i

LEAN CONCEPT IMPLEMENTATION IN A SMALL

MEDIUM ENTERPRISE (SME) PHARMACEUTICAL

START-UP COMPANY

BY

WAN MOHD KHAIRI BIN WAN IBRAHIM

A dissertation submitted in fulfillment of the

requirements for the degree of Master of Science in

Manufacturing Engineering

Kulliyyah of Engineering

International Islamic University Malaysia

APRIL 2017

ii

ABSTRACT

The domestic pharmaceutical industry has been identified by the Malaysian

government as an industry to be developed under its new 11th economic development

plan. Most of the homegrown companies within the industry fall under the category of

small and medium enterprises (SME) and therefore need to be highly efficient in their

operations in order to compete with the multinationals. One approach to achieve an

efficient operation is to implement lean manufacturing. However, a relatively small

percentage of the local SME companies implement lean manufacturing. The study

aims at determining the real success factors in lean implementation through systematic

review of relevant literature on implementation of lean manufacturing in local

companies, onsite observation of a selected SME company, Global Factor Sdn. Bhd.

(GFSB), that claim to have successfully implemented lean manufacturing. The actual

implementation of lean manufacturing at Ikop Sdn. Bhd., a SME pharmaceutical start-

up company then conducted. Lean tools such as Gemba, value stream mapping (VSM)

and spaghetti diagram were used to analyze and improve a selected process at Ikop

Sdn. Bhd. The literature review has shown that the implementation of lean

manufacturing at Malaysian SMEs involved in pharmaceutical industry is really at its

infancy. Study at GFSB indicates that successful implementation of lean

manufacturing stem from management support, employee’s commitment, government

support and knowledge on lean among employees. Gemba activity was conducted at

Ikop Sdn. Bhd. by walking through the plant and thus, current VSM and spaghetti

diagram were prepared to visualize the waste. Future VSM was created after

visualizing the process with elimination of non-value adding activities for the solution.

Application of lean tools in Ikop Sdn. Bhd. in improving the manufacturing process

cycle efficiency of hand sanitizer, i-Hand 4.0 has shown that the GMP guidelines are

not jeopardized. The first Kaizen improvement process has resulted in the reduction of

lead time by 46.3%. It may be concluded that implementing lean manufacturing in any

Malaysian small and medium startup pharmaceutical company is very beneficial in

terms of reducing operational costs and increasing the efficiency and effectiveness and

does not conflict with the existing GMP guidelines.

iii

خلاصة البحث

طار خطتها إدوية المحلية باعتبارها صناعة سيتم تطويرها فى وقد حددت الحكومة الماليزية صناعة الأ

وتندرج معظم الشركات المحلية العاملة في هذه الصناعة ضمن . للتنمية الاقتصادية الحادية عشرة الجديدةتحتاج إلى أن تكون ذات كفاءة عالية في عملياتها من وبالتالي ،فئة المؤسسات الصغيرة والمتوسطة الحجم

ويتمثل النهج لتحقيق عملية فعالة في تنفيذ التصنيع . تعددة الجنسياتمأجل التنافس مع الشركات . المنظمومع ذلك، فإن نسبة صغيرة نسبيا من الشركات الصغيرة والمتوسطة المحلية تنفذ التصنيع . المنظم

للدراساتمن خلال المراجعة المنهجية المنظمعوامل النجاح الحقيقية في التنفيذ تهدف الدراسة إلى تحديدفي الشركات المحلية، والمراقبة في الموقع لشركة مختارة من الشركات المنظمذات الصلة بشأن تنفيذ التصنيع

نفيذ التصنيع نهاا جحح في تبأ، التي تدعي (GFSB) المحدودةغلوبال فاكتور شركة الصغيرة والمتوسطة، الشركة الصغيرة والمتوسطة وهي ، المحدودةإيكوب شركة في المنظملتصنيع لالتنفيذ الفعلي ويتم . المنظمتيار القيمة لرسم الخرائط و ، (Gemba) مثل غيمبا التنظيمتم استخدام أدوات لقد .الأدوية لصناعة

