Thursday, July 22, 2010

Manufacturing Management Practices




What skills and responsibilities do managers need for API manufacturing?



By Cliff R. King, Ph.D.



Some general managers may think they need only an accountant and an attorney to run a business, but if you have risen through the technical ranks, you know a lot more insight is required to successfully manage an API facility. Sure, accounting and legal services are two very important items in your toolbox. Both functions tend to operate in a conservative fashion and serve to mitigate or limit risk. However, businesses do not tend to grow without taking risks. General Patton was quoted as saying, "Take calculated risks. That is quite different from being rash."


So, the accounting and legal functions should be asked for the extent and degree of risk acquired by some particular business action. By analogy, the API development chemist might say, "I got it! You want to know the scope and limitation of each reaction in the synthetic sequence, the hazards involved, and whether the process is sufficiently robust to produce the desired outcome every time!" Exactly.

So how does the general manager integrate many of the truly business-function issues with the technical operations of the company? Often barriers exist well beyond the cherry paneling of the front office echelons, the laboratory bench-top and the shipping dock. Some managers may work from a holistic approach; on the surface this sounds good, but complex chemical operations, rigorous quality standards and regulatory mandates require a more analytical and definitive approach. There are always the clich├ęs to justify the "soft" people skills or the "hard" analytical strengths, such as "Leaders lead people and managers manage things."

However the current market environment demands that successful businesses -- and their general managers -- must have strong combinations of hard and soft skills. It can be a difficult balancing act. As the deleterious effects of a one-world economy challenge the standard of living and the quality of life for the U.S. workforce, higher productivity, faster delivery and cheaper production costs appear to be the remedies expected by company investors to assure a return. To even the most casual analyst, these expectations approach an asymptotic limit and certainly a point of diminishing returns. How does the general manager retain effectiveness during this market turmoil? How does one hang on until some level of prosperity returns? What disciplines can managers exercise to place the company in position for the best opportunity for success?

One familiar, yet simplistic, refrain in the management ranks is also prophetic: "I'd rather be lucky than good." Being in the right place at the right time can often bring unexpected rewards. However, fortuitous geography and timing is not a good substitute for a practical business plan. This article discusses how the general manager balances risk with opportunity, and what planning, organizational, implementation and control behaviors will add value to the enterprise. It is definitely important for the effective general manager to have a disciplined review cycle to address each of these activities to optimize the return on the assets for which they have been entrusted.

The Organization



There have been numerous comparisons between business activities and military operations ranging from Clausewitz and Sun Tzu to Guerrilla marketing. As our nation is in the midst of an "economic war," perhaps these comparisons should receive more serious consideration, but that discussion is beyond the scope intended here. However, military organization based on the "PITS" model is worth a few comments. "PITS" is an acronym for: Personnel, Intelligence, Training (and Operations), and Supply. No doubt, general managers have the equivalent of these functions along with the accounting and legal teams at their regular staff meetings. For instance, the personnel department representative may have fairly defined responsibilities (benefits, hiring, labor law, etc.), while competitive Intelligence may include strategic marketing, sales force observations and information gleaned from the company's technical leadership. The Training and Operations activities can often be well defined in a manufacturing environment, but when the R&D function is included, the responsibilities take on a potentially broader and long-term perspective. Similarly, the Supply function can often have a "liberal" interpretation; in its usual business context it contains all of the logistical components needed to manufacture and ship APIs. This includes receiving raw materials, scheduling production and shipping the drug substance. Naturally, the thread (or titanium-linked chain) of regulatory requirements runs throughout this process and may include everything from import laws to DOT regulations and of course, the FDA's GMP guidances. Systematic processes and SOPs will assist in preventing these activities from becoming a "new event" every time the name on the product changes or an employee leaves the company.

Organizationally, nearly every company has the same standard departments or functions. What is intended here is to present a way to think organizationally that delivers the desired results, and a way to clearly understand the parties responsible for their delivery. A general manager should never hear that items have dropped through the cracks or someone did not know he was responsible for a given task. With the "general staff" approach, the team should recognize there is "no excuse, sir"! Individuals' titles may represent the traditional business hierarchy -- e.g. director of manufacturing -- but the general manager would be well served to cross-match their responsibilities to the fundamental requirements contained within the PITS model.

