Lean Corner

Operational Excellence in the Pharmaceutical Industry: Challenges and Strategies for a Highly Regulated Sector

Context of operational excellence in the pharmaceutical industry
Major Challenges of Operational Excellence in the Pharmaceutical Industry
Initiatives Among Industry Leaders
Conclusion: Operational Excellence, a Key Lever for the Pharmaceutical Industry

Few industries face as many constraints as the pharmaceutical industry. In this highly competitive and strictly regulated sector, manufacturers must make extra efforts to stand out.
Innovation is therefore a key element in remaining competitive: according to Deloitte’s report ‘Pharma: Increasing Returns in Research and Development,’ investments in R&D by the world’s 20 largest pharmaceutical companies increased in 2023, reaching $145 billion.

Context of operational excellence in the pharmaceutical industry

Why is Operational Excellence a Must in the Pharmaceutical Industry?

Pharmaceutical giants operate in a demanding environment where operational performance is directly linked to public health concerns. Profitability and competitiveness issues are also critical, especially due to the high costs of developing new treatments.
Operational performance is therefore crucial for enabling manufacturers to enhance efficiency and productivity at all levels. The use of Lean/Six Sigma methodologies has been common in the industry for decades, leading to significant improvements. For example, pharmaceutical giant Pfizer developed the “Lean Toolbox” to increase efficiency and better manage complexity. By applying Lean principles to manufacturing and support processes, the company successfully eliminated non-value-added activities. One notable achievement was the widespread use of Value Stream Mapping, which helped reduce supply lead times by more than 50% for certain products.
The recent rise in manufacturing costs, the entry of new competitors, and the imminent expiration of numerous patents are pushing pharmaceutical companies to continuously innovate in both research and production. This makes operational excellence more critical than ever.

What Are the Tangible Benefits of Operational Excellence?

Implementing Lean and operational excellence practices in a pharmaceutical company can have a significant impact at all levels:

Reduction in development time: Operational excellence helps optimize development phases, particularly the duration of clinical trials, allowing companies to reduce the time-to-market for new products.
Increased productivity: As in many industries, implementing Lean practices and digital tools leads to shorter cycle times.
Lower operational costs: By minimizing waste and optimizing inventory management, companies can reduce production costs.
Enhanced quality:  The use of Six Sigma practices or tools that enhance team collaboration, such as iObeya, enables better control of production processes, leading to a reduction in anomalies and defects.
Better traceability and regulatory compliance:  The use of digital tools can enhance traceability across the entire value chain, from suppliers to distributors, including manufacturers.

Major Challenges of Operational Excellence in the Pharmaceutical Industry

Regulation and Compliance: A Binding Imperative

As one of the most heavily regulated industries, the pharmaceutical sector must implement Lean tools and practices to mitigate the impact of stringent regulatory requirements. According to the 2023 report ‘Pharma Regulatory Compliance’ by KPMG, pharmaceutical companies dedicate up to 20% of their operational time to administrative compliance tasks, slowing down and complicating manufacturing processes. Regulatory bodies such as the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) impose new regulatory constraints each year, which companies must comply with to avoid financial penalties or even market bans.
These requirements force companies to invest in traceability systems and document management to ensure that every drug is properly tracked throughout its production cycle.

Complexity of Development Cycles and the Need for Innovation

Developing a new drug and bringing it to market is a long and costly process. According to McKinsey’s report ‘Operational Excellence in Biopharma Research and Early Development,’ it takes an average of 10 to 15 years to progress from initial testing to market launch, with costs often exceeding $2 billion. Regulatory and health constraints largely explain these high expenses.
Furthermore, patent expirations and the influx of generic drugs compel pharmaceutical companies to constantly innovate to maintain a competitive edge. Lean and Agile approaches are essential to optimize clinical trial management, making operational excellence crucial for accelerating product development without compromising quality or compliance.

The Contribution of iObeya: Digital obeyas facilitate cross-team collaboration, helping identify and resolve development issues more quickly.

