ELI LILY Company Case Study (Manufacturing Strategy)

ELI LILY and Company(Manufacturing Strategy)Submitted by:27NMP22 Mukesh Kumar Sahu27NMP43 Amit Gujjewar27NMP51 Komal Tagra

Company IntroductionFounded in 1876Second largest Pharmaceutical concern in the US and 8th largest in the worldServes in Pharmaceutical products, medical services and diagnostic and animal productsManufacture and distribute its products in 25 countriesSell products in 120 countriesMain Competitor-American Firms- Bristol Myers-Squibb, American Home Products, Johnson and Johnson, and Pfizer.Non American Firms-Ciba-Geigy, Hoechst, Glaxo, Bayer, and SmithKline-Beecham

Industry Trends(in the 1980s)GlobalizationDifference in the national healthcare market diminished Increasing complexity in Government approval and testing procedureSlower rates of innovationGovernment involvementMore Government interventionHigher standards of environmental and product safetyShorter product life cycleIntense competition

Existing Product Development Cycle

CREATION OF PHARMACEUTICAL PRODUCTSDiscovery of chemical compound.Analysis of chemicals requiredExperimental tests conducted on animals3 phase of clinical trials on humans:Phase1 : Trials tested whether the drug was safe for humans at recommended dosages levelsPhase 2: Demonstration of whether the drug actually worked for the application claimed for it. Phase 3: Simultaneous testing of safety and efficacy of the drug in larger patient populations than the first two phasesFiling of NDA with the United States FDA

PROCESS DEVELOPMENT & RESEARCH FOR INGREDIENTDetermination of the sequence of chemical reactions required to synthesize the particular compoundClinical trials in laboratoriesClinical trial in Pilot plantRefining of process and yield for large scale commercial manufacturing environmentTransfer to one of the companys bulk chemical manufacturing sites

Current StrategyManufacturings contribution a relatively lower weight in corporate strategyCurrent manufactruing strategy is + reactive and + lacks coordination among various plants unitsIt leads to lost opportunitiesSo senior manufacturing managers were attracted to process development and improvement as a focal point

STRATEGY DEVELOPMENT(PROCESS TECHNOLOGY) Plan 1: Increase the investment to improve the manufacturing processes for successful products that are already on the market. Plan 2: Commit to process improvement for a product (or products) that is not yet on the market, but which appears overwhelmingly likely to succeed.Plan 3: Commit substantial resources to a selected basket of products, very early in their development lifecycles.

Product PhasesPhase 1&2Phase 3In marketFail in Phase 1& 2Fail in Phase 3

Analysis

Analysis Plan 1Regular process cost= $.58MnAfter launch process cost= $1.16Mn(As process improvement is done after product is successful in the market)Only 20% of the product that enter are launched in the market.

Analysis Plan 2Cost of Process Improvement in Phase 3= $1.16MnAfter launch Process Cost= $.58Mn20% of the products that enter Phase 3 are launched in the market.

Analysis Plan 3Process Improvement Cost in Phase 1= $1.60MnProcess Improvement Cost in Phase 2= $1.60MnProcess Improvement Cost in Phase 3= $1.16MnAfter launch process cost= $.58Mn

Per unit costs decreases by implementing any of the three plans

Thank You!

Sheet1Current planPlan 1Plan 2Plan 3YearAnnual VolumeUnit cost($/kg)Annual Process development costTotal costUnit cost($/kg)Annual Process development costTotal costUnit cost($/kg)Annual Process development costTotal costUnit cost($/kg)Annual Process development costTotal cost197700001.61600000197800001.6160000019795,00015,0000.587558000015,0000.587558000012,0001.16611600007,8001.164016000019801,00014,0000.581458000014,0000.581458000010,3201.16114800007,1501.16831000019811,00013,0000.581358000013,0000.58135800008,7311.1698910006,5001.16766000019821,00012,0000.581258000012,0000.58125800007,3341.1684940005,8501.16701000019831,00011,0000.581158000011,0000.58115800006,0141.1671740004,5501.165710000launch10,0009,0000.58905800009,0000.58905800004,6911.16480700003,2501.1633660000-19840000198510,0007,0000.58705800006,7901.16690600003,2830.58334100002,6000.5826580000198610,0006,0000.58605800005,8201.16593600002,7250.58278300001,9500.5820080000198710,0005,0000.58505800004,8501.16496600002,1800.58223800001,3000.5813580000198810,0004,0000.58405800003,8801.16399600001,6350.58169300006500.587080000198925,0003,0000.58755800002,9101.16739100001,0960.58279800005200.5813580000199025,0002,0000.58505800001,9401.16496600005480.58142800003900.58103300005669600005600900002890790001969400002184800001462690001057100001243160002184800004707350012294200065129250