(VSM ) الدراسةوقد أظهرت . المحدودةإيكوب شركة ومخطط السباغيتي لتحليل وتحسين عملية مختارة في تشارك في صناعة المستحضرات والتي في الشركات الصغيرة والمتوسطة الماليزية المنظمأن تنفيذ التصنيع

إلى أن التنفيذ الناجح GFSBوتشير الدراسة في . هامرحلة بدايتفي مازال الصيدلانية هو في الواقع . بين الموظفين التنظيموالتزام الموظف، والدعم الحكومي والمعرفة على ينبع من دعم الإدارة، المنظملتصنيع ل .من خلال المشي من خلال المصنع المحدودةإيكوب شركة في ( Gemba) تم إجراء نشاط غيمباو

VSMتم إنشاء و . الحالي والرسم التخطيطي السباغيتي لتصور النفايات VSMوبالتالي، تم إعداد تطبيق أدوات و تم . لية مع القضاء على الأنشطة غير القيمة المضافة للحلبعد تصور عم يالمستقبلوقد ،i 0.4طهر اليد، متحسين كفاءة دورة عملية التصنيع من ل المحدودةإيكوب شركة في التنظيم. تتعرض للخطر لم( GMP)القائمة على ممارسات التصنيع الجيدة أن المبادئ التوجيهيةالدراسة أظهرت ويمكن أن نستنتج أن . ٪4..0بنسبة التصنيعالأولى عن خفض زمن رت عملية تحسين كايزنوقد أسف

تشغيل الأدوية مفيد جدا من حيث أولية فيفي أي شركة ماليزية صغيرة ومتوسطة المنظمتنفيذ التصنيع على .ةتعارض مع المبادئ التوجيهية القائمتخفض التكاليف التشغيلية وزيادة الكفاءة والفعالية لا

(. GMP)ممارسات التصنيع الجيدة

iv

APPROVAL PAGE

I certify that I have supervised and read this study and that in my opinion, it conforms

to acceptable standards of scholarly presentation and is fully adequate, in scope and

quality, as a dissertation for the degree of Master of Science (Manufacturing

Engineering).

……………………………....

Mohamed Bin Abd. Rahman

Supervisor

I certify that I have read this study and that in my opinion it conforms to acceptable

standards of scholarly presentation and is fully adequate, in scope and quality, as a

dissertation for the degree of Master of Science (Manufacturing Engineering).

……………………………....

A.N. Mustafizul Karim

Internal Examiner

……………………………....

Md. Yusof Bin Ismail

Internal Examiner

This dissertation was submitted to the Department of Manufacturing and Materials

Engineering and is accepted as a fulfillment of the requirements for the degree of

Master of Science (Manufacturing Engineering).

……………………………...

Mohd. Hanafi Bin Ani

Head,

Manufacturing and Materials

Department

This dissertation was submitted to the Kulliyyah of Engineering and is accepted as a

fulfillment of the requirements for the degree of Master of Science (Manufacturing

Engineering).

……………….…………….

Erry Yulian Triblas Adesta

Dean,

Kulliyyah of Engineering

v

DECLARATION

I hereby declare that this dissertation is the result of my own investigations, except

where otherwise stated. I also declare that it has not been previously or concurrently

submitted as a whole for any other degrees at IIUM or other institutions.

(Wan Mohd Khairi bin Wan Ibrahim)

Signature ........................................................... Date .........................................

vi

INTERNATIONAL ISLAMIC UNIVERSITY

DECLARATION OF COPYRIGHT AND AFFIRMATION OF

FAIR USE OF UNPUBLISHED RESEARCH

LEAN CONCEPT IMPLEMENTATION IN A SMALL MEDIUM

ENTERPRISE (SME) PHARMACEUTICAL START-UP

COMPANY

I declare that the copyright holders of this dissertation are jointly owned by the

student and IIUM.

