successful culture change with lean six sigma
TRANSCRIPT
Successful Culture Change with
Lean Six Sigma November 15th, 2005
Jeffrey T. KucVice President, Global Process Improvement
Copyright © 2005 Alpharma Inc. All rights reserved.
2Copyright © 2005 Alpharma Inc. All rights reserved.
Agenda
• Alpharma – Our Global Business
• The Pharmaceutical Industry today
Understanding your base line, a situational analysis
• 6 Elements for Effective Culture Change
• Alpharma’s Deployment of Lean Six Sigma
• Have we changed yet?
• Show me the Money!
• No more Dolphin Stories!
3Copyright © 2005 Alpharma Inc. All rights reserved.
Alpharma - Worldwide
• A global company generating approximately $1.3 billion in revenues
• Alpharma is one of the top ten largest human generics pharmaceutical companies in the world
• Employ over 4,200 multinational associates in over 20 countries
• 1903 to 2003 - Celebrating a century of making medicines accessible
• Conduct Business in more than 70 countries
• Sell over 500 products
• Headquarters
New Jersey, USA
Oslo, Norway
Revenues by Region
4Copyright © 2005 Alpharma Inc. All rights reserved.
Multinational Sites and Offices in Over 50 Locations
5Copyright © 2005 Alpharma Inc. All rights reserved.
• Alpharma market positions in human generic pharmaceuticals in the U.S. and Europe:
#1 in the UK
#2 in Pan-Nordic countries
#7 in the US
• Animal Health Division - Worldwide Leader in Development of Medicated Feed-Additives
• International Generics - One of the Broadest Pan-European Generic Portfolios
Over 260 products - Rx and OTC
Growing Asian / MEA Businesses
China, Asia-Pacific, Indonesia
• Branded Products – Kadian - A Growing US Pain Franchise
Sales of $62 million in 2004
• Active Pharmaceutical Ingredients (API)
Worldwide leader in fermentation-based APIs
Active Ingredients for finished products (e.g. Neosporin tm)
Leading manufacturer of antibiotic APIs:
Bacitracin / Polymyxin /Amphotericin B (inject) / Vancomycin
Our Businesses
Revenues by Business
6Copyright © 2005 Alpharma Inc. All rights reserved.
Understanding your Baseline/Starting Point
A situational analysis
7Copyright © 2005 Alpharma Inc. All rights reserved.
The Way It Was!
• Icons of industry Merck, J & J, BMS, GSK, Pfizer
• Full market absorption of product
• End Customer willing to pay any price
• Consistent HIGH Gross Margin & ROI
• High cost barrier to entry; R & D, Lengthy product development timelines, Expensive sales channels
Very successful business models - Why Change!
8Copyright © 2005 Alpharma Inc. All rights reserved.
“Culture Change becomes more difficult as organizations become more
established and successful. Early success can be a hindrance to needed change.”
Kotter and Heskett (1992)
9Copyright © 2005 Alpharma Inc. All rights reserved.
Pharmaceutical Industry Today
Brand Companies
• Losing patent protection on existing products & Limited New Product pipeline
• Globalization of business model – Cross Border Competition
• Industry Consolidation
• Pressure from Generics Manufacturers
• Heightened levels of compliance and associated cost?
• Hierarchical Organizational structures hinder innovation & communication flow
• Saturated sales channels
• Unsure how to bring about change and when attempted PAINFULLY slow Generic Companies
• Lower cost barriers to entry breeds fierce global competition by allowing new entries into marketplace
• Price Pressure – Customer Reverse Auctions yield shrinking margins
• Creative Innovator Co. patent extension tactics
• Increased cost of Compliance when refusing to change operating processes
• Narrow Sales Channels – Limited Free market activity
Dynamic changes are occurring in the Pharmaceutical Industry
10Copyright © 2005 Alpharma Inc. All rights reserved.
“You need to improve, other High Tech industries have achieved enormous productivity gains in manufacturing in the last 25 years. We should expect nothing less from the Pharmaceutical Industry.”
National Product Recalls – 176 in 1998, 258 in 2001, 354 in 2002
0.0001% of Semi Conductors are discarded for quality reasons during manufacturing
FDA Commissioner Dr. McClellan
11Copyright © 2005 Alpharma Inc. All rights reserved.
Alpharma Focused on the 6 Elements of Effective Change Management
• Burning Platform
• Top Down Driven
• Robust Planning
• Communication
• Adequate Resources
• Execution Focus
12Copyright © 2005 Alpharma Inc. All rights reserved.
Burning Platform
• Our Burning Platform was clear
Major revolution within Pharma Industry
Changing Market dynamics unlike anything seen before
Greatest rationale for change, ALO’s own poor performance!
