Bucking the trend

At a time when pharmaceutical companies are outsourcing manufacturing to cut costs, Reckitt Benckiser is expanding its award-winning plant in the UK where it makes some of the biggest healthcare brands. E&T reports.

Global pharmaceutical companies, known as 'big pharma', have been making headlines for considering factory closures and outsourcing to cut costs. However, one 'smaller' group is digging in to get results.

It's not that Reckitt Benckiser (RB) is a small group overall, but this Anglo-Dutch giant, created from a merger in 1999, is probably best known as a household goods manufacturer, producing global brands such as Harpic, Calgon, Finish, Airwick and Dettol in factories worldwide.

However, Dettol itself is one of a number of healthcare products that are playing a key part in RB's growth plans, and these products are nearly all produced at one UK facility in Hull. The success of this unit means that the factory is continuing to expand and there are no plans to move production to low-cost centres overseas.

This is important for UK manufacturing in another sense - its historical roots. The Hull site was where the original Reckitt company was founded in 1840, when Isaac Reckitt set up a starch mill and went on to produce other household products. A merger in 1938 with the rival Colman company, famed for its mustard, created Reckitt & Colman, and RB still makes a brand of mustard.

The Hull factory, though, boasts a wide range of famous brands of its own. As well as Dettol, the facility produces Lemsip, Disprin and Gaviscon, among others. It also makes its own patented prescription drug, Buprenorphine, which is used as a heroin substitute to treat addiction. The site also houses a major research and development (R&D) facility and commercial activities.

One reason why RB's healthcare unit is riding the storms afflicting other pharma companies is simply that the big pharma groups depend heavily on patented drugs, which often require extensive and expensive R&D. While the resultant products can generate huge profits - witness the global success of Prozac - when their patents run out, cheaper generic versions can be produced by rivals in competition with the original drug.

This is the situation that RB may face when the patent for Buprenorphine expires in future years. But its major health and personal care brands are seen as continuing to drive growth at the Hull facility.

"Being part of a household goods organisation has made [the healthcare unit in Hull] what we are - we're not a typical pharma operation, in fact we're miles ahead of that," says Andrew Sunley, continuous improvement (CI) manager at RB Healthcare.

Sunley can point to some objective evidence to back up his claim. This view was expressed by judges who gave the top prize to the Hull facility in the 2007 Best Factory Awards, overseen by Cranfield School of Management and Works Management magazine. "In terms of pharmacy, they [RB] are probably the best in the world," the judges said.

Staying efficient

RB's healthcare unit is distinctive in being a pharma operation that also adopts the company's wider consumer