Copyright © 2017 (Wan Mohd Khairi bin Wan Ibrahim) and International Islamic

University Malaysia. All rights reserved.

No part of this unpublished research may be reproduced, stored in a retrieval

system, or transmitted, in any form or by any means, electronic, mechanical,

photocopying, recording or otherwise without prior written permission of the

copyright holder except as provided below

1. Any material contained in or derived from this unpublished research

may be used by others in their writing with due acknowledgement.

2. IIUM or its library will have the right to make and transmit copies

(print or electronic) for institutional and academic purposes.

3. The IIUM library will have the right to make, store in a retrieved

system and supply copies of this unpublished research if requested by

other universities and research libraries.

By signing this form, I acknowledged that I have read and understand the IIUM

Intellectual Property Right and Commercialization policy.

Affirmed by Wan Mohd Khairi bin Wan Ibrahim

……..…………………….. ………………………..

Signature Date

vii

ACKNOWLEDGEMENT

I am very grateful to my supervisor, Associate Professor Dr. Mohamed bin Abd

Rahman, for allowing me to undertake this research project. I must also thank for his

guidance and his willingness to share his wisdom throughout the course of this

project.

I would like to thank Dr. Mohd Rushdi bin Abu Bakar for his valuable help

and advice during the course of this project.

Special thanks to my dear parents, wife and children, who inspired me to

accomplish this goal: this is for you, for your support and motivation.

I am also grateful to Global Factor Sdn. Bhd . and Ikop Sdn. Bhd for giving

me the permission to carry out the works in their premises as well as for the

information and data required for this project.

Finally, I wish to express my appreciation and thanks to those who provided

their time, effort and support for this project.

