet the production schedule. The need to standardize the raw material release process
is not only crucial for following current good manufacturing practices (cGMP) and regulatory policies;
but more importantly, it will instill confidence in the staff and help show that management understands
the criticality of the situation. By site management expressing the importance and showing support for
the improvement of the raw material release process, employees' will rally behind this mind set ultimately
creating a positive and healthy culture.
2.1.2
Impactful Metrics
In the discovery of the process through the exercise above, the group realized that metrics would
need to be instituted in order to measure the effectiveness of the process. The group agreed upon three
criteria to measure: speed, cost, and quality (see Table 2: Raw Material Metrics).
Table 2: Raw Material Metrics
19
The team delved into the analytical situation and recognized that within each criteria specific
items would have to be looked at in order to holistically evaluate the efficiency of the task. When looking
at speed, two important items need to be tracked: the goods receipt procedural time, and the adherence to
a 23-day testing and release schedule. The goods receipt procedural time includes all the steps from when
a material type is chosen by management until the material reaches the dock of Holly Springs' warehouse.
The adherence to a 23-day time for testing and release includes all the steps between when the material is
unloaded at the Holly Springs' dock until the material is released for production use in SAP. Without
knowing where the entire process stood, the group determined that 22 days is the "blue sky" target goal
listed in the SAP system.
2.1.3
Holly Springs Supplier
Another major observation involves NV&D Holly Springs' relationship with third-party
suppliers. The Holly Springs' supply chain and production teams are responsible for ordering the
material necessary to run HS production according to schedule. HS worked with their first-tier suppliers
to understand the RM production times and set the initial order quantities and delivery dates before the
site even opened.
The relationship with the suppliers was going smoothly until changes in the production schedule
led HS supply chain/purchasing to cancel orders; these changes were necessary for establishing the
correct process from the beginning.
20
Novartis and supplier
negotiate terms
Supplier stuck with
expensive RM inventory
+
Quantity and delivery
schedule established
Novartis Supplier
Relations+
Order modified by
NV&D Staff
Novartis RM order
submitted to supplier
Suppliers begin RM +
production
Figure 4: NV&D Holly Springs' Supplier Relationship Feedback Loop
From there, a chain of events happened that are well drawn out in Figure 4: NV&D Holly
Springs' Supplier Relationship Feedback Loop. The cycle began with Novartis' supply chain department
submitting purchase orders. The suppliers were confident that Novartis was not going to cancel their
orders and began producing the raw material without POs in place. Due to unforeseen events with
production challenges, NV&D management had to change the production schedules and the orders were
cancelled with the supplier. The suppliers had produced a large quantity of Novartis' raw material, and
ultimately had to destroy the material due to expiration and absorbed the cost. Over five years, this cycle
of ordering and cancelling the material occurred several times which has led to opportunities for
improvement in the relationships between Novartis and their suppliers.
Adding to the suppliers' frustration, the NV&D network does not work as a unified
organizational with their suppliers. With that said, as NV&D management works to unify the sites, there
is an opportunity use one raw material control process and benefit from economies of scale by
transferring extra raw material inventory between the facilities instead of canceling orders.
2.2
General Organizational Processes Assessment
21
Organizational process (or organizational behavior) is the study of individuals and their actions
within the context of the organization in a workplace setting. Within the organizational process
framework, the author explores the staff using a "three lens" approach; the three lenses are strategic
design, cultural, and political. The strategic lens looks at an organization as if it were a machine, where
each individual has a defined role that aligns with the goal of the organization; the cultural lens looks at
an organization as an institution that has define values and a higher meaning; and lastly, the political lens
looks at an organization as if everyone involved is in a competition and competing with each other for
varying resources (Reagan, 2010).
The remainder of this chapter focuses on HS' organizational process and enterprise architecting
structure through an examination of the staff at the North Carolina location from an outsider's
perspective. The author's observations are crucial in analyzing the short and long-term impacts of the
IQP system and providing recommendations on the complex, dynamic goal-oriented processes that
happen everyday at the site (Organizational Processes, 2012).
2.2.1
Strategic Design Lens
NV&D holds a common trait to many companies, in that they are trying to define processes,
address a plethora of challenging issues, and start up a facility on a strict resource budget. Even in this
"perfect storm", the Holly Springs' senior leadership team (SLT) wants to bring a " quality mindset"
culture to the employees of Holly Springs. The concept of quality mindset centers on the idea that all
NV&D employees consider product quality in everything they do in their work-life, from signing their
name on a document to following current good manufacturing processes (cGMP).
The quality mindset initiative (instituted through the IQP raw material release project) is a
difficult project, but SLT understands the short-term and long-term benefits of having a culture where
quality is number one. From a short-term perspective, a culture of quality lends itself well to the strategic
design of the site: gain FDA approval. The longer-term perspective is one where people are more
22
creative, productive, committed, and collegial in their jobs because they have positive inner work lives,
since there work is meaningful to the people doing it (How leaders kill, 2012).
With that said, HS' SLT is doing its best to express one clear objective to its employees, but the
current resources cannot adequately address the vast amount of activities. Within the immediate raw
material release process, the stretch of resources is evident. The RMR team was instructed that any and
all resources would be provided in order to iron out problems and identify an effective RMR process.
Unfortunately, over time, the priorities at the site were adjusted and the project was de-prioritized while
other projects, such as process validation of the flu cell culture product was moved up in priority.
Due to the strict resource budget, the staff is asked to split their time to participate and address
many problems at one time. Some of these issues (i.e. quality mindset) are driven by divisional
leadership, which puts added pressure on the individual and departments. Although the tension between
local and global priorities exists in all teams to some extent, it tends to be the greatest when teams tackle
problems in which the resolutions make real changes at the local level that are counter to immediate local
interests and are perceived to focus on corporate or division headquarter interests. A good example of
such teams is one tasked with developing and propagating common global manufacturing processes
(Klein, 2001).