The Plan



A good routine to adopt is the yearly exercise of detailing a rolling five-year business plan. The business plan should encompass more than a re-hash of the annual report and financial statements; it needs to include a tactical and strategic assessment of the enterprise--kind of a "state of the union" address, minus the political positioning. Ideally, the business plan should be a compilation of the short- and long-term perspectives of the organizational PITS components discussed above. The Intelligence function should clearly integrate business development activities with market trends and production capability. Extending this, an evaluation of the competitive landscape needs to be aligned with tactical marketing activities, the sales force's goals and the forecast(s). Obviously, parts of this plan overlap among the different staff functions. The general manager should make it clear that the staff should reach consensus on the issues that interface between functions.

In an API manufacturing environment, the Training and Operations function would likely contain the capital expenditures anticipated throughout the year along with the longer-term expenditures expected for subsequent years. Large expansions, or planned refurbishments should include an Economic Value Added (EVA) or net present value calculation for each project. Naturally, within a GMP environment (and/or facility where controlled substances are prepared), employee training for regulatory compliance is essential. The operations management also needs to be appraised of R&D projects or business prospects that may impact plant capacity or scheduling.

The plan can also serve as a repository for the management's top-level thinking and to assist the company in being a learning organization. The business plan is the company's vision and description of how it will not only survive, but also thrive in a competitive marketplace. Therefore, the plan should include a heavy dose of the operating philosophy for which each staff function should be committed (and held accountable). To continue with the military organization analogy, the company can respond quickly and flexibly to an evolving economic battlefield when the top leadership is of one mind. Of course, the plan includes the operational doctrine that transmits the vision into a manufacturing reality and each staff function should be satisfied. In connection with the general manager's soft skills, it should be noted that leadership does not depend upon the democratic process. If the overall plan consists of the sum of the (staff function) parts, the general manager has a responsibility to assign different weights or levels of importance to each as reason and conscience dictate.

As mentioned in the introduction, the accounting and legal functions invariably tend toward a conservative, status quo approach. Decisive leadership may limit the weighting placed on the "avoid risk at all costs" factions and balance the equation in favor of reasonable risk for a favorable return. Indeed, risk avoiders often use wild speculation to introduce fear into an organization instead of providing inspired leadership to assure the company receives good advice on difficult issues. The discerning general manager may tolerate the "sky is falling" positioning for a limited duration, however eventually, the creative imaginations of these staff members are not adding value to the company's business objectives.

In summarizing this section, the general manager needs to assemble a business plan meeting tactical and strategic objectives. Independent of how a company is organized, the company has invested in assets, resources and people--and some of those people (the staff) are responsible for leading and managing different portions of the company's investments.

It all comes together with the general manager, whose responsibility is to fine-tune each company instrument into the perfect ensemble.

Implementation



With the business plan in-hand, implementation should be easy, right? It rarely is, because in chemical terms, entropy takes over. One of management's main duties--at all levels within a company--is to minimize the natural tendency toward higher entropy (disorder). At the general manager level, the implementation of the business plan essentially consists of allocating sufficient resources to accomplish the objectives. The plan might be neat and tidy, but as the battle dynamics evolve, allocating resources and reserves, changing schedules and possibly modifying the objectives have ripple effects and consequences throughout the company. Entropy can rule (read: "ruin") the day if decisive leadership doesn't step in and correct the problem(s).

As an example, let's take a look at the problems encountered by the supply staff function when the plan's implementation runs afoul. Let's focus on Supply as the purchasing organization. The plan indicates a manufacturing forecast and schedule for which Purchasing responds by ordering raw materials. Unexpectedly, Manufacturing reports that the equipment required to produce the API is in need of immediate repair (e.g. repair of a glass-lined reactor). The process has been validated using that particular reactor train and equipment, so now QA/QC will have to assure the reactor is clean before starting the batch. The client has formulation and fill capacity scheduled and reserved--they expect API delivery on-time. The business development unit negotiated a premium from the client for on-time delivery. The raw material is temperature and time sensitive and has to be shipped from a distant location; its timely use is imperative. R&D is asked to evaluate if the raw material can be stored for a longer period and still be good. QA/QC will have to run additional tests for the R&D function to demonstrate material would pass release specifications if used. Perhaps waivers would have to be written and approved. Then, the manufacturing manager gets chastised by nearly everyone for "creating" problems. You get the point; it gets ugly quickly and absolutely no one will be happy. It is easy to say, "Things like this happen," and that people should be accommodating. Then you have to hear from the "risk avoiders" (discussed above) saying, "I told you this could happen." Well, sure, but what are you going to do about it? Entropy took round one.

