Sustaining Operational Excellence Improvements

A conversation with Wendy A. Kouba, Vice President, Operations Management, Wyeth

Last week, Pfizer, the world's largest biopharmaceutical company, officially completed its merger with Wyeth, which produces some of the world's top-selling medicines, including Enbrel for rheumatoid arthritis and Prevnar, a vaccine against pneumococcal disease. Wyeth's manufacturing organization, known as Technical Operations & Product Supply (TO&PS), has been producing more than 4,800 SKUs manufactured by about 18,000 employees at 28 plants in 13 countries. For several years, TO&PS realized productivity improvements using traditional operational excellence methods, including Six Sigma and Lean manufacturing. Almost two years ago, however, Wyeth faced a powerful threat. Wendy Kouba, vice president of operations management, recently explained to BioPharm International how Wyeth overcame the challenge using a holistic approach to operational excellence that has transformed its global manufacturing network.
Q: What happened that forced Wyeth to revamp the way it approached operational excellence?
A: Like all pharma companies, we were faced with generic competition, a changing regulatory landscape and declining sales. But in late December 2007, our situation changed dramatically when we learned that a generics company planned to launch its own version of one of our blockbuster products-several years before our patent expired. In response to what we anticipated would be a dramatic revenue shortfall, Wyeth initiated an aggressive program to reduce costs by $1.4 billion.

On the global manufacturing side, we realized that we had to make dramatic changes to deliver our portion of that savings and we wouldn't get there via a traditional, incremental approach to cost savings. We needed to transform the way we thought and behaved across our site network.

Q: So what did you do?
A: We set an aggressive and highly aspirational goal, to reduce operating costs by 25% while maintaining quality and supply standards. We also committed to doing it in a way that would enable the organization to build the capability to continuously improve.

Q: Why 25 percent?
A: Mike Kamarck (the president of TO&PS) and his leaders chose 25 percent because it was psychologically significant. Any leader can easily reduce costs by 5 or 10 percent, but 25 percent got people's attention pretty fast. They quickly realized that achieving the target would require fundamental changes in the way everyone at our sites thought about their work. We needed a real transformation across the global manufacturing network.

Q: So how did you do it?
A: We adopted a holistic approach that focused on three key elements, or levers (Figure 1). The first is the operating system-making technical changes by adopting elements of Lean and Six Sigma. Second, we focused on the management infrastructure (MI). MI includes the formal structures, processes, and systems through which the operating system is managed to achieve business objectives, and deliver results.

What we have found critical in MI is the notion of how-and where-leaders spend their time. (Figure 2). This is about lean leadership. It's our version of Gemba, or "where the truth lies," and it's all about getting leaders out of their offices and focused on supporting and engaging people on the floor.

The third element, mindsets and behaviors, is driving a continuous improvement culture by doing two things: building the capability of the organization through a just-in-time approach to learning, and coupling that learning with engaging the hearts and minds of everyone in the plant.

Very simply, with this holistic model, we are blending deep technical change with cultural change-and then enabling our site leaders to run with the tools and approach to drive breakthrough improvements locally.

Q: How is that different from traditional operational excellence initiatives?
A: The critical differentiator is changing the way people think and behave. We knew that real, sustainable change could only happen if local leaders made personal changes in their own thinking and behavior. Once they realized what they had to do as leaders, they could engage others to take ownership of process improvements and drive change. Leaders began to talk about step change improvement rather than incremental change, and they understood their unique position as role models for that change. Organizational transformation began with them as individuals. They changed their own actions, and productivity increased and the organization became more efficient. Cost savings became a natural byproduct of the process.

Q: How did you get your leaders to change?
A: We started with a comprehensive diagnostic at each site. Headquarters-based OpEx leaders partnered with their OpEx colleagues at the site level to assess the value streams of the plant and 100 percent of the budget and headcount, as well as key performance indicators such as overall equipment effectiveness (OEE).

We also conducted qualitative research, including focus groups and personal interviews with cross-sections of site employees. Then we compiled all the data and took site leaders through a structured process of reading, absorbing, and discussing the information the diagnostic reveals. This can be a painful process, but it is effective. After the site leaders completed the diagnostic process, they worked as a team to develop a transformation roadmap for their site, which included comprehensive training for leaders at all levels, starting at the top of the house with the site leadership team.

As part of this, we have made a tremendous investment in learning and building the organization's capability. In fact, we have developed more than 40 training modules for site leaders, front-line leaders and those who are participating in mini-transformations.

Q: That's impressive, but how do you turn information from the diagnostic into real cost reductions?
A: Yes, that's the test, isn't it? The diagnostics identify opportunities for cost-cutting and process improvement. The site leaders make a decision in terms of what improvements to go after first, and they then launch mini-transformations in those specific areas. "Mini-T's", as we call them, are short, sharply focused efforts in one particular area that run for about 12 weeks and literally transform the way we work in that area. Mini-T's are followed by a "continuous improvement" phase that is literally never-ending.

For example, at our vaccines plant in Pearl River, New York, we conducted a Mini-T in the fill-finish area (Figure 3). In just 12 weeks, the Pearl River team decreased change-over time from 14 hours to 8 hours, and they are still improving today. As a result, they increased capacity by 78 percent with a 12 percent reduction in headcount per shift, and went from completing 6 or 7 fills per week to an average of 8 or 9 fills per week. All of that equates to a dollar savings of about $23 million.

Q: How did they do it?
A: They did it by reducing change-over time, and reducing the need for headcount and increasing capacity, which has enabled them to insource work that was previously being outsourced. Supervisors held daily shift huddles to listen to ideas and implement them quickly. The team focused on root causes and problem solving, and people on the shop floor stopped thinking of change-over time as break time. Now, when it's time for a change-over, they think of themselves as a pit crew on a racecar track, completing change-overs much more quickly and efficiently. That's what I call a change in mindsets and behaviors.

Q: How does that kind of motivation translate to your other plants?

A: We are building capability across our site network and transforming leaders at all levels. Our supervisors now think of themselves as coaches. Instead of coming onto the shop floor to check work, they are coaching people and listening to their ideas. They are using performance boards to plan for work, share information, and generate ideas. As a result, our sites are becoming more competitive.

In fact, we are even seeing a new, healthy competition develop among our sites. It's almost like sibling rivalry. They absolutely understand that the future of their sites depends on their ability to transform and be cost-effective. The mindset of leaders and front line employees has changed dramatically. Supervisors now are expected to "get out and Gemba"-to go out and find where the truth lies. One recently said in a focus group, "I now ask much more than I direct." Another supervisor said, "We used to focus solely on not making mistakes; now we focus on where and how we can improve."

Q: That sounds great. How can you sustain that level of engagement?
A: The only way to sustain these operational gains is by becoming an active learning organization and building the capability of your people, while at the same time engaging their hearts and minds. It's not just about business anymore; it's personal. That's the hardest part of any transformation and it's well worth the effort, because it's the real key to sustainability.

In fact, in his book Execution, Larry Bossidy wrote, "The culture of a company is the behavior of its leaders. Leaders get the behavior they exhibit and tolerate. You change the culture of a company by changing the behavior of its leaders." At Wyeth, our leaders have changed their mindsets and behaviors, and we are already seeing the benefits.

Q: How do you know you're right?
A: We know what works at Wyeth. We're well on our way to achieving our aspirational goal of a 25 percent reduction in operating costs, and lately we've been wondering if perhaps we should have aspired higher. Jokingly, the team speculates that maybe we should have set our target at 30 or even 40 percent!