viii

TABLE OF CONTENTS

Abstract ………………………………………………………………………… ii

Abstract in Arabic……………………………………………………..……….. iii

Approval Page……………………………………………….…………………. iv

Declaration…………………………………………………………………..….. vi

Copyright Page………………………………………………………………… vii

Acknowledgement……………………………………………………...……… viii

List of Tables…………………………………………………………….……… xi

List of Figures………………………………………………………...………… xiii

CHAPTER ONE: INTRODUCTION…………………………………….…… 1

1.1 Background…………………………………………………….…… 1

1.2 Problem Statement and Its Significance………………………….… 2

1.3 Research Objectives………………………………………………… 3

1.4 Research Methodology………………………………...……………. 4

1.5 Research Scope………………………………………...…………… 5

1.6 Report Structure……………………………………...……………… 5

CHAPTER TWO: LITERATURE REVIEW……………………...………… 7

Introduction…………………………………………………………….. 7

2.1 History of LM..………………………………………………..……. 8

2.2 LM in Pharmaceutical Industry …………….… ………....………... 9

2.3 Implementing LM………………...……………….………………... 12

2.3.1 LM tools in SME…………………...…………………….. 15

2.3.1.1 Value Stream Mapping…………………………... 15

2.3.1.2 Standardized work………...……………………... 16

2.3.1.3 Continuous Improvement……………………… 16

2.3.1.4 Spaghetti Diagram…………..……….…………… 16

2.3.2 Implementation of LM in Malaysia………………………… 17

2.3.2.1 Research Method………………………………… 20

2.3.2.2 Industry Sector…………………………………… 21

2.3.2.3 Distribution of Papers vs Time………………… 23

2.3.2.4 Barriers in Lean Implementation in Malaysia……. 24

2.4 Summary…………….……………………………………….……… 26

CHAPTER THREE: METHODOLOGY…………………………………….. 27

Introduction………………….…………………………….……. 27

3.1 Multiple Case Study………………………………………… 28

3.1.1 Designing Case Study …………………………………….. 29

3.1.2 Conducting Case Study …………………………………… 29

3.1.2.1 Interview …………………………….………….. 30

3.1.2.2 Field Observation …………….……………….... 30

3.1.2.3 Document Analysis ……………………..………. 31

3.1.2.4 Case Study Databases …………….……………… 31

ix

3.1.2.5 Analysis …………….………………………...… 31

3.2 Implementation Tools……………………………………….. 31

3.2.1 Value Stream Mapping (VSM)…………………………….. 32

3.2.2 Spaghetti Diagram………………………………………..... 32

3.2.3 Continuous Improvement (Kaizen)……………...……….. 33

3.2.4 Measurement in the Field………………………………….. 33

3.3 Selection of Seven (7) Wastes……………………………….. 33

3.4 Summary …………………..…………………….………….. 34

CHAPTER FOUR: RESULTS AND DISCUSSION…….…………………… 35

Introduction……..….…………………………………………… 35

4.1 Case Studies…….…………………………...……………..... 36

4.1.1 Companies’ background…………….……..……………… 36

4.1.2 Data Collection at GFSB…………………………………… 39

4.1.3 Lean Tools Analysis on Production Department -GFSB….... 42

4.1.4 Lean tools analysis on Sales and Marketing Dept -GFSB … 47

4.1.5 Data Analysis at GFSB…………………………………….. 51

4.2 Success Factors in GFSB……………………………. …….... 54

4.2.1 Internal Factors………... …….……………………….…… 54

4.2.2 External Factor. …………………………………………… 55

4.3 The Observation Process – IKOP Sdn. Bhd ..……………...... 56

4.3.1 Lean Tools Implementation: Current Value stream

mapping (cVSM) – IKOP Sdn. Bhd.…………………………....... 57

4.3.1.1 Process mapping………………………………… 58

4.3.1.2 Dispensing ………….…………………………… 60

4.3.1.3 Mixing ………….………………………………… 63

4.3.1.4 Filling …………………………………………… 64

4.4 Adaptation of Lean Implementation from GFSB - IKOP SB... 64

4.4.1 Current value stream mapping (cVSM) …………………… 65

4.4.2 Future value stream mapping (fVSM) ……………………. 67

CHAPTER FIVE: CONCLUSION AND RECOMMENDATION………..… 71

5.1 Conclusion.….……………………………………………...... 71

5.1.1 Success Factors in Lean Implementation at GFSB ………… 71

5.1.2 Lean Implementation at IKOP Sdn. Bhd …….…….……… 72

5.2 Recommendation….………………………………………… 73

REFERENCES………………………………………………………………… 74

LIST OF PUBLICATION ……………………………...……………………… 81

APPENDIX I FIRST FLOOR LAYOUT….……………..…………………… 82

APPENDIX II SECOND FLOOR LAYOUT……………………….………… 83

APPENDIX III OBSERVATION FORM………..…………………………… 84

APPENDIX IV TOOLBOX CHECKLIST …….……………….……………. 85

APPENDIX V USING TOOLBOX………...……..…………………………… 86

APPENDIX IV CHILLER…………..……………………………….………… 87

x

LIST OF TABLES

Table No.

Page No.

2.1 The success factors of implementing LM in pharmaceutical

companies

11

2.2 Literature review of LM implementation in Malaysia

17

2.3 Barriers in LM in Malaysia

25

4.1 List of major machines/equipment in the manufacturing facilities

of IKOP Sdn Bhd

38

4.2 Number of full-time employees at IKOP Sdn Bhd and its

distribution according to department

39

4.3 Production department - activity 1

43

4.4 Production department - activity 2

44

4.5 Production department - activity 3

45

4.6 Production department - activity 4

46

4.7 Sales and marketing department - activity 5

48

4.8 Sales and marketing department - activity 6

49

4.9 Sales and marketing department - activity 7

50

4.10 Result on lean implementation at production department: Mold

setup

51

4.11 Result on lean implementation at production department: Inking

52

4.12 Result on lean implementation at sales and marketing

department

52

4.13 Process of producing iHand and classification of VA and NVA 58

4.14 Motion of production staff in dispensing process

62

4.15 Data of current VSM for the production of iHand

67

xi

4.16 Comparison data of current VSM with suggested future VSM for

the production of i-Hand.