Even though the quality mindset project is a directive from the divisional level management, site
management aligned the initiative to the RMR project thereby giving it legitimacy to site staff. As
Professor Klein states "the tension between local and global priorities becomes moot when both
headquarters and local management have identified [the quality mindset initiative] to be critical to an
organization's competitiveness" (Klein, 2001). From a strategy standpoint, this high prioritization and
alignment may slow down production (or even stop it), but in order to properly conFigure the site with the
best operational systems, this collaboration at all levels is necessary.
Overall, the strategic design of the NV&D site in Holly Springs is on the right track. The raw
material release process is seen as a critical improvement from all staff, and it gives the SLT a positive
23
and effective way to align themselves with divisional and global management. A potential next step is for
all organization levels to assign priority rankings to current projects. This collaboration will assist in
resource management and allocation as the site expands into full commercial production.
2.2.2
Cultural Lens
The culture within the NV&D division originates from the Chiron Corporation, pre-2006, and
brings incorporates interesting dynamics. During the Chiron days, only the Germany, Italy, and United
Kingdom sites existed. Each operated as their own "company," creating their own quality systems,
operational guidelines, and management structures; it was at this time that the silos were founded. Once
Novartis A.G. acquired Chiron Corporation in 2006, Novartis began a unification effort, but quickly
realized the cultural tensions between the sites.
Novartis Vaccines and Diagnostics global management postponed the effort in order to better
understand the site cultures that had developed over the last 150 years. After some time, NV&D created a
Global department to focus on site alignment and addressing system-wide issues to help all the facilities
benefit through best practices. The quality mindset initiative is the start of the unions. HS' management
accepted the quality mindset initiative, and with that, comes an opportunity to demonstrate Holly Springs'
ability to work with the other sites. The HS' site will earn respect and credibility, and ideally, show the
benefits gained when the sites work together. But with those benefits always comes challenges, and now,
NV&D Holly Springs is caught in the middle of leading a global alignment plan while trying to struggle
between starting a new site and working through the historical site turf wars (created years before
Novartis' acquisition of Chiron).
At a microscopic site level, the success in the quality mindset initiative via the raw material
release project shows management's commitment to the site and their employees. The raw material
release project is the perfect opportunity for management to encourage the team members to interact with
the sister sites, which have effectively created and run the process for over a combined 200+ years. "The
exposure to different plants is good, and personally, it's a good opportunity to get an opportunity to learn
24
from different cultures. [One can] learn different concepts, processes, people, and share this information
with peers" (Klein, 2001). RMR team members will be recognized for bringing up issues, and most
importantly, they will express to their colleagues that things are changing for the better, even if the
changes are slow in implementation.
Overall, from a cultural standpoint, the raw material release improvement project is looked at as a
positive step in the right direction, but with most projects, some improvements could be made. One
major improvement would be in communication about the RMR project outside the group as well as
outside of the site. Many of the team members take time out of their regular schedules to attend the
meetings and address specific tasks, but are met with resistance from individuals that do not know about
the project. Site management holds monthly "All Hands" meetings where they could include status
updates to the site, and ask for potential feedback on current team implementations. This could help the
site become more aware and less resistance to changes.
Following along the same lines, management and the team could inform other sites of the IQP
project and work to find best practices between the different sites. This helps on two fronts: 1) increasing
communication between the sites, and 2) combining best practices to create an ideal raw material release
process. When the MIT intern was originally introduced to the team, she facilitated a process mapping
exercise and suggested the HS facility should benchmark their process against sister sites. The Global
Head of IQP explained the concept during a kaizen activity, and afterwards, a meeting was setup with the
Italy site. It was discovered that the two processes were similar at a high-level, but there was a lot more
automation with information flow at the Italian site that helped to reduce traceability issues.
By working with the other sites, the information flow and communication between all
stakeholders could lead to improvement in the NV&D culture and transform it from one of competition to
one of collaboration.
2.2.3
Political Lens
25
The political assessment of the Novartis Vaccines and Diagnostics network is the most significant
aspect in the company that can influence the internship project. Much of the analysis in the following
section will refer to Figure 5, the Raw Material Release Stakeholder Analysis.
Raw MaterialRelease
StakeholderAnalysis
Sus
TeamSponsors
TeamMembers
?
??
2
2
22
Figure 5: Raw Material Release Stakeholder Analysis
With the short-term and important goal of gaining FDA approval by the middle of 2012, the
various departments are working together to address varying situations. The short timeframe and
resource constraint is leading to individuals becoming frustrated and overwhelmed; SLT has
acknowledged this tension and is working to address this situation.
Focusing on Figure 5, the team sponsors, represented by six-sided yellow stars, are all part of the
Holly Springs senior leadership team. They meet bi-weekly and many of them understand the importance
of process validation and gaining FDA approval. NV&D is composed of two separate groups Quality
(green and yellow in Figure 5) and Technical Operations (TechOps) (all other colors in Figure 5), which
are working together to operate production successfully.
In order to gain FDA approval, Holly Springs must demonstrate that three main systems are in
control throngh measureable outputs: the quality management system, the operational/productivity
26
management system, and the facility/maintenance system. Strategically, SLT and HS staff understands
the site's goal, but similar to individuals at other sites, more collaboration could take place to improve the
cultural and political environments. One recommendation is that NV&D rewards positive teamwork
recognition system, thereby encouraging more cross-functional teamwork. Professionals enjoy being
recognized by their technical peers for their expertise and often relish the opportunity to be interacting
with those peers in making a global change. This intrinsic recognition can be as fulfilling as formal
rewards, as one engineer commented, "It's more than the monetary rewards, it's the intangible rewards praise, expertise, and authority" (Klein, 200 1). By combining this brand-new, top-notch vaccine
production facility with a stellar, motivated staff that is supported and recognized by management will
lead NV&D HS to become the employer of choice in the region.
Ultimately, accountability and reward systems influence the level of participation by local team
members but, all too often, organizations have been slow to adapt their human resource policies to
encompass globally dispersed teams (Crandall & Wallaces, 1998; Snell & Snow et al., 1998). [Special
project] team members typically find themselves rewarded at the local level for local activities and rarely
evaluated or rewarded on their [special] team performance (Klein, 2001). There are direct repercussions
for actions at all levels, and without metrics, there is no way to understand the issues of the system.
