May 1-3, 2012 Javits Center New York, NY

Deploying Lean Six Sigma in Global Manufacturing Networks Robert Lechich Director Operational Excellence Pfizer Global Supply Title – Date – Javits Center – New York, NY

Agenda • • • • • • •

Current State of Pharmaceutical Manufacturing Traditional Manufacturing LSS Deployments Manufacturing Strategy Manufacturing Network Approach New LSS Deployment Methods Lessons Learned Future Directions

Current State of Pharmaceutical Manufacturing • Manufacturing – Traditional Small Molecule – Large Molecule: Vaccines, Biotechnology

• Large set of global manufacturing facilities focused on either drug substance or drug product – Acquisitions of Pharmacia, Warner Lambert and most recently Wyeth – Supported by a number of CMOs

• Some products have or about to lose patent exclusivity – Examples: Lipitor, Viagra – Increased pressure from generic drugs

Current State of Pharmaceutical Manufacturing • Overcapacity across the some of the internal plants – Due to changing product volumes – Rationalizing existing internal plants

• Marketing opportunities with Emerging Markets – Addressing challenges to support increased volumes with in country manufacturing

• Increased importance of Biotechnology products – Vaccines (Prevnar 13) – Enbrel – Elelyso

Current State of Pharmaceutical Manufacturing • Several state of the art manufacturing facilities • Major investments in plant automation and information technology • Continual harmonization activities with acquired companies • Beginning to implement 21st Century GMPs concepts – Quality by design – Process Analytical Technologies to monitor processes in real-time

Traditional Lean Six Sigma Manufacturing Deployments • Leadership: Well established within the company • Strategy: Company strategy driven with alignment to the Balanced Scorecard • Governance: Driven by site management and local OE resources (Central OpEx group for support) • Process Management: typically a portion of supply chain operated at the manufacturing site

Traditional Lean Six Sigma Manufacturing Deployments • Training and Staffing: Certified GB/BB/MBB and assigned to the sites • Incentives and Accountability: Company wide program • Metrics: KPIs defined within the company using Balanced Scorecard with local tracking capabilities • Projects: Site specific improvements bounded typically by site manufacturing

Traditional Lean Six Sigma Manufacturing Deployments •

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Major savings at individual manufacturing sites have occurred. Lean efforts such as kaizen events have local positive impact to equipment changeovers, decreased cycle time in quality control Inventory levels of WIP have decreased but difficult to reduce Raw Materials and Finished Products Quality processes have had significant areas of improvement for cycle time improvement and eliminating duplicate testing

Traditional Manufacturing Deployments • Manufacturing process improvements have eliminated significant non-value added steps although limited to regulatory filings and real deep process knowledge • Employee suggestion program is well implemented but resources availability is limited • Personnel reductions due to acquisitions have overshadowed true process improvement opportunities

If we are making good progress, should we continue on this path? Is there anything happening requiring change in direction?

Manufacturing Strategy • Continue rationalization of existing plants • Continuing driving to lower manufacturing costs • Focus on overall supply chain performance such as cycle time, inventory and changes to the costs and volumes • Reinforce core competencies within the firm and leverage external sources for complementary needs • Company entering emerging markets (BRIC, etc.) requires manufacturing operations within country to support marketing • Collaborations with small to medium biopharmaceutical R&D organizations needing manufacturing capabilities • Access to new pharmaceutical technologies where current manufacturing is not proficient

Manufacturing Network Approach • Pfizer move to a manage manufacturing as a resource network – Design Network to support manufacturing strategy – Eliminate competition between sites, the Manufacturing Network competes for business!!! – Composed of internal sites and external sites (outsourcing) – Recognize Contract Manufacturing Organizations (CMO) will have a strategic place (30-50%) – CMO managed formally by the Pfizer Global External Supply Group

Manufacturing Network Approach • Operational Excellence Approach – Leadership: Multi-company approach – Strategy: Align across the Pfizer – Partner relationships – Governance: OpEx Committee composed of representatives from each manufacturing site – Process Management: Reaches greater percentage of the supply chain – Training and Staffing: Share resources and provided training across the network – Incentives and Accountability: Shared savings on projects – Metrics: Shared metrics between Pfizer and the CMOs – Projects: Portfolio management approach across the network including the CMOs

Manufacturing Network Approach • Challenges – Internal sites will see CMO and the joint OpEx improvements as direct competition – CMO business contracts have many constraints and may prohibit OpEx approach – OpEx Capability varies across the manufacturing network – Overtime CMOs will change strategy, potentially become competitors – Improvements maybe difficult to implement with CMOs which have multiple customers – Efficient technology transfers projects – Limited Process Knowledge driven from Manufacturing Science – Potential Loss of Intellectual Property

New Deployment Methods • OpEx integrated into Contract Management – – – –

OpEx is programmed into the relationship Cost Reduction Targets (Year on Year) Negotiation drives OpEx projects and continuous improvement Share Responsibility with CMOs and the brand company

• New Governance Model – Joint OpEx Committees between Pfizer and CMOs – Business Review Meetings to include OpEx

New Deployment Methods • Sharing Staff within the Manufacturing Network – Provide CMO OE Capability Evaluation – Lean Six Sigma Training for CMO organizations

• Supply Chain Management Visibility – Implement process monitoring/manufacturing analytics for sharing data, KPIs and analysis of manufacturing processes – Alignment of consistent metrics in production, quality and costs – Share costs of suppliers

• Agility within the Manufacturing Network – Technology harmonization across the network – Develop production volume variability within the network – Develop alternate sourcing with partners

Lessons Learned • Understand your LSS Maturity of CMO/Suppliers strategic partners as part of Selection Process • Need to understand and support contract negotiations with LSS objectives with commitment to a Win-Win Scenario • Understanding the local cultures in the network • Need to share and provide collaboration of OpEx resources within the network by formal best practices replication program

Lessons Learned

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In d iv id u als - R e p len is h m e n t T im e (D a y s )

• Deploy a shared information system infrastructure for manufacturing KPIs across the manufacturing network • Learning Network: Knowledge transfer is critical between sites within the manufacturing network requiring “true” process knowledge (manufacturing science vs. tribal knowledge) • Challenge the improvements gained in the network at CMOs versus leaking Intellectual Property

Future Directions • Provide manufacturing network infrastructure services including OpEx, technical and manufacturing analytics resources • Support process knowledge efforts such as Quality by Design to ensure efficient product transfers needed in the network • Raise the focus of Lean Six Sigma improvements on network and supply chain performance • Expand the use of Lean Six Sigma on manufacturing network agility needs