68

4.17 Suggestions for waste to be eliminated 69

xii

LIST OF FIGURES

Figure No. Page No.

2.1 Percentages of articles based on research methods 21

2.2 Percentages of papers by industry sector 22

2.3 The distribution of reviewed paper from 2007 until

December 2015

24

3.1 Flow chart design in conducting this research 27

3.2 Multiple Case Study Method Flow (Adapted from Yin,

1994)

28

4.1 Lean implementation flowchart for the production of

Kedidi marker

41

4.2 Tools brought to the workplace 43

4.3 Tools place in a toolbox to the workplace 43

4.4 Technician table away from workplace 44

4.5 Technician table near to workplace 44

4.6 Moving mold by pushing 45

4.7 Moving mold by using wood pallet 45

4.8 Transfering ink bottle manually 46

4.9 Transfering ink bottle using wheeled platform 46

4.10 Informing warehouse to prepare customer order 48

4.11 Informing warehouse to prepare customer order using

pulley

48

4.12 Exhibition equipment before lean 49

4.13 Exhibition equipment after lean 49

4.14 Booth visitor’s counter 50

4.15 Booth visitor’s counter after lean 50

xiii

4.16 Production flow of i-Hand 58

4.17 Spaghetti diagram of current VSM of dispensing 61

4.18 Moving alcohol drum 62

4.19 Pumping alcohol from drum to bottle 62

4.20 Mixing ingredient 63

4.21 Opening outlet valve

63

4.22 Mixtures to be transferred

63

4.23 Mixtures transferred to moveable tank

63

4.24 Transferring mixtures to bottle

64

4.25 Filling process

64

4.26 Current value stream mapping for the production of i-Hand

at IKOP Sdn. Bhd.

65

4.27 Spaghetti diagram of current process of producing i-Hand

at IKOP Sdn. Bhd.

66

4.28 Suggested future value stream mapping for the production

of i-Hand at IKOP Sdn. Bhd.

68

1

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND

The study of lean manufacturing (LM) was first pioneered by Toyota Production

System (TPS) in automotive industry after the World War II. With its main

philosophy of maximizing values and eliminating waste, LM was since studied and

implemented in many companies. The implementation of LM using techniques, such

as value stream mapping, Kanban card, spaghetti diagram and preventive

maintenance, are able to improve the production performance by reducing non-value

added activities. The most important outcome of applying this system is the reduction

of manufacturing costs. That was why Toyota became the first car producer in 80’s

that overcome other established car producers such as General Motor and Ford.

The production of drugs in pharmaceutical industry emphasizes on three

important aspects; protecting patient safety, precise production and tried-and-true

system rather than using the latest manufacturing system. Whatever the cost is, as long

as the three aspects are fulfilled, then the system is considered excellent. But, it is a

tough set of requirements to be followed by small and newly set up pharmaceutical

companies where resources are limited especially those related to expenses.

2

1.2 PROBLEM STATEMENT AND ITS SIGNIFICANCE

The cost of developing drugs is very high as pharmaceutical companies are required to

invest approximately 3-4 times more than other manufacturing companies (Cohen,

2005). This high cost is due to higher failure rates, longer times required for clinical

trials, and increasing drug complexity (Lawler, 2010). In order to compensate the

increase in drug development cost, the pharmaceutical companies are now facing

increasing pressure to reduce manufacturing costs through improvement of

operational efficiencies. For small startup pharmaceutical companies to be

competitive and sustainable, they can no longer afford to lose revenue from their

products because of operational inefficiencies, such as long startup and scaleup times,

lost batches, process instability, and product recalls.

Even though LM has been proven to be effective in improving the performance

of manufacturing companies the pharmaceutical industry is slow in adopting it. Few

studies were found (Chowdary and George, 2011) on the implementation of LM in

pharmaceutical companies. This is also true in the Malaysian context even though

there are a number of pharmaceutical companies operating locally. In 2011, SME

Corporation had recorded that 192 manufacturers were doing pharmaceutical

manufacturing in which 60 companies were categorized as micro, 115 of them

categorized as small and 17 companies were medium (SME Corp., 2015).