This organizational analysis has identified some positive attributes that show support for the raw
material release IQP project from many groups. At the same time, there is some room for improvement,
but with constrained time and limited resources for improvements, management must weigh all their
options.
2.3
Chapter Summary
As one can gather, the current state of the process, the Holly Springs site, and the NV&D division
have many challenges in front of them, and therefore, many opportunities for improvement. The raw
material release improvement project will give Holly Springs much credibility through divisional
leadership, but must be executed in an efficient and timely manner. This process, at the current time, is
27
secondary only to the process validation activities, but must still be kept in the forefront in order to have
the desired impact on the organization.
28
Chapter 3: Approach
When the raw material release project was established as the pilot project for rolling out the global
quality mindset initiative, many problem-solving approaches were thrown around among leadership.
Collaboration between the MIT intern and the senior leadership team, it was determined that a modified
version of the lean six sigma DMAIC (Define, Measure, Analyze, Improve, Control) problem solving
model.
Currently, most of the senior leadership team and middle management at the Holly Springs' site
have gone through Novartis' Innovation, Quality, and Productivity lean six sigma training, and therefore,
creating an assessment report based on the philosophies taught in that course would be a smoother
knowledge transfer at the end of the six months. The course focuses on four different stages: Scope,
Seek, Solve, and Sustain; each phase will be explained in more detail through Chapter 3.
3.1
General Approach
As mentioned at the beginning of the chapter, the raw material release project is using Novartis'
Innovation, Quality, and Productivity program's 4-step approach to identify the bottlenecks and determine
the appropriate solution. Figure 6, The 4-Step Approach, illustrates a high-level explanation of the
different tasks that happen at each stage.
Scop See
Sole
Figure 6: The 4-Step Appraoch
29
S
s tad/
The initial scope phase focused on defining the project objective through meeting with different
key stakeholders. Once the project objective was clearly defined, a team was formed based on
recommendations from key stakeholders and project sponsors. The team then created a current state
process flow map that allowed all team members to visibly see all processes involved in the raw material
release process.
The seek phase began to benchmark the current state Holly Springs' RMR process to other sites
including the Rosia/Siena, Italy site. At the same time, the project team established baseline metrics
which helped the team create measureable milestone markers and compare the final implementation
improvements to a starting point. Lastly, the team created an ideal future state model for use as their
"north star" to success.
Continuing onto the solve phase, one noticed that this was the beginning stages of implementation.
The team's focal point was to identify solutions and determine what tasks needed to be completed in
order to implement those solutions. As solutions were put in place, certain policies (or standards)
generated so that anyone could quickly reference and understand the new changes.
Finally, the sustain phase built on the solve phase by defining roles and responsibilities to each
solution activity implemented. The accountability of following through on certain tasks was not present;
but by allocating tasks to specific individuals/departments, a sense of responsibility and accountability are
present, thereby reducing "blame-storming" meetings. Management also had stronger influence during
this stage as they could align following years' performance goals on pre-determine metrics and measure
individuals based on how well they aligned and reached specific metrics.
3.1.1
Scope
Without reintegrating further, the raw material release process was identified as a pilot project to
slowly, but effectively spread a quality mindset throughout the culture of NV&D. But, this section will
dive deeper into how the team was formed, how the group established project scope, as well as, how the
group identified out-of-scope items.
30
The cross-functional team was originally chosen by management by looking at the individuals that
were directly involved and impacted by incoming raw material. The team experience included new
employees all the way up to an individual from the Senior Leadership Team. The team included the
individuals from the roles below (names are excluded for privacy purposes):
e
Senior Leadership Manager representative
*
Associate Project Manager (MIT Intern)
*
Project Team Lead
*
Purchaser/Buyer
*
QA Supervisor
*
QA Analysts
e
Warehouse Clerk
e
Sr. Supplier/QA Engineer
*
Sr. Process Engineer
e
Sr. QA Analysts
Once the team was formed and after going through a couple of brainstorming activities, the team
leadership (i.e. SLT, Project Manager and Team Lead) realized that many individuals varied in their
opinions of how the process flow operated. It was decided that the team needed to understand the current
state, and so, a process mapping exercise took place. Figure 7 and Appendix 1 show the final product
from the process mapping session.
31
Figure 7: Current State Process Mapping Exercise
Once the group concurred on the process, the team identified value-added, non value-added and
business value-added activities.
Value-added is defined as enhancement added to
a product or service by a company before the product is offered; non value-added generates
a zero or negative return on the investment of resources and usually can be eliminated without impairing
a process; and business value-added activity is a change or addition that a business makes to a product or
process before it reaches the customer or point of purchase (Business Value-Add, 2009; Non value-add,
2011; Value-add, 2011).
3.1.2
Seek
After determining the process and defining the problem definition, the team focused on creating
value-added metrics to measure and track the process. One can see in the chart from Appendix 2:
Current Stat Flowchart Analysis of Value-add Activities that many tasks fall under the category of non
value-added (NVA), but more under business value-added (also known as required non value-added).
Knowing that most business value-added activities are only performed because they make the current
business process more efficient, one can see that 18.3% of all processes are adding value to the raw
material release process at Novartis Vaccines & Diagnostics in Holly Springs.
32
After pinpointing the various tasks in the process that were not adding value, the team worked
together to form a future state process map, Figure 8.
aw Material Release Process (SwimnLane)
Figure 8: Future State Process Map
As the team generated the future state process map, each member began thinking about activities
that they could perform to solve the main issue of communication (see yellow communication squares in
Figure 8). The team decided that they wanted to find solutions that they could implement themselves.
This "self-implementation" mentality developed since the team understood the stretch of resources at the
site; also, they wanted to ensure the solutions introduced by the team were implemented according to the
team's vision of the future state process. As a result of the team's commitment and excitement, the Team
Lead created a useful task tracker to assign and track tasks, but he let the assigned individual set their own
deadlines (captured in Appendix 3: Project Action Tracker). This action of allowing the team to set their
own deadline increased participation and helped to foster cross-functional learning between the various
team members.