High Inventories
Poor Customer Service levels
Degrading Financial results
13Copyright © 2005 Alpharma Inc. All rights reserved.
Top-Down Leadership
• We Benefited from Top Down Leadership
Executive session to gain consensus
Top Team had Past experience as Green Belts & Black Belts
Indoctrinate the Formal & Informal Leaders – Awareness Training
Visibility and Public Support Throughout the Process
Investment of time and resources
14Copyright © 2005 Alpharma Inc. All rights reserved.
Planning
• Recognized the Need for Initial Planning Recognition of ineffective previous internal program rollouts
Recognition of resistance to change because of past successes!
Critical Support from our Partnership with Six Sigma Academy
Global Operating Reach
History of successful LSS deployments (knows the pitfalls)
Master Consultants have actually worked as BB’s & MBB’s
Blended in with the ALO team and have superbly coached our project and leadership teams
Outstanding training techniques and capabilities
Break Through Value contract showed real commitment
15Copyright © 2005 Alpharma Inc. All rights reserved.
Communication
• Communication – “Internal Marketing” Soft kick off of LSS Deployment
Letting Results speak for themselves
Understated communication – Pull Theory
Associates connect with different communication channels Multi pronged approach
• PowerSteering
• Awareness Sessions
• Email Updates
• Town Halls
• Staff Meeting Reviews
• KPI alignment
16Copyright © 2005 Alpharma Inc. All rights reserved.
Resources
• Adequate Resources Dedicated
Core Deployment Team established
Previous Plant Managers, Change Management expertise, Communication resource
20 Black Belts, 91 Green Belts, 100 Project Champions Trained Globally
Focus on full-time resources
Dedicated Finance and IT participation
Full time resources have a quicker return on investment
17Copyright © 2005 Alpharma Inc. All rights reserved.
Execution
• Execution
#1 reason why Global Deployments, Culture Change Initiatives, and Executives Fail – Lack of Execution Focus
Requires continuous attention and information to recognize success and overcome challenges
Continuous tracking and reporting of results to date, payback, and other program metrics
18Copyright © 2005 Alpharma Inc. All rights reserved.
Critical Responses to Each Element
Ongoing reviews of process, progress and results.Execution Focus
Re-investment of proceeds into the program. Certification and BB effectiveness tracking.Adequate Resources
Centralized availability of tools, methods, best practices. Visibility of results.Communication
Enlisting Internal and External expertise. Continuous review and revision.Robust Planning
Engagement of leadership early and often. Ongoing visibility and reporting of progress and success.Top Down Driven
Communication of changes in the Pharmaceutical industry. “Business as usual” not good enough anymore.Burning Platform
PowerSteering provides key support throughout!
19Copyright © 2005 Alpharma Inc. All rights reserved.
2006 Deployment Challenges
• Lack of alignment in LINE OF SIGHT Key Performance Indicators
Greater focus on 2006
Financial targets established by site and function
Focus on tracking in PowerSteering
• Struggling Project Pipeline
Global plant footprint too large
Greater focus on Project Champion training
• Revolutionary Changes of Pharmaceutical industry
• Pockets of “Support” not Leadership!
20Copyright © 2005 Alpharma Inc. All rights reserved.
Impact of LSS on our culture
• Teaching discipline, accountability, and business maturity
• Creates a common platform / language for sustainable change
• Establishes mindset of continuous improvement
Creates a feeling of “Esprit de Corps”
• Forces us to make data driven decisions
• Highlights where we have broken processes
• Forces us to focus on the Customer, the driver of our business
• Gets people fired up!
Process Improvement is becoming part of our operating DNA
21Copyright © 2005 Alpharma Inc. All rights reserved.
Results (ROI) – Show me the Money!
• Deployment Status
20 Black Belts, 91 Green Belts, & 100 Champions Trained Globally
The LSS Deployment has provided over $ 14.8 Million in benefits
72 Active Projects started in Alpharma, with over 66 closed to date
• Manufacturing site results
70% Reduction in Production cycle time
RM dispense to FG release from 86 to 25 days.
Reduction of 45 Supply Chain FTE's
66% Reduction in WIP Inventory
Batches “ Right the First Time” up from 69% to 95%
Plant product availability up from 84% to 99%
48 Hour Customer Service Levels up from 69% to 95%
YTD Cost of Deployment has returned 5:1
22Copyright © 2005 Alpharma Inc. All rights reserved.
Our Biggest Success No Dolphin Stories
23Copyright © 2005 Alpharma Inc. All rights reserved.
Questions?
Contact Information:
Jeffrey T. KucAlpharma Pharmaceuticals
14 Commerce Drive, Suite 301Cranford, NJ 07016
Telephone: 908-653-8104Fax: 908-653-8206