Drug prices are likely to continue to increase in Malaysia due to unstable

currency, increasing raw material prices and escalating processing and transportation

costs. To be competitives in today’s business environment, companies like

pharmaceutical companies should implement systematic management system. With

increasing raw material and production cost of drug, pharmaceutical companies

3

therefore should implement LM system. Although LM has been implemented

globally, the approach is still new in Malaysian context especially in the

pharmaceutical industry due to the lack of relevant information and studies. Therefore,

it is very important to increase our understanding and awareness on the factors

contributing to successful implementation of LM in pharmaceutical industry

especially in the context of Malaysian small startup companies.

1.3 RESEARCH OBJECTIVES

The aim of this research project is to have a better understanding of the success

factor(s) and the effects of LM implementation in a small Malaysian startup

pharmaceutical company. In order to achieve this; three objectives have been set that

are to lead to a logical progression through this project:

To identify the potential driving forces behind successful implementation of

LM by pharmaceutical SMEs using previous studies involving Malaysian

SMEs and other relevant investigations.

To determine the success factors in lean implementation using onsite

observation of a SME company, Global Factor Sdn. Bhd. (GFSB) and

correlate these factors to the local SME pharmaceutical companies.

To investigate the effects of implementing selected lean tools such as value

stream mapping (VSM) and spaghetti diagram in the production of hand

sanitizer at Ikop Sdn. Bhd. on the product lead time (PLT).

4

1.4 RESEARCH METHODOLOGY

The Research begins with the process of gathering literature review intensively. The

papers related to LM in SMEs for Malaysian context were collected. Conceptual

analysis on the success and failure factors was done so that we have a better

understanding on the level of lean implementation in Malaysia (Gray, 2004).

Then, an onsite observation was done on a real manufacturing company that

successfully implemented LM system. Data were gathered to evaluate the real success

factors on the implementation of LM system in GFSB. Time motion study was carried

out during the observation. It was found that the selected company was the one and

only company which implemented LM system in east coast region as recorded from

interview with a Malaysian Productivity Corporation personnel (S. Mohamed,

personal communication, October 15, 2014). The analysis of data collected during the

onsite observation was used in the case of a newly established pharmaceutical

company in term of success factors, effects on the implementation and performance of

LM system for the company.

Continuous observation was done on the pharmaceutical company to show

whether LM system is beneficial to Malaysian SME pharmaceutical company or else.

Main lean tools used were value stream mapping (VSM) and spaghetti diagram. The

implementation process at Ikop Sdn. Bhd. began with preparing current VSM (cVSM)

of production process based on onsite observation, evaluating and analyzing the data

with the help of spaghetti diagram. Then, the future VSM (fVSM) was proposed to the

top management of Ikop Sdn. Bhd. based on waste elimination and improving value

added of the product.

5

1.5 RESEARCH SCOPE

The scope of this research project is the implementation of LM at a small startup

pharmaceutical company namely Ikop Sdn. Bhd. to improve its production efficiency.

Though the research is limited to one Malaysian small pharmaceutical company,

nevertheless, the nature of the company selected is typical of any small medium

pharmaceutical companies in the country and findings of this study may be useful for

the others as well.

1.6 REPORT STRUCTURE

Chapter 1 gives an overview of the LM and the pharmaceutical industry leading to the

description of the problem statement, research objectives and scope of the study.

Chapter 2 then provides a literature review on LM; its definition, philosophy, barriers,

and success factors globally. Also, information on LM in Malaysian SMEs and in

pharmaceutical companies is provided.

Chapter 3 explained the research methodology which is separated into three

(3) parts. The first part of the methodology explains onsite observation conducted at

an SME manufacturing company to find out the real success factors in implementing

LM system. The second part of the methodology was about the LM tools to be used.