3.1.3
Solve
Once the project action tracker was in place and ready to accept data, the team went through
several renditions of brainstorming solutions for the process flow communication issues. Figure 9,
Solution Blossoms for Communication Pain Points, demonstrates results from brainstorming for
33
communication square number 5 from Figure 8. The yellow sticky notes represent the communication
solution (i.e. email, form, verbal communication), the blue represents a variety of solutions to address the
communication issue, and the pink squares represent what actions need to take place to address the blue
squares. The pink squares are the immediate actions that are recorded in the project action tracker with
assigned team members' names and due dates.
Figure 9: Solution Blossoms for Communication Pain Points
One specific example from communication issue 4 surrounded temperature data tracking during
transportation. Two individuals, a quality assurance member and the MIT intern, were tasked with
determining if third-party logistic suppliers (3PLs) would be able to provide digital read-outs of the
temperature data. Figure 10, Digital Temperature Data, is an example of the data that a couple of
companies had provided. It was determined that all raw material 3PLs had the capabilities of providing
digital data read-outs, and so, the NV&D Buyer worked with each supplier and the HS warehouse to get
this change in place; this change resulted in an intangible benefit for the company of obtaining more
accurate temperature control readings, as well as, the ability to easily identify if raw material that required
temperature control settings between 2C-8C, went out of specification and called for a deviation to be
written. The more tangible benefit was the saved man-hours from not having to create unnecessary
34
deviation reports, and the time that product would have to be placed in a quarantine area thereby
increasing its release time to production.
Figure 10: Digital Temperature Data
3.1.4
Sustain
During the sustain phase, the team verified the success of the implementations by measuring the
current state RMR process metrics (from the seek phase) against the future state, or the new "current
state." The results can be seen by comparing the flowchart analyses from the current state flowchart
analysis to the swim lane and future state flowchart analyses (see Appendix 2 and Appendix 4). One will
notice the drastic increase of value-added activities from 18.3% to 63.3%; Table 3 shows the increases
across the board.
VA
Tim
A
Day
Current State
Interim Future State
Future State
% Savings
Tim
Toa
Day
Tm
VA
CotNA
CotToaCs
Das$
203.78
266
92.18
54.8%
53.37
79.9%
469.78 $3,342.90
$ 3,464.00 $ 6,80E6.90
145.55 $1,623.60 $
69.0%
51.4%
814.08 $ 2,43-7.68
76.5%
64 .2%1
Table 3: Value-add Percentage Change
This is not an unusual phenomenon where many industries and companies experience similar
gains from "minor" improvements (Projects and Case Studies, 2011).
35
Also, during this phase, the new raw material release process will be presented to management
via knowledge sharing sessions. The combined knowledge sharing sessions are key in ensuring the
process will continue to run smoothly in the future, even if members of the current team transfer to new
positions or leave the company.
At least one of the knowledge sharing sessions will be used to go through lessons learned from
the raw material release IQP project. This particular session will share all challenges that the team faced
and give potential solutions to these issues so that future projects at the site level can avoid these road
blocks. One particular issue that will be shared is the division of labor resources, especially during the 30
day preparation time up to the HS' process validation.
Also, during the lessons learned, the team can express the activities during the project that went
well. A couple examples of activities that went well include performing the process mapping/kaizen
exercise early in the improvement process. This gave all team members a chance to explain their
particular role in the RMR process, thereby getting all the team members on the same page when looking
at the RMR process.
3.2
Chapter Summary
Chapter 3 focused on the four-phase Novartis IQP approach, Scope, Seek, Solve, and Sustain, and
the distinct methods used during the raw material release project in order to improve the process. The
scope phase focused on identifying the process and issues, the seek phase looked at metrics and problem
analysis, the solve phase focused on implementation, and the sustain phase ensure a smooth transition of
the process into the future.
Going forward, Chapter 4 looks at the benefits and challenges of using the four-phase problem
solving approach. Chapter 5 begins to understand how the 4-stage IQP approach can be coupled with
system dynamics modeling to create an assessment tool that can be used by management to begin to
understand how different solutions (on this project or others) will impact the distinctive areas throughout
the Holly Springs site.
36
Chapter 6 ties all of the information from Chapters 3, 4, and 5 together in order to understand the
lasting impact from a divisional level. The final chapter also looks to provide specific recommendations
based on the culture of the Novartis V&D division, and the culture at each silo site. The goal by the end
of the thesis is to provide a comprehensive report that helps NV&D become fit for the future, and get all
of the sites working together and benefitting from best practices at each site.
37
Chapter 4: The 4-Phase Approach: Benefits and Challenges
The team transitioned to the solve phase and focused on implementing solutions for "low-hanging
fruit" issues. During this time, the group agreed to establish baseline metrics on three frequently received
and used raw materials: chemically defined media (CDM), protein free media (PFM), and Buffer. Within
the site and SAP, raw materials also includes consumables and other rarely used raw materials that all fall
under the miscellaneous category in this paper.
4.1
Data Collection: Current State Metrics versus Future State Metrics
In order to accurately understand the RMR process and understand the control of the process, the
team examined a unique time frame of the process: the time between the receipt of the goods through
release of material to production. The data was analyzed comparing the before and after stages for each
of the raw material categories, as well as, holistically. Figure 11, Total Release Time of Incoming Raw
Materials, is a graph representing the total release time of all incoming raw materials (excluding
consumables) used in bulk production.
Release Time of Raw Material
400-
300-
a
200-
S100-
001-Sep-10
01-Nov-10 01-Jan-il
01-Mr-il 01-My-li
01-Jul-i
01-Sep-li
01-Nv-il
Date
Figure 11: Total Release Time of Incoming Raw Materials
The Figure above demonstrates a downward trend corresponding to a decrease in time to release
RM once received at the Holly Springs. Upon further analysis, Figures 12 and 13 compare the average
38
release time of raw materials before the team began implementing solutions (pre 01 August 2011) and
after implementing solutions (post 01 August 2011), respectively.
