The most important assignment after a project gets approved after due diligence is implementation of project which include all phases of project, namely project initiation, planning, execution, close out and of course the control & monitoring. What strategy project owner must use for successful implementation of the project.
The Project Management Institute (PMI) defines a project as “a temporary endeavour undertaken to create a unique product or service.” This temporary nature of project compel management to decide whether to do everything in house or outsource the activities. In other word to implement the project what are the activities a project owner should do himself and what are the activities they should outsource. Also, it is important for the owner to finalize a plan for outsourcing the temporary activities asking what, how, when and from where.
Organization acts according to their operation and core competency for implementing the project to its success. When considering construction project for a construction company may acts differently than a pharmaceutical company. For a pharmaceutical company it may be one time but for the construction company it is their everyday works. So, organization’s strategies may differ considering their own operational strategy based on normally on total cost of ownership (TCO).
Normally, organizations use following strategies for implementation of construction projects.
EPCM: Engineering, Procurement assistance and Construction Management
EPC: Engineering, Procurement and Construction
Today, about 80% projects are being implemented through EPCM strategy and about 20% on EPC strategy. But as the maturity in the industry is increasing with presence of capable EPC company the trend of EPC is increasing as it is giving more value to client. Let us discuss about both the strategies to understand better.
EPC:
Engineering, procurement, and construction (EPC) contracts are considered by the clients for getting the project implemented as a single point responsibility. Under an EPC contract a contractor is obliged to deliver a complete facility to a client who need only turn a key to start operating the facility, hence EPC contracts are sometimes called turnkey projects or designed build and handover project Sometimes this is called as EPCI where ‘I’ stands for implementation and commissioning.
EPCM:
In the EPCM, as shown in the above flow chart, the procurement comes to play a role once the engineering is complete and at some stage once they get techno commercial comparison. Then they award the construction contract order and other order to various supplier/contractor. So, chance of value engineering, cost/ schedule improvement is very low. But due to collaboration in the case of EPC is very high.
Though there are many differences between the two strategies, one most important difference is providing value to project due to collaboration between the planner, design, engineering team, construction team and procurement team from planning to execution phase in the EPC strategy. The team work together to reduce the project schedule by adapting review and checks, negotiation with supplier, developing new/alternate process for work etc.
Now, let us let us further evaluate some key differences between both strategies.
Key Factors
EPC
EPCM 2
Remarks 2
Contracts & Purchase orders
One contract signed between EPC contractor and owner. Further subletting to subcontractor & supplier by EPC contractor
Signed between project owner and supplier/contractor with EPCM contractor advise
High level involvement by owner for EPCM. The owner should be very specific about the project outcome before signing contract with EPC
Scope of supplies/contract
It is a fixed contract. Changing of scope is difficult and required to go through tedious change control process
Project owner can make change before the contract/order finalization
Front end loading is advisable for all projects, that helps projects to plan better and minimizes chance of failure
Coordination & Project management
Owner to coordinate only with EPC contractor
Owner to coordinate with all suppliers including the EPCM contractor
Owner has advantage with EPC. Increasing communication channel could delay project
Value engineering
Keeping the deliverable unchanged, good chance to reduce cost & time of project by negotiation, engineering process changes etc. due to team
collaboration
Teamwork in isolation and every team uses their standard processes. Collaboration are normally missing
For owner it could reduce project time and EPC contractor could finalize the contract at a lesser cost than EPCM contract considering the project
lifecycle cost
Project Cost Over run
The cost risks are to contractor account unless change order on works
The cost risks are borne by project owner
Fixed price contract always benefit to project owner
Project Schedule Over run
The risk is solely on the EPC contractor
The risk can be with any of the contractor supplier. But with delay by some contractor the entire project can be delayed
Though individual supplier contractor bears the risks and can play penalties but owner has a greater risk of total project risk
Project warranties
For owner EPC contractor is responsible and single point contact
Project owner is required to every supplier separately
Cost to owner to high
Project Finance
Cash flow is higher since advance of the total contract is required to be paid by owner and rest on milestone payment
Cash flow is lower, based on every contract and payment terms agreed upon with each supplier
Overall total cost of ownership must be reviewed critically for choosing the right strategy
Legal & Administrative cost
One contract and therefore less administrative cost for contract administration
Since no. of supplier are high contract administration cost & time is very high
Owner can manage with part time legal admin person, including procurement
Safety & house keeping
Since one contract managing all, better safety practices expected out of EPC
Since there are number of supplier (small & big). Maintaining safety is a concern
Better safety control with EPC. Since safety cost to project cost ratio is better for them
Another key point in favour of EPC company is that today they are investing in technologies for managing risk, uncertainty, and volatility of their operating environment.
Lastly, EPC company can manage safety practices better as safety cost to them is sustainable for them comparing to small contractor and supplier. Never the less in case of EPC the project owner involvement is very low comparing to that of EPCM. In case of EPC owner must have his quality team for approval and acceptance of the deliverables.