And finally, the methodology provides the description on how the previous two parts

are combined and analyze to determine the types of wastes to be eliminated in which a

number of lean tools are used to effect process improvement in a small startup

pharmaceutical company, Ikop Sdn. Bhd.

6

In Chapter 4, firstly, the results of the data from the onsite observation of the

chosen SME company were analyzed and discussed to establish the real success

factors in its lean implementation. The data obtained from the process improvement

activity carried out using selected lean tools at Ikop Sdn. Bhd. were then analyzed and

discussed.

Finally, Chapter 5 concludes the outcomes of the study with respect to the

research objectives. In addition, some recommendations for future work are made as

well.

7

CHAPTER TWO

LITERATURE REVIEW

INTRODUCTION

LM, a concept originally inspired by the Toyota Production System (TPS), focuses on

continuous improvement and streamlining overall manufacturing operations through

elimination of waste (Womack et al., 1990). Womack et al. (1990) defines LM as a

“multidimensional approach of doing business with the primary focus on waste

reduction”, whereas Taj (2005) defines the concept simply as “manufacturing without

waste”. The definition of waste in LM is broad; it refers to any activity that absorbs

resources but does not add value to the end product.

Taiichi Ohno, the Toyota Production System (TPS) inventor, identified seven

sources of waste: (1) overproduction, (2) waiting time, (3) transportation and material

handling, (4) inappropriate processing, (5) unnecessary inventory, (6) unnecessary

motions, and (7) defective products (Taj, 2005). In order to achieve the objective of

eliminating the waste; LM is assisted by a set of tools/approaches, such as Total

Productive Maintenance, Just-in-Time, 5S, Kanban, Kaizen, Value Stream and Value

Stream Mapping (Greene and O’Rourke, 2006). Although the concept of LM came

from the automotive industry, it has been successfully implemented in various other

industries (Bamber and Dale, 2000; Womack et al., 1990).

8

2.1 HISTORY OF LM

In 19th century, foundation for mass production was developed by Frederick Winslow

Taylor through the study on time and motion known as Taylorism (Ahlstrom, 1998).

The concept of Taylorism was utilized by separating planning activity from

production, standardized work to identify the best way to do the job and to reduce

cycle time. Then, Henry Ford used this concept and developed moving assembly line

and T Ford system for his automotive production system (Dennis, 2002). In this

system, the production scale is larger than before. But, the defect rates were very high

and the workers were not really involved in running of the organization.

Eiji Toyoda, an engineer from Toyota Motor Company visited one of the Ford

plants in Detroit in 1950 after WWII. He and his production manager, Taiichi Ohno

concluded that this type of manufacturing system was not to be successful in his

country due to high amount of non-value added activities. The situation in that time in

Japanese manufacturing environment needed them to upgrade their overall operation

strategy so that the process were multipurpose, movable and easy to handle to be used

with different products (Dennis, 2002). The focus was on batch instead of mass

production. With this innovation, the sources of wastes were identified and eliminated

thus giving values to companies (Liker, 2004).

Joint venture (JV) in producing light truck was held between Toyota and

General Motors (GM) in 1980 (Liker, 2004). After 4 years of the JV, the plant was

awarded the best factory among GM plants for North America region. This

achievement was achieved as Toyota transferred the management system and workers

they had in Japan to the plant. Toyota then transformed the workers and the

management system as what they had in Japan. A research in automotive industries by

9

Massachusetts Institute of Technology in 1985 successfully produced a book titled

“The Machine that Changed the World”. In this book, they suggested that the

industries must transform their production systems from mass production to Lean

Production as they called it in order to survive in the industry (Andersson, 2007).

The production efficiency can be increased with the guidelines given by this

book on lean implementation where five (5) main principles were introduced

(Womack et al, 1990); 1) defines value from the customer’s perspective. Every step in

the production process is giving values to customer and that is the reason they are

paying for, 2) identify the value stream, where the initial process is started with

customer orders and finished when customers received the products, 3) transformation

from traditional manufacturing to LM; the production process flow moves smoothly,

4) the production should be activated by customer demand, and 5) constantly perfect

in implementation (Womack and Jones, 1996).