Probability Plot of Tiniu to Release
Probability Plot of Time to release
Normal- 95%
Normal-95%
95
952
a
9.
Mean
St3es
143.7
92-03
-4
*ne-to
Me~
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95
ao
N
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a
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17.06
53
AD
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P-Ve
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0
10-
10,
5
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0
C
5
100
200
Thise
to Redlssue
300
400
Project:
THESISPROJECT.MPJ;
Worksheet:
PreAug01.MTW;11/13/2011
Figure 12: Propability Plot of Time to Release
(Pre Improvement)
0
25
s0
75
Tie to release
Project:
THESSPROJECT.MPJ;
Worksheet:
PostAugO1.MTW;
11/13/2011
Figure 13: Propability Plot of Time to Release
(Post Improvement)
The normal probability plot is a graphical technique for assessing whether or not a data set is
approximately normally distributed (Chambers, 1983). In addition, a straight line can be fit to the points
and added as a reference line. The further the points vary from this line, the greater the indication of
departures from normality (Normal Probability Plot, 2011).
Figure 12 is a non-normal distribution of data with a 95% confidence interval and shows the
average time to release raw material is 143.7 days with a standard deviation of 92.03 showing very little
consistency between release times. When comparing Figure 12 to Figure 13, the mean of time of release
has drastically decreased to 31.87 days with a slightly more manageable standard deviation of 17.06.
Continuing with the comparison of the two data sets, the p-value of Figure 12, p<0.005, demonstrates that
the original hypothesis of standardization of the process will increase control of the raw material release
process is valid. Figure 13's p-value of 0.216 validates the hypothesis with 78.4% confidence that the
standardization of the raw material process has increased overall process control.
Since Figure 12 shows that the data is non-normal, a data transformation must take place in order to
perform a like-for-like comparison between the two data sets. The Johnson Transformation was used to
obtain a set of normal data. The Johnson Transformation uses a different algorithm than the Box-Cox
39
Transformation, and it is based on three potential functions in the Johnson transformation family, while
the Box-Cox Transformation simply finds a power transformation. In other words, Box-Cox determines if
your non-normal data, raised to a power between -5 and 5, become normal, and if the natural log of your
non-normal data is normal (How Johnson Transformation, 2009).
After performing the Johnson Transformation, the equation below was used to obtain a set of
normal data (the result is in Figure 15):
-0.860212 + 0.632444 * Asinh( ( X - 74.4472 ) / 14.3985 ), where X is the original data point.
Johnson Transforntion for Time to Release
Pahanay
Saict aTransfonmadan
PlatfrO*ighI Data
99
0.47
N
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P
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<
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z Van
1
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400
(P-Vake =
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Prabably platfrTmdenmad Data
99N
42
P-Value for Best Fit: 0.149678
Z for BestFt: 0.47
BestTransfonatim Type:SU
functin equab
Transformation
* Asinh((X - 74.4472)/14.3985)
+ 0.632444
-0.860212
50
10
-2
0
2
Project: THESIsPROJECT.MPJ; Worksheet: Pre Aug 01.MTW; 11/14/2011
Figure 14: Johnson Transformation: Pre-Improvement Data
With the updated pre-improvement data probability plot, a realistic process capability comparison
of the two data sets can occur (see Figures 15 and 16).
40
Process Capability of Time to Release
Process Capability of Tim to release
(using95.0% confidence)
1in
L
(using95.0% confidence)
UCL
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Figure 15: Process Capability of Time to Release
(Pre Improvement)
10Tota 8.43
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Project TSISPROET.MP , WicrisePmtAg 01.mTW;
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Figure 16: Process Capability of Time to Release
(Post Improvement)
When comparing Figure 15 and Figure 16, one notices the expected overall performance (success
of raw material release between upper and lower specifications) differ quite a bit. The process after
project improvements has an overall process efficiency 91.6% compared with an original efficiency of
58.8% before improvements. The efficiency delta is 55.7%. The overall process capability, Cpk and Cp of
1.00 and 1.00, respectively, in Figure 15 represents that the process fits perfectly within the specifications
limits with no room for error. The Cpk and Cp, of 1.04 and 1.04 in Figure 16 is similar to Figure 15 but
represents a hint more room for error. In turn, this shows a small improvement in the process which is
supported by the Ppk and Pp, numbers.
Ppk and Pp are the process performance indexes. They are estimates of the process capability of a
process during its initial set-up, before it has been brought into a state of statistical control. Larger values
Of Ppk may be interpreted to indicate that a process is more capable of producing output within the
specification limits (Process Performance Index, 2011). Both Ppk and Pp increase from 0.27 to 0.58 from
the original process to the improved process, respectively. This increase in Ppk and Pp,process stability are
reflected in the previous measurements.
4.2
Challenges
41
As one can see from the previous section, the main challenge in directly measuring the impact of
the raw material release project improvements is that the process was not in a stable condition at the
beginning of the project. Also, the process was not well-defined or understood by the team, and
therefore, no baseline process or metrics could be found. Without reiterating the details of the 4-step
approach, the team realized that they first had to define the process and create baseline metrics from the
team's "tribal knowledge".
After the team defined (and began to measure) the critical parameters, data analysis was
performed leading to another issue. Many statistical programs use two sets of measurements, 1) historical
(with low variability) data before improvements and 2) data after improvements, in order to correctly
compare the impact of the improvements. A steep downward trend (instead of a relatively stable
horizontal line) was present in the historical data since the process was going through a lot of changes
(refer to Figure 11). Due to this, the team must use the process performance index, Ppk and Pp, values to
understand whether the process is becoming more stable with less variability.
4.3
Chapter Summary
Chapter 4 examined the data and helped to point out that due to the high variability of the original
process, it is difficult to perform a like-to-like assessment of the before and after project comparison. A
statistical analysis of the process performance index did demonstrate an improvement with regards to
process variability and control a month after project improvements were implemented.