It shouldn't be necessary for the general manager to step in and solve the hypothetical problem presented here, but potentially it could have serious consequences and the general manager should be informed. Both the soft and hard skills possessed by the general manager should be employed to get the organization back on track. The general manager should expect a results-oriented focus on the problem using good problem-solving skills. The magnitude of the problem should be well understood and kept contained. Lastly, the internal resources applied to the solution should be commensurate with the difficulty of, and consequences from, the problem. The general manager can provide appropriate focus, set the expectation for results, and if smart, appear to have accounted for this contingency!

Implementation of the business plan is all about good execution of tactical and strategic tasks needed to accomplish the objective. Good execution is expected throughout an organization from the staff, to project managers, to accounts payable. In an API manufacturing environment, the number of factors associated with producing an approvable API batch--everything from QA and regulatory compliance to robust chemistry--can often appear insurmountable. Good execution of each component is required and most often, the failure modes happen at the interface between functions. A good general manager should encourage his staff to work to yield the popular buzzword operational status of "seamless." Of course, there is a feedback loop on the implementation program and that's the control mechanisms that the general manager uses to assure operational integrity and results.

Control



Exercising control of business operations may be the most difficult task of all the general manager's duties. Control at the general manager level requires the ultimate balancing act between the "soft" people skills and the "hard" analytical skills. After all, it's people with whom you accomplish the goals and objectives; the flip-side is that "hard' analytical skills are usually required in API production--and the company has made commitments! Those commitments pay the bills and allow the company (and therefore its employees) to prosper. To insure the company remains healthy and viable, the general manager must establish and enforce accountability throughout the company. As discussed above, the overall business plan may consist of a component sum where the components represent each of the staff functions and their inherent responsibilities. The general manager may apply different weights to each of these staff function components to affect the overall business outcome. Similarly, control of that "equation" may require another coefficient in front of each component to optimize the overall outcome (and to decrease entropy!). Again, the general manager's techniques for maintaining integrity and accountability throughout the organization are a challenging balance between soft and hard skills.

So how does the general manager provide accountable leadership and thereby, in good conscience, hold the staff accountable? For sure, the general manager has a boss or bosses too--at least the CEO, the chairman of the board, and the stockholders--so despite all the rhetoric surrounding the team approach, the leadership hierarchy definitely has the underlying element of a military organization. In simplistic terms, this structure states, "you will produce, or we will find someone who will." Can the general manager really afford to do otherwise? Would it be responsible leadership to keep unproductive staff in the company or to use fixed assets or resources at something less than their optimum? These answers should be obvious. Accountable leadership means, "You say what you do, and do what you say." The equitable consequence to this behavior is the general manager can and should have the expectation that their staff will perform and operate similarly.

For true accountability, there have to be consequences to failure. Sometimes, the inability to achieve the objective was not for the lack of hard, disciplined work. The general manager and senior management can be very forgiving in these circumstances especially if they were routinely informed of the approach and the difficulties encountered. Here again, the "soft" skills of the general manager and the ability to discern fact from fiction may determine the extent of the consequences. Further, an employee's history for accomplishing the company's objectives may heavily influence whether consequences are forthcoming. Most everyone has heard of the Peter Principle, whereby some people are ultimately promoted to their highest level of incompetence. It is important for the general manager to recognize when this has occurred and to take appropriate action--quickly.

Probably the best means of controlling the organization's progress is to provide definitive goals and objectives that cascade through the organization so that everyone has been told and understands what is expected of them. The general manager's staff may have directors and project managers on their respective staffs, and the duties and responsibilities are allocated or delegated accordingly. A major component to this cascading system is for each employee (at any level) accepting ownership for their responsibility. With that ownership acceptance, the senior management must allocate sufficient authority to that employee to accomplish their tasks. Now, when one succeeds, all succeed. However, when there's failure, it's not too difficult to find the root cause or where the system broke down. Ultimately, the general manager has to report to their boss(es), and results -- not excuses -- are expected. Hence, a pattern of failing to deliver results will inevitably lead to the individual being reassigned to duties commensurate with their abilities, or being terminated from the company. A general manager cannot exercise control over company performance without the ability to apply consequences to poor performers.


The effective general manager must employ both the soft (people) and hard (analytical) skills to produce the desired results from an organization. Disciplined planning cycles and clear, concise expectations placed on the senior staff can be translated throughout the enterprise to every employee. Appropriate levels of authority must accompany the control of this responsibility cascade, or the system will mire into analysis paralysis. The general manager can envision optimizing the company's performance based on the sum of the functional group contributions and refine or modify the results by applying different weights (or multipliers) to each factor. In this manner, the goals and objectives of the business plan can be optimized.

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