Rigidity and Production Constraints: Balancing Standardization and Flexibility

Pharmaceutical production relies on standardized processes that require regulatory validation. Any modification in a manufacturing process must be approved by regulators, significantly limiting operational flexibility.
At the same time, the market increasingly demands personalized treatments, unlike traditional mass-produced drugs. This trend necessitates greater flexibility in production facilities.
As we know, specialized production generates complexity, which is why applying Lean Management principles can help manufacturers gain agility and flexibility in their operations.

Managing Information Flows: A Cross-Cutting Challenge

With numerous stakeholders involved, poor information flow can lead to significant delays in drug development and production. A Deloitte study published in 2023 states that about 60% of drug launch delays stem from communication issues between teams.
The presence of multiple subcontractors further complicates information flows, as more industry leaders outsource production stages for cost reasons. Efficient coordination with partners and subcontractors is necessary to prevent errors and delays.
Regulations requiring near-total traceability of decisions and actions throughout the development and production processes add another layer of complexity.

The Contribution of iObeya :  Intuitive interfaces centralize essential information on shared boards, ensuring better issue escalation and enabling teams to respond quickly and effectively to unexpected challenges.

Initiatives Among Industry Leaders

Accelerating Drug Development: McKinsey Case Study

In its study ”Operational Excellence in Biopharma Research and Early Development,” McKinsey discusses the initiatives implemented by leading pharmaceutical companies to shorten research and development timelines for new products. By adopting Lean processes and leveraging advanced technologies in both automation and digitalization, some companies have managed to reduce cycle times from conception to early clinical trials by 40%.
Among the initiatives deployed, several approaches stand out: Lean methodologies such as streamlining experimental procedures, governance strategies like restructuring departments to reduce the number of decision-makers, and technological advancements, including the widespread use of miniaturization in screening processes.
McKinsey highlights five key pillars that can help companies achieve operational excellence in research and development:

Defining and clarifying ambitions to focus resources on areas with the highest potential for added value.
Leveraging digitalization, automation, and artificial intelligence.
Cultivating a culture of innovation to drive the entire organization forward.
Designing a research model capable of handling increasing complexity and evolving regulations.
Choosing an appropriate production model, whether through in-house manufacturing or outsourcing.

Production Innovation: Sanofi’s Modular Factory

Pharmaceutical production facilities have historically faced significant challenges in terms of flexibility and agility. Traditionally, a pharmaceutical manufacturing site consists of multiple buildings, each designed to produce a specific type of drug or vaccine. These factories are not built for rapid reconfiguration, which severely limits their agility when there is a need to increase production capacity or integrate the manufacturing of a new product.
To address this issue, Sanofi launched the construction of a groundbreaking facility named Modulus in 2022. This investment of nearly €500 million aims to create a flexible production environment capable of manufacturing up to four vaccines simultaneously, with the ability to be completely reconfigured in just a few days or weeks—compared to several months or even years for traditional factories.
This innovation is part of a broader investment plan of more than €1 billion by the French group, with the goal of doubling its production capacity by 2028.

Digital Tools for Managing Information Flows

To optimize increasingly dense and complex information flows, the use of digital tools like iObeya enables industrial companies to enhance efficiency in information sharing and problem-solving.

At Sanofi, the implementation of visual management has significantly improved team performance at all levels:

Time savings in project management.
Greater efficiency in executing daily tasks.
Accelerated Lean transformation throughout the organization.

The tool is now fully adopted by employees and has become an integral part of daily routines.

The observed benefits are already substantial, with an ROI of 121% in just six years. Since the implementation of the iObeya platform, cost savings for Sanofi are estimated at nearly €23 million, with key gains in the following areas:

Faster decision-making and problem-solving.
More effective meetings.
Material savings (eliminating physical whiteboards).

Additional benefits have also been noted, including greater employee engagement and a reduced environmental impact thanks to the widespread adoption of remote work.

Conclusion: Operational Excellence, a Key Lever for the Pharmaceutical Industry

Operational excellence is imperative for the pharmaceutical industry, which faces strict regulatory requirements, long development cycles, and a constant need for innovation. To meet these challenges, companies must invest in digitalization, industrial flexibility, continuous improvement, and artificial intelligence. iObeya facilitates this transformation by improving collaboration and information flow management, thereby accelerating decision-making and project execution. More than just a performance driver, operational excellence is a necessity to ensure the sector’s competitiveness and resilience.

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