Last month, Pfizer Asia Pacific, Glaxo Wellcome Manufacturing and Siemens signed on as founding members of a consortium that will offer a platform to pharma companies to address challenges such as costs, regulatory compliance, and responsiveness in production and processes to take drugs from trials to market. As also, leverage new manufacturing technologies to drive up productivity and improve manpower development.
Global companies in high-tech sectors such as pharmaceuticals have long realised the value of collaboration beyond the obvious. In the Indian drug industry however, value has historically been created through greater, and ever greater, competition.
Happily, Indian drug companies are gradually realizing that this is not the only way to create wealth for themselves.
In mid-2010, I brought together the CEOs of six large Indian pharmaceutical companies, with a total annual turnover of $7bn then. We wanted to see if we could strengthen the industry by zeroing in on, then busting, operational inefficiencies across the entire value chain of business. For competitive reasons, marketing, research, business strategy and related areas were kept out of the experiment.
It was dubbed LAZOR (drawn from the first letter of each participant namely Lupin, Aurobindo, Zydus Cadila, Orchid, Ranbaxy). In 2011, Dr Reddy’s came on board, and we added another ‘R’ to the acronym.
At its peak, there were 120 executives from these six companies on board. (Imagine managing 120 busy calendars!) These executives were to meet over the ensuing months, to share practices, to discuss problems and then brainstorm solutions, then go back and pilot these in their companies and come back with the result.
This was a big step. These were competitors, some in direct business conflict. Yet they came together to nominate senior executives from their companies to the effort. Why?
The fact was that global companies had evolved over many decades and put best practices in place. Indian companies with global aspirations had emerged only in the last two or three decades. They had no Big Brother sitting in the Triad (US, Europe or Japan) to help develop best practices to strengthen compliance, cost leadership and ruggedness in delivery. LAZORR was felt to accelerate the evolution process.
The entire industry was feeling the pinch of the weakening rupee and competition from China. In such an environment, “business as usual” was just not enough.
One of the efficiencies that LAZORR went after was solvent consumption. Solvents are ubiquitous in drug manufacturing. With the rising safety bar and environmental awareness, the industry is on a quest to reduce consumption.
LAZORR discovered that its members collectively consumed 73,000 metric tonnes of solvent per year, costing over Rs 330 crore. For safety reasons, finished products had to be free of solvents so a huge quantity of solvents had to be released into the environment, despite reasonably efficient solvent recovery processes.
LAZORR was impressed by the urgency to enhance solvent management thus curtailing damage to the environment. There was also a monetary goal – most solvents are imported using precious foreign exchange. With crude oil prices going up, the Indian Rupee weakening against the dollar and the pharmaceutical industry growing significantly, the losses could compound in subsequent years.
LAZORR networked with global and domestic solvent players to learn and adopt from their experience and piloted experiments to try out newer technologies to move to higher recovery efficiencies. It identified culprit operations and processes and intervened. When one member found itself extremely poor on solvent management in comparison to the others it initiated a corporate level drive to be amongst the best in class. It estimated annual recurring savings of Rs 75 crore. Not to mention slashing the load on the environment,
Similarly, LAZORR took on the task of reducing fresh water consumption by a billion litres a year, power consumption by 35 million units a year, and steam usage by 35 million kg amongst just six LAZORR members and made significant strides towards the goal.
LAZORR strengthened material handling techniques by bringing in an automation drive. It also introduced systems at a macro level to strengthen the corporate Safety, Health and Environment, or SHE, function. All this over just two years.
I have since moved away from co-ordinating LAZORR’s various members, handing it over into the able hands of one of the senior members. It may not be as structured as it used to be but the networks that the members developed still work on an almost daily basis. Its outcomes have inspired other sectors such as agrochemicals to take on similar initiatives. Not only has this initiative worked for the companies themselves there is a realization that it can strengthen the industry’s defence against competitors such as China.
LAZORR is now a verb and I am expecting the Lazorrization of many industries in India, going forward.
Satish Khanna is former Group President of Indian generic drugs producer Lupin and a veteran of the Indian pharma and chemical industries having served in diverse functions such as manufacturing, human resources, business development, global sourcing and international strategic alliances over a career spanning four decades. He is Chairman, Kagashin, an initiative to bring Indian, Japanese and European chemical industries onto a common business highway. He mentors post-graduate management students at a reputed Indian management institute and invests in small and mid-sized companies across sectors. He has also authored three books on management and entrepreneurship,
Pic courtesy Satish Khanna
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