Since the process is deemed relatively stable, the remainder of this thesis will focus on system
dynamics modeling and how it has impacted the process. Also, it will focus on how management and
staff can better predict the impact of future decisions on the organization.
The final chapter and conclusion will be used to tie all of the information throughout the thesis
together. Also, the last chapter provides recommendations for future projects and items to consider in
order to effectively execute the next Innovation, Quality, Productivity project.
42
Chapter 5: System Dynamics Modeling
The team progressed and examined the interactions between various departments. This chapter
explores the business decisions and their impact on different individuals and groups through system
dynamics (also known as business dynamics).
5.1
System Dynamics
System dynamics is an approach to understanding the behavior of complex systems over time. It
deals with internal feedback loops and time delays that affect the behavior of the entire system. The
systems framework is also fundamental to organizational theory as organizations are complex dynamic
goal-oriented processes.
What makes using system dynamics different from other approaches to studying complex systems is
the use of causal loops and stocks and flows as seen in Figures 17 and 18. These elements help describe
how even seemingly simple systems display baffling nonlinearity (System Dynamics, 2011 and
Repenning and Sterman, 2002).
Potential
Improvement Rate
Improvements Improvement
+
+
Wmn
InpDovenents
Impact
liprove Rate
Saturation
Figure 17: Causal Loop (Feedback Loop)
Diagram
Figure 18: Stock and Flow Diagram
A causal loop diagram is a visual representation of the feedback loops in a system. The causal loop
diagram for a company working on improvements may look similar to Figure 17. Figure 18 represents a
stock and flow diagram; a stock is the term for any entity that accumulates or depletes over time, and a
flow is the rate of change in a stock (System Dynamics, 2011).
43
Complex systems are made up of a combination of causal loops and stock and flow systems. Using
system engineering to break down the whole business into smaller, more manageable arrangements, one
begins to observe the foundational feedback loop controlling many of the actions of the organization.
5.2 Supply Chain Causal Loop
Financial Pressure to
+ Reduce Surplus Inventory
Surplus Inventory
Initial raw Material
Commitments
Supply Chain
Overreaction
Likelihood of Initial
+
Shortages
Phantom Ordering
Figure 19: Common Supply Chain Reaction
Figure 19, Common Supply Chain Reaction, is taken from the research work of John D. Sterman
and Nelson P. Repenning. The same feedback loop was observed many times in the supply chain channel
at the NV&D's Holly Springs site. Beginning with the financial pressure to reduce surplus inventory, the
original design of the warehouse limited overall inventory by reducing the physical amount of inventory
that could be held. The high financial pressure (from various levels of upper management) to reduce
surplus inventory led to a decrease in the initial raw material commitments (or ordering) from site
management. In turn, when there is not enough material there is a higher likelihood of initial shortages.
During the initial three months of the internship, NV&D Holly Springs struggled with stabilizing the
necessary raw material quantities; the challenge arose because the BOM for each product had to be
finalized before the MRP/ERP systems could be setup for automatic reordering based on demand. On top
of the BOM finalization situation, the timeframe for raw material release was unknown.
44
All of those issues led to high levels of phantom ordering and site and divisional supply chain
overreaction. This overreaction to not miss an order release (or production validation run in Holly
Springs' case) led to surplus inventory. In most normal situations and at the majority of NV&D sites, the
goal is to optimize the amount of inventory in order to always meet product demand even if there is
surplus inventory that must be written off. All sites work with NV&D department heads to ensure the
sunk costs from write-offs does not exceed a certain percentage, but also, they want to ensure that there is
enough product to meet external demand and internal revenue targets.
In Holly Springs, the situation varies from the norm since the production process is still in the
refinement stage and no product is being sold, and therefore, no revenue to make up for the sunk cost of
surplus inventory write-offs. The following sections of this chapter delve deeper into the business
dynamics of the HS site using a modified version of McKinsey Consulting's Synergy Among Lead Time
Reduction Policies. This model provides a holistic view of how various decisions impact productivity (i.e.
lead time), quality, and financial metrics.
From there, the Capability Trap, from Repenning and Sterman's research, assists in explaining
the organizational impact from a process improvement project similar to the raw material release IQP
project.
5.2.1
Synergy Among Lead Time Reduction Policies
45
Shorter
Material Lead
Time
Expeditin
+
Raw MaterialAvailability
andQuality
/
~New Product
Planning/Integration
Late Buildup of
RawMateriats
Holes in Product Line
)
kS)
Shorter
Operational
Res
s e
Volatitity of Ordersto
Suppliers)
Logistics Costs
Large Backlog Early in
ProductLife
uoltilityof
ChannelOrders
DemandForecast
Accuracy
+Lend Time
PhantomOrders
ortr
Order-toReeep
Time
+
Ti mee
SludgeInventory
RawMaterial
Costs
Preitliy
+osts
ExcessCapacity
CharmelaSafety
Inventoty Write-down at
End of ProductLife+
Market Share
+
Net Costs
Figure 20: Synergy Among Lead Time Reduction Policies
Figure 20 is aptly named Synergy Among Lead Time Reduction Policies because this feedback
loop is a detailed view demonstrating how various lead-time improvements impact the delivery time of
material. McKinsey & Company Consulting generated the original version, and the above model in
Figure 20 is a modified version to better illustrate the NV&D Holly Springs site cost structure at the time
of the project.
Holly Springs raw material release process faced several challenges all focused on establishing
basic lead-times for various processes, thus, enabling various departments to better understand their
processes and provide accurate material delivery dates. Pre-determined lead-times thereby impacts
inventory levels, resource needs, confidence in the process, and net costs.
Original state lead-times were established and the team understood the need to reduce lead-times.
In order to accomplish this, Figure 20 accurately portrays that the IQP team needed to focus on three
46
specific types of improvements: shorter material lead times, shorter operational response time, and shorter
order-to-receipt time. Figure 21, Lead Time Reductions in Raw Material Release Process, displays the
relationship of RMR process improvements with the three types of lead-time reductions.