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Sheet1Volumes of Drug Required (Kg)Current Annual Yield (Kg/rig)Plan 1 Annual YieldCapacity Required Plan 1Plan 2 Annual YieldCapacity required Plan 2Plan 3 Annual yieldCapacity Required Plan 3Capcity Required Current PlanCost Plan 1Cost Plan 2Cost Plan 3Cost Current Plan5,0001,5001,5003.33333333331,5003.33333333331,7252.89855072463.33133.3333333333133.3333333333115.9420289855133.21,0001,5001,5000.66666666671,5000.66666666671,7250.57971014490.6726.666666666726.666666666723.188405797126.81,0001,7501,7500.57142857141,7500.57142857142,0130.49677098860.5722.857142857122.857142857119.87083954322.81,0001,7501,7500.57142857142,0000.52,2950.43572984750.5722.85714285712017.429193899822.81,0001,7501,7500.57142857142,5000.42,8690.3485535030.5722.85714285711613.942140118522.81,0002,0002,0000.53,2500.30769230773,7300.26809651470.52012.307692307710.72386058982010,0002,5002,55044,0002.54,5912.1781746896416010087.126987584416010,0002,7502,8053.63636363644,7502.10526315795,4521.83418928833.64145.454545454584.210526315873.3675715334145.610,0003,0003,0603.33333333335,5001.81818181826,3121.58428390373.33133.333333333372.727272727363.371356147133.210,0003,5003,5702.85714285716,0001.66666666676,8861.45222189952.86114.285714285766.666666666758.0888759802114.425,0004,0004,0806.256,0004.16666666676,8863.63055474886.25250166.6666666667145.222189950625025,0004,5004,5905.55555555566,25047,1733.48529206755.56222.2222222222160139.411682699222.430,0005,0005,10066,5004.61538461547,4604.02144772126240184.6153846154160.857908847224033,0005,2505,3556.28571428576,7504.88888888897,7474.25971343756.29251.4285714286195.5555555556170.3885374984251.636,0005,7505,8656.26086956526,7505.33333333337,7474.64696011366.26250.4347826087213.3333333333185.8784045437250.440,0006,0006,1206.66666666677,0005.71428571438,0344.97883993036.67266.6666666667228.5714285714199.1535972119266.844,0006,2506,3757.047,2506.06896551728,3215.28782598257.04281.6242.7586206897211.5130392982281.647,0006,5006,6307.23076923087,2506.48275862078,3215.64835957227.23289.2307692308259.3103448276225.9343828867289.249,0006,5006,6307.53846153857,2506.75862068978,3215.88871529867.54301.5384615385270.3448275862235.5486119457301.650,0006,7506,8857.40740740747,5006.66666666678,6085.80855018597.41296.2962962963266.6666666667232.3420074349296.451,0006,7506,8857.55555555567,5006.88,6085.92472118967.56302.2222222222272236.9888475836302.452,0007,0007,1407.42857142867,5006.93333333338,6086.04089219337.43297.1428571429277.3333333333241.6356877323297.2Total Cost4050.42787100183291.92546272042867.92615781094051.2

Sheet2Current Yield (Kgs)Plan 2 Yield (Kgs)New Tank Volume Required ('000Kgs)Projected Capacity Required Current Yield (#rigs)Projected Capacity Required Plan 2 Yield (#rigs)Projected Cost in current plan (in Million)Projected Cost in plan 2 (in Million)1,5001,5001,5001,5001,7501,75050,0002929116011601,7502,00070,0004035160014001,7502,50080,0004632184012802,0003,250100,0005031200012402,5004,000130,0005233208013202,7504,750170,0006236248014403,0005,500210,0007038280015203,5006,000240,0006940276016004,0006,000270,0006845272018004,5006,250300,0006748268019205,0006,500310,0006248248019205,2506,750290,0005543220017205,7506,750250,0004337172014806,0007,000240,0004034160013606,2507,250220,0003530140012006,5007,250200,0003128124011206,5007,250180,0002825112010006,7507,500150,00022208808006,7507,500110,00016156406007,0007,50090,0001312520480

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