2.2 LM IN PHARMACEUTICAL INDUSTRY

Pharmaceutical industries, however, have been slow in adopting LM (Green and

O’Rourke, 2006; Villa, 2008; Jaiganesh and Sudhahar, 2013). This is mainly due to

their focus on establishing themselves in the initial market since for many drugs, the

first to market captures the majority market share (Villa, 2008). The complexity of

designing operational procedures to incorporate LM into the existing system that is

highly controlled and regulated by the current Good Manufacturing Practices (cGMP)

may also be an issue. Barriers or difficulties in the implementation of lean in

pharmaceutical industry came from the cGMP guidelines. The cGMP requires a lot of

paper works; documentations and standard operation procedures (SOP) that affects the

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lead time (Khlat et al., 2014). cGMP are the guidelines formulated by the US Food

and Drug Administration (FDA) that pharmaceutical industries in the entire world

should follow in the production of drugs. Sometimes the rules and regulations by

cGMP are not applicable and a waste in production process in pharmaceutical

(Chowdary and George, 2011).

The implementation of LM in pharmaceutical industries is different as

compared to other industries. The differences are in terms of plant layout and strict

operation procedure to maintain high quality standards. But, study has shown that in

term of improving process lead time that cause by waiting time such cleaning,

dispensing and setting up, the implementation of LM tools has no conflict with GMP

(Greene and O’Rourke, 2006; Lawler, 2010), but is still slow to be implemented in

Malaysia pharmaceutical. Until 2015, there was only a literature (Mahmud et al.,

2015) found to do research on lean implementation in pharmaceutical.

In addition, the profit margins in the pharmaceutical industry have historically

been so high that there has been little incentive to invest in improving the

manufacturing process (Tozer, 2008). The cost of developing drugs, however, is very

high that it requires the pharmaceutical industries to invest approximately 3-4 times

more than other manufacturing companies (Cohen, 2005). This high cost is due to

higher failure rates, longer times required for clinical trials, and increasing complexity

of drugs (Lawler, 2010). In order to compensate the increase in drug development

cost, the pharmaceutical industries are now facing increasing pressure to reduce

manufacturing costs due to the current competitive environment as they can no longer

afford to lose revenue from their products because of long start-up and scale-up times,

lost batches, process instability, and product recalls (Lawler, 2010).

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The implementation of LM in pharmaceutical industries is expected to enhance

manufacturing process efficiency, which consequently reduces manufacturing costs.

But its implementation in pharmaceutical did not widely used due to 2 factors; 1)

employees implementation understanding and 2) top management commitment

(Jaiganesh and Sudhahar, 2013). Leaders should apply five (5) strategies to

successfully implement lean in pharmaceutical; 1) start with strategy; 2) set the

ambitious goal; 3) focus on customer; 4) look beyond the silo; 5) change mindset with

metrics and incentives (Farber et al., 2009). According to Chowdary and George

(2011), the implementation of LM in pharmaceutical gives positive impact to the

production efficiency. GlaxoSmithKLine Bio, a multinational pharmaceutical

company, implemented lean concept adapted from car company, Jaguar by hiring two

experts from them, to transfer lean expertise into their organization (Farber et al.,

2009). The main success factor of the implementation is the role of top management

that must ignite the effort for the implementation process.

Table 2.1: The success factors of implementing LM in pharmaceutical.

No Success factors References

1 Understanding lean concept (Jaiganesh and Sudhadar, 2013), (Greene

and O’Rourke, 2006)

2 Management support (Jaiganesh and Sudhadar, 2013), (Haleem et

al., 2013), (Politis and Rekkas, 2011),

(Chowdary and George, 2011)

3 Employees attitude (Greene and O’Rourke, 2006)

4 Training (Shanley et al., 2006)

5 Communication (Shanley et al., 2006)