Today we are in a VUCA (Volatile, Uncertain, Complex, Ambiguous) world, and to make project success it is better to go with a fixed price contract with a competent EPC company. The trend towards EPC is increasing as it is reducing liabilities, reducing risk of uncertainty & volatility of the market, and finally keeping the total cost of ownership at low. However, choosing a good EPC contractor is always challenge. One should evaluate following parameters for choosing an EPC partner.
Scope: should be fixed, better to carry out front End Engineering Design (FEED) for finalizing scope.
Quality: Evaluate contractors quality management system, past work.
Follow good safety practices, should have safety management practice in place.
Financial Strength: Should have sound financial strength. Preferably should be able to complete the project without timely contribution of owner’s finance.
Good culture (easy to walk with) and payment history to subcontractor/supplier.
Pharmaceutical manufacturers are eliminating the use of paper batch records in favor of electronic batch recording. Manufacturing Execution Systems (MES) facilitate manufacturers to improve performance and reduce operational cost, while simultaneously increasing compliance with regulatory requirements.
The MES plays a critical role at the center of the manufacturing operation, connecting shop floor personnel, equipment automation, logistics, sales and planning. Its ability to align these different functions and provide visibility to key stakeholders drives performance and compliance across the organization.
Do i need it for my manufacturing plant?
Executives at manufacturing companies of all sizes need to make decisions about where to invest to maintain and grow their businesses. Investments in manufacturing execution system (MES) applications may reduce costs and increase revenues, but they also might compete with other investment priorities, such as marketing campaigns and capital equipment upgrades.
In this article we will explore together the benefits of MES & evaluate an investment in MES versus other alternatives.
What are the advantages?
Manufacturing Execution Systems offer substantial improvements over paper based processes. They help pharma manufacturers create flawless manufacturing processes, reduce risks, time, costs and effort, and increase process efficiency and product quality. In addition, they provide valuable real time information on requirement changes. Nonetheless they are an important prerequisite for digitization and Pharma 4.0..
Few areas of opportunities where MES can help reduce costs are as following:
Are there any revenue improvements?
Implementation of MES is shown to increase the revenue and benefit the manufacturer in the following ways:
Greater Asset Productivity: MES allows more saleable product to be made in the same time on the same equipment, the margin of that incremental
product shall be considered a cash inflow
Faster Better decisions: Uncertainly about the disposition of a product can cause it to sit in a warehouse or delay shipment. Quicker resolution of such issues saves money and could lead to faster realization of revenue
Reduced working capital: Keeping material around when it is not immediately needed for production or sale is wasteful. These materials take up space and money. Eliminating them frees up working capital-money, space, or effort that would be spent dealing with these items can instead be used elsewhere
Better compliance profile and inspection results: Fewer nonconformances and manual errors reduce the risk of regulatory scrutiny and subsequent
regulatory actions
Customer retention due to improved cost and quality: MES implementation retains a customer that would likely be lost given the current state, the retention can be considered an incremental cash in flow.
New sales or better support for sales growth: For a plant in a sold out position, every additional unit that can be produced is a cash in flow of the margin of that unit.
What do we conclude
Implementation of MES is shown to increase the revenue and benefit the manufacturer in the following ways:
For existing facilities: For existing production facilities, the operational justification for the MES is typically based on quality and patient safety needs such as non conformances, CAPAs, audit observations, as well as business needs such as expansion plans, process/product changes, and overall business agility to meet unknown demands.
For greenfield facilities: For new operations, using an approach such as failure modes and effects analysis (FMEA) can identify risks that can be mitigated by implementing MES applications.
Conclusion
The decision to invest in MES applications should be driven by sound economics, based on real costs and benefits. The costs and benefits considered should be incremental, representing changes from what would happen anyway (the current state or base case) or, in the case of alternatives, real cash flow differences between the options.
With the right MES, pharmaceutical and biotech manufacturers can reduce time, efforts and risks and finally save costs provided that the system meets the requirements of the pharmaceutical industry in terms of functions, usability and compliance. Connect with us at sales@pharmaaccess.net to know the best practices for your facility!
Why focus on Material Handling and Overall Equipment effectiveness (OEE) should be of high priority
In any pharmaceutical facility, material handling systems and equipment play an important role in overall productivity of the plant. No matter how high capacity processing machines are installed, if the feed to these machines is not provided timely and consistently, the productivity of the plant go down drastically, more so the cost of re-starting some of the machines after a break.
Material handling starts from the raw material warehouse, till it reaches the finished goods warehouse. It involves warehouse racking, storage retrieval, pallet handling, pneumatic conveying, loading, and unloading of each unit operation, in process storage, tools & change parts management etc. During the routine operations, tons of raw material, semi-finished and finished goods are handled at different stages to process the material intended for final product. This constitute a major part of routine operation and undoubtedly has bearing on plant efficiency.
