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Cost is what you pay for the product and Value is the worth you get for the cost you pay. Cambridge Dictionary defines value engineering as it is the process of reducing the cost of producing a product without reducing its quality. Quality Guru Philips Crosby define Quality as fitness for use. In his best seller “Quality is Free” that brought quality revolution to industry, Crosby advocated about the zero defect product. According to him every penny you do not spend on doing things wrong, over, or instead of, becomes half a penny right on the bottom line. If you concentrate on making quality certain, you can probably increase your profit by an amount equal to 5 to10% of your sales. That is a lot of money for free.

In other word any part or component which is not required for proper functioning of the product should be consciously eliminated and focus on improving the quality and reliability of component / system desired by the end user. While eliminating the functions / component and system the following questions should be asked.

• Does this elimination would affect the law of land (statutory & regulatory)
• Is my customer ready to pay extra for this?
• Are there any alternatives that improves the design & price without altering the customer requirements?
• Can we avoid the component / parts / systems?

The above statement just does not apply to product / system it is also applicable to services also or business processes where we apply that consciously to improve it.

Customer will be delighted if we can place all our product / process / services in the low-cost high value category from other three quadrant. The probability is always high when the product in design stage.

In our day-to-day activities we come across many where consciously if selected the value of the product / processes or services can be improved. Often, we follow the processes and procedure without questioning why only in the consideration that what is working well shall work well and with that attitude we do not improve or bring efficiency to system. For example, in pharmaceutical water (Water for injection, WFI) storage tank is fitted with a spray ball. Is it necessary when hot WFI at 80 Deg C are circulated in the tubing? When the pressurized water falls on the atmospheric tank at 80 Deg C it becomes steam and sanitize the tank top then wetting of tank top is not necessary by spray ball rather it increases the pressure drop in the loop and increase the operating cost 24 hrs 365 days basis.

Similarly, the loop return velocity at 1.2 m/s minimum does not have a firm basis where 1m/s is good enough. By increasing the return velocity, we not only increase the pumping cost but also reduce the availability of water to user point and elevates rouging and its treatment cost. Do we really require 316l EP tubes for pure steam? These are just few examples but based on the project we can drill down to each activity of a project let it be water system, HVAC, utility we can find many things being practices without a logical background and thereby increasing the capital and operational cost.

Sometime it is true that we consider too much for future that compel us to consider so many functions which is not required for the project. Every project has a success criterion, and we must focus on that and if project success criteria mentioned about those requirement, then it is must to consider other wise at best you should consider to provide the minimum flexibility so that changes is possible at a later date through another project criteria. Once a project criterion is finalized, we must work on that to make the project successful at a better cost, quality and timeline that ultimately improves the business.

Value engineering is not cutting the cost, but a systematic effort to minimize cost to improve the value Once the facility design is at an acceptable level, value engineering session should be carried out along with all SMEs and consultants to improve the project quality (scope), cost and schedule so that the project success criteria is met at a reasonable cost and time This exercise at design level has the potential to reduce the cost and time by minimum 10% if thoughts are applied consciously.

We, at Pharma Access have our subject matter experts who boast hands on experience in value engineering of greenfield and brownfield pharmaceutical projects Get in touch with us at sales@pharmaaccess.net or visit us at www.pharmaaccess.net to know more about the services we offer.

PROJECT FACT BOX

PROJECT FACT BOX

OUR VALUE ADDITIONS

PROJECT FACT BOX

OUR VALUE ADDITIONS

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.

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.

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.