Material Lead Time
Order-to-Receipt Time
Operational Lead Time
Figure 21: Lead Time Reductions in Raw Material Release Process
5.2.2
Organizational Impact from Process Performance
The team identified bottlenecks and implemented solutions designed to resolve many of the
process halting challenges. During these implementations, the team continually thought about solutions
that would be sustainable after reviewing Figure 22, Organizational Improvement Theory.
The Organizational Improvement Theory causal loop demonstrates the relationships between
several factors including management's performance expectation to current process performance which
leads to pressure (or demand) for improvements. The diagram also incorporates certain limiting factors
such as resource constraints and the relationship between work speed and error rate.
47
Performance
Expectation
Process
Performance Gap
+
Process Performance
B
+
Demand for
Improvement
.
Improvements
Under
Development
Improvements
in the Current
ImprovementSte
Completion
Resource Demand for
Improvement Tools
Error Rate
+
Improvement Work
Error Rate
+Work Speed
Resource Ratio
Available Resources
Figure 22: Organizational Improvement Theory
5.3
Summary of Modeling Results
In designing and modeling the Novartis V&D Holly Springs raw material release process, the
Novartis IQP problem solving system is an effective methodology for identifying and solving large scale
organizational issues. While the problem solving system is useful, Novartis' leadership should
incorporate process improvements from IQP into common daily tasks.
As one can see in the Organizational Improvement Theory diagram, processes improve through
exogenous pressures to meet specific deadlines and corporate management. The workforce meets these
pressures by using process shortcuts, decreasing quality, or with their management's support to start a
specialized improvement project. But once the necessary objective is achieved and new goals are
established, the workforce re-directs their attention to the immediate issue at hand.
48
Investment
Capability
Capabait Erosion-,
Reinvestment
Work Smarter
Pressure to Improve +
CapabRity
Desired
Performance
Figure 23: The Capability Trap (Repenning and Sterman, 2002)
This causal loop reaction is demonstrated through Repenning and Sterman's The Capability Trap
(Figure 23). As one can observe, the workforce focuses their attention on the issues that are ranked
highest priority among their management. When high process performance is not necessary, there is a lax
in the pressure to work on the task and improve (or maintain) the capability, and therefore, the overall
investment of resource, time, and money is reduced, thereby reducing the overall capability of the
process. And while this thesis is based on work performed at Novartis V&D in Holly Springs, the
Capability Trap is a common occurrence in many processes and companies. If management wants to
maintain high process performance and productivity, attention must be given to the capability trap
phenomenon. In the conclusion section, specific recommendations are provided to Holly Springs'
management.
5.4
Chapter Summary
Chapter 5 introduced system dynamics modeling and explained how it could be used to
effectively describe the causal feedback loops that affected the raw material release process. The
improvement to the raw material release process resulted in increased productivity and increased quality
due to pressure from management and alignment of project goals. At the same time, the Capability Trap
49
went one step further into explaining the importance of managements continued involvement to ensure
the process does not fall back into its old ways of inefficiency.
The final chapter summarizes all of the results and observations and provides recommendations
to Novartis about maintaining the high efficiency raw material process. The given suggestions are based
on the Novartis V&D Holly Springs' management and culture, but are designed for application at the
divisional level to help Novartis Vaccines & Diagnostics perform at a higher potential.
50
Conclusion and Recommendations
The previous sections explained the ability of an organization to use a cross-functional team to
recognize a systematic issue, identify root causes, and effectively address the problem in a timely fashion.
Effective collaboration between the cross-functional team, Novartis management, and the MIT network
allowed for a complete analysis of the Novartis Vaccine and Diagnostic IQP methodology through
business modeling.
Combining these two approaches lead to a holistic examination and identified key factors in the
continuous improvement process that Novartis management should acknowledge in order to sustain high
productivity and quality in the future. The remaining sections of this thesis provide final observations and
recommendations to management at Novartis in order to continually achieve the high level of quality the
company was built upon.
Novartis V&D and the Holly Springs, NC Site
Observations at the Holly Springs Site
Novartis Vaccine and Diagnostic built the Holly Springs, NC site in direct response to a request
from US HHS. The site and equipment layouts and much of the management came from other NV&D
sites, but each site creates its own unique culture as employees and management become more
established. The author witnessed a positive transformation of employee morale and site culture over the
internship. Some of the culture changes were the result of a change in management, but much of the
morale improvement was in a direct response from the site unified around a common goal: produce and
release the first batch of influenza vaccine to HHS.
Teresa Amabile and Steven Kramer explain work morale best in their January article from
McKinsey Quarterly, "If high-level leaders don't appear to have their act together on exactly where the
organization should be heading, it's awfully difficult for the troops to maintain a strong sense of purpose"
(How leaders kill, 2012). At the beginning of the internship, over 400 projects existed throughout the
site. Employees were placed on one or more project teams, and asked to accomplish a specific goal. But
51
due to the large amount of projects and lack of resources for project management supervision, employees
focused their time on the projects getting the most attention at the time.
As soon as the pressure was off, the employee turned to the next project, but rarely saw the
completion of any of their projects. In practice, we see too many top managers start and abandon
initiatives so frequently that they appear to display a kind of attention deficit disorder (ADD) when it
comes to strategy and tactics. They don't allow sufficient time to discover whether initiatives are
working, and they communicate insufficient rationales to their employees when they make strategic shifts
(How leaders kill, 2012). This same phenomenon aligns with The Capability Trap business model.
Recommendations for Novartis Vaccines & Diagnostics
"Strategic ADD" appears so frequently and seems to have no solution, what can be done? Each
company culture is different, but the recognition of degradation of employee morale is key in the success
of a company and begins at the management level. The first recommendation is for management to
acknowledge the importance of working together to find a unified objective. From there, they need to
agree that sending one united message to their individual departments, and not wavering from this
message, is just as important as the goal.