Why the need:
In general, facility design takes care of requirements related to man material movement as per cGMP guidelines and focus on processing equipment. However, often the part of material handling operations is overlooked by designers and decision makers largely due to missing focus and at times it is believed that material handling is not as important as the process machines and always can be managed later. In practice, when actual operations on the shop floor are performed, the need for proper material handling systems is felt by plant operating staffs. Thus, the design of the facility and selection of such material handling equipment requires a well thought out plan on the basis of operational needs of the plant so that all machines are being fed their respective raw material at an optimal speed without making machine operations to stop( or reduced speed) and thereby not affecting the throughput.
Types of material Storage &Transport systems
Manual Handling
Automatic with logic controller
Robotics
Continuous processing
Intermediate Bulk containers (IBCs)
Categories of material handling:
Conveyor
Intermediate Bulk Containers
Drums handlers
Pallet truck
Pneumatic conveying
Auto Storage & Retrieval system (ASRS)
High reach Truck
Racking systems
One of the crucial mistakes that any pharmaceutical company can make while enhancing the plant capacity is by not enhancing the material handling system. Generally, investors and stakeholders prefer to invest in high capacity machine during the capex phase of the project with a plan to expand the production by running the facility in multiple shifts and utilizing the production machines to maximum extend. However, for plant to run efficiently the auxiliary processes like Raw material storage, finished good storage as well as material handling system to provide right feed to processing equipment need a closer look and right balancing in order to not create a bottleneck situation. The enhancement in material handling system may include the following :
Increasing the number of material handling equipment like IBCs
Optimizing the use of material handling equipment
Increasing the capacity of conveyors, pallets etc.
Modifying the existing system designs so to cater localized need of the plant.
Improvement in SOP of cleaning by adopting sanitary designed equipment
As companies grow in sales, the focus shifts to maintaining high inventory turnover ratio. For finished good warehouse this is achievable by increasing the dispatch and streamlining the downstream supply chain with the help of 3PL players. However, this puts stress on the Raw material warehouse as sampling, testing, and dispensing is standard process with defined time. Hence, to achieve higher output it is important to analyze all links in the network to reduce not have a weakest link that can break the chain. A holistic approach towards project investment decisions is, thus, an important aspect.
Overall equipment effectiveness is a standard for measuring productivity in any manufacturing plant. It identifies the percentage of manufacturing time that is truly productive. It helps in identifying bottlenecks in manufacturing chain thereby providing insights on further improvement to produce quality goods as fast as possible with no stop time of machine.
OEE = A x P x Q
Where:
A = Availability = Run time / Planned production time
P = Performance = (Ideal cycle time x total count) / Run time
Q = Quality = Good count / total count
The balancing act to increase OEE to a satisfactory level is very important.
Week 1
Week 2
OEE
80.35%
81.23%
Availability
85.00%
90.00%
Performance
95.00%
95.00%
Quality
99.50%
95.00%
Companies would not want to increase Availability by 5.0% at the expense of decreasing Quality by 4.5%.
An average manufacturing facility, the OEE of a process equipment varies from 25 to 60% despite having good branded machines & good operating personnel. This means that there is inefficiency in the system from 40 % to 75% at various operations. If this is the case with you, then one of the reasons could be material handling system and it is time to review your material handling system once again to improve your equipment OEE effectively. Though the entire inefficiency can not be attributed to material handling alone.
Some of the desirable characteristics of Efficient Material handling systems are:
Lean and flexibility: The lean and flexible systems can improve workable area, capacity expansion and ease of handling material with different specifications
Efficient operations and control
Continuity of operations
Future expansion capabilities
Degree of control
Sanitary Design: Ease of cleaning and maintenance
Some of the examples of inefficient material handling could be as below:
Materials are observed on floors of processing area due to spillage or uncontrolled transfer.
Quality defects in product due to improper loading /unloading or storage.
Manual transferring of samples and documents.
Operator spending more time on material handling thereby effectively losing control on machine parameters and slowing down the machine
Loading/ unloading held due to unavailability of material handling system.
Due to poor quality, mobility devices are under break down very often.
Change parts / tools are not retrieved on time when required and operator search the facility.
With greater focus on the material handling, all material handling in the facility should be mapped to understand the real issue at every stage. With assistance of today’s technology, the handling system could be improved for bringing efficiency to plant. Some of the things that you may review before selecting a material handling system/equipment are as following.
Losses of material during handling could be in granulation, compression or blending
Washing/cleaning time for product contact parts. (ready to take next batch)
Toolless construction for product contact parts for easy dismantling & assembling.
Mobility systems are reliable.
RFID tagging of screens/tools
Fast loading & unloading without quality issue
Effective storage & retrieval system
How to reduce mobility distance
Human quest for improvement has no boundary or limits and try to benchmark for betterment ever. Improving the material handling system could effectively improve the yield and OEE thereby decreasing the per thousand processing cost. Moreover, it will enhance better GMP and safety practices in the facility.
