Assessed Case StudyGroup 1 (Operations Management)

When Supply is of Public InterestRoche and Tamiflu

When Supply is of Public InterestRoche and Tamiflu

Background Tamiflu in 2005 Capacity management issues Response and improvements Tamiflu in 2007 Going forward

OUTLINE

Tamiflu (oseltamivir phosphate) - an oral antiviral drug for seasonal flu 3-5 million seasonal influenza (flu) cases yearly Over 48 m flu patients in about 100 countries Patent protected until 2016 in 30 countries WHO recommended governments to stockpile Tamiflu Less than 15 countries had stockpile

BACKGROUND

MANUFACTURING PROCESS

6 months

2 months

Shikimic Acid

Epoxide

Azide

Active Pharmaceutical Ingredients

Blending, Encapsulation & Packaging

Step 1

Step 2

Step 3

Step 4

Step 5

PROCESS MAPPING (2005)

Customer

Demand Forecast(Ongoing Process)

Demand Forecast(Ongoing Process)

Step 1 Step 2 Step 3 Step 4 Step 5

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Market Research 30%

Blending, Encapsulation

& Packaging

Active pharmaceutical ingredients

AzideEpoxideShikimic acid

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Based on Order

Stock

5

2030= = 18.5 %

Suppliers

20

5 30

30 35

5

10 15 35

5

10 15

60

270

Plan Capacity

KEY PERFORMANCE INDICATOR (2005)

KPI 2005

Flexibility Hardly can match global demand (3) *

Quality Patent & 90% of Market (8)

Speed 8 months process (2)

Dependability It has Technical ability + patent (9)

Cost Affordable Price (5)

CAPACITY MANAGEMENT ISSUES

Limited capacity

Complex production process

Long production cycle time

Capital expenses

Logistic

Capacity Management

Issues

Government assurance

Unpredictable spread of pandemic

SCALE UP THE PRODUCTION CAPACITY

Options to increase production capacity up to 400 million treatment in 18 months :

Redesign Development Process > Time constraints (approx. 2-3 Years) Building New Plants > Time constraints Sublicensing Focus production mainly on Tamiflu Expand supply network, especially on material Outsourcing Improved technology

Preferred option

SCALE UP THE PRODUCTION CAPACITY

Increase production capacity up to 400 m in

18 months

Redesign Development Process

Building New Plants

Sublicensing

Focused production

Expand supply network

PROCESS MAPPING (2007)Customer/GovtDemand Forecast

(Ongoing Process)Demand Forecast

(Ongoing Process)

Step 1 Step 2 Step 3 Step 4 Step 5

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OrderOrder

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Strong DemandStrong

DemandSuppliers

50% (+20%)

Stock

10

1010= = 25.8 %

10

10 10

10 20

5

5 15 15

5

10 10

40

155

KPI - 2005 vs 2007

KPI 2005 2007

Flexibility Hardly can match global demand (3) *

Capacity increased (x15), with no obligation to use suppliers (7)

Quality Patent & 90% of Market (8)

Patent & 90% of Market (8)

Speed 8 months process (2) 6 months process + faster transportation (5)

Dependability It has Technical ability + patent (9)

It has Technical ability + patent (9)

Cost Affordable Price (5)Good price for buyers + lower margin for the company (8)

Tamiflu

MediaInvestors

Suppliers

General Public

WHO

Government

STAKEHOLDERS’ EXPECTATIONS

FUTURE PRODUCTION CAPACITY

?

SCENARIO ANALYSIS

Option Direction Pros. Cons.Plan A Increase - Public image

- Strengthen stock level (can meet global needs)

- Heavy stocks - Government approval - Profit margin reduction

Plan B Maintain - Production capability- Flexibility

- Necessity to keep communication between external network-High level stock

Plan C Reduce to 100 million

- More efficient- Less stockpiling

- Risk of public criticism- May lose business opportunities

Plan C

Forecasted demand is 30 million

Sublicensing to India and China

No immediate/low risk of pandemic

Invest in R&D

Technology Transfer

Sublicensing

Improved capability to respond to pandemic

Several countries with sufficient stockpile

Reduce Capacity to 100 million

WHAT SHOULD BE ANNOUNCED

KEY MESSAGES

Efficient usage of KPI is an important element to judge on current operation (Good or Bad). Also, it shows the gap between current performance & how it wishes to perform (strategic goal)

1

2

3

Use media effectively, ignoring or over reacting to media could lead to external & internal pressure on the company & its performance.

Efficient use of outsourcing will affect the operation performance positively

Bamford, D. R. & Forrester, P. L. (2010) Essential Guide to Operations Management. John Wiley and Sons

Fisher, M.L, Hammond, J.H, and Obermeyer, W. (1994) Making supply meet demand in an uncertain world. Harvard Business Review, Vol. 72, No. 3, May-June

N. Slack, A. Chambers, Alan Betts and R. Johnston (2008) Operations and Process Management (2nd ed.). Prentice-Hall,

References

THANK YOUAbdullah AlarfajChetan TyagiJohn Ssenyondo Main AnhMasaaki YamagishiRui QiTsuneki SugizakiYardin Octora