The above advice is not ideal in every situation and is in no way easy; but management's goal
should be to show coordination and support within the organization. Without those two elements, people
stop believing that they can produce something of high quality. This makes it extremely difficult to
maintain a sense of purpose (How leaders kill, 2012).
In the case of Novartis V&D Holly Springs, NC, management continually emphasized the
importance of IQP. Many managers included IQP training on employee's annual performance objectives,
but during the reviews, some managers overlooked that objective in the overall rating due to various
reasons (i.e. employee was asked by higher level management to fire-fight various problems). This
"flexibility" of IQP training was seen at all levels of management, and therefore, over the years,
employees stopped taking IQP seriously.
52
The second recommendation builds on the first, and it is that quality and training are vital.
Novartis is known for hiring only the best and the brightest, where pay is fully negotiable if they can
obtain the best individual for the job. With that said, a sense of "you're the best and the brightest, so we
don't need to train you" exists throughout all of Novartis. The preferred method of training is "on-thejob" in a "sink-or-swim" type of fashion.
The author comes from the highly regulated biomedical device industry. In that industry, 90% of
all processes are performed manually included inspection. Manual processes require high levels of
training and certification with months dedicated to side-by-side training between the employee and a
trainer. While the vaccine/biotechnology industries are highly automated, training is still necessary since
automated machinery breaks down and needs individuals with technical skills to fix these instruments.
Training in the vaccine industry should require individuals to the company/site/industry to work
in the clean room around the production equipment. The training should last the length of time it takes a
full batch campaign to run through the process. Obviously, the training scope will vary based on a new
employee's previous work experience, and their role in the company. Again this may sound ideal in
theory, and is very difficult to implement in reality, but this provides two imperative skills to all new
employees: 1) introduction to company culture and processes, and 2) introduction to the process and
problem-solving system at the company.
In return, a company like Novartis gets to have an "outsider" examining their process and looking
for process improvement opportunities. Also, Novartis will better understand the employee's strengths
and weaknesses, hopefully leading the company to encourage the employee to take courses to improve
their weaknesses.
The third, and final, recommendation is again a general recommendation and would assume the
first two recommendations are implemented. Also, the final recommendation is the largest, and toughest,
to implement as it calls for a re-organization of company structure. Currently, Novartis Vaccines &
Diagnostics is organized into two groups, Technical Operations (TechOps) and Quality. There are two
53
group heads, one for TechOps and one for Quality, and they report directly to the President of Novartis
Vaccines & Diagnostics. Looking at TechOps, a major split occurs under the head of TechOps into a
variety of departments ranging from R&D, Production, and many other groups. The challenge begins at
the departmental level. Large portions of employees focus on project work, but they are still required to
aid when an issue arises. In the end, the employees' time is stretched too thin leading to frequent project
priority changes, employees being overworked, and employee frustration.
The last recommendation is to consider having two separate sub-departments, daily operations
and continuous improvement, within production, global, and quality. The current organizational structure
would lend well to having a sub-department that is only focused on daily operations. Their goal is to
support your day-to-day running of the plant from the production, global, and quality standpoints. The
other sub-department, continuous improvement, could report into the global IQP head, but is site based.
Individuals in this department are responsible for creating working guides for general processes, looking
for ways to improve current processes, as well as modeling business dynamics to understand the longterm impact of changes.
As one can see, this is a large undertaking and both sub-departments must work together, but
some of the benefits can be seen below:
*
Employees and managers understanding their job responsibilities
e
Employees and managers taking accountability for specific tasks
*
Employees and managers understanding their priorities in a logical manner
*
Better management of projects (current and in the pipeline)
e
More effective improvement of current process
e
Better communication between quality, production and global groups
*
Helps management identify and align yearly performance goals (based on past achievements)
After the two groups are implemented and stabilized (individuals and managers understand what
is expected of them), Novartis V&D global management most likely will notice an environment more
54
willing to collaborate, and thereby, leading to best-in-class production of all their products at any of their
sites.
Novartis A.G. International
Novartis A.G. prides itself on wanting to discover, develop and successfully market innovative
products to prevent and cure diseases, to ease suffering and to enhance the quality of life, while still
providing shareholder return that reflects outstanding performance and to adequately reward those who
invest ideas and work in our company (About Novartis: Our mission, 2011).
IQP Program Expansion
In order for Novartis to successfully continue its life saving mission, it must ensure all divisions
are working together at the highest productivity and quality levels possible. Novartis' IQP program was
specifically designed to share best practices between sites within a division; the IQP program could have
tremendously greater impact by instituting a Novartis A.G. Global IQP program. The main goals of the
program would be to identify the root-cause of issues, create solutions for particular challenges, validate
the solutions through divisional pilot programs, and then institute the solutions to the entire network.
The raw material release project that was the North Star of this thesis and the IQP rollout at the
NV&D Holly Springs site is a prime example of a process that could be optimized between the divisions
(and ideally, between all Novartis sites). The receipt of product process is not a product, location, or
region specific situation and happens at hundreds of thousands of manufacturing companies every day.
Yet, the process varies tremendously between each location. The author's previous experience in a
warehouse demonstrates that receipt of product is not simple, but the general business process can be
optimized through the network. Once a general raw material release process is established, new (and old)
sites can align to the new process, and incorporate region specific modifications (i.e. European work
hours are different from Asian and Western world hours).
Final Considerations
55
With tougher international regulations in place, standardization is key at a multi-national
manufacturing company. Novartis A.G. management has focused on healthy competition between their
varying sites, which has paid off tremendously to their shareholders. But as the FDA becomes more
stringent and expects quality system controls within and between sites, Novartis International
management must encourage collaboration over competition. Only Novartis corporate management can
express the importance of collaboration because,
In conclusion, Teresa Amabile and Steven Kramer sum it up best, "As an executive, you are in a
better position than anyone to identify and articulate the higher purpose of what people do within your
organization. Make that purpose real, support its achievement through consistent everyday actions, and
you will create the meaning that motivates people toward greatness (How leaders kill, 2012)."
56
Appendix 1: Current State Raw Material Release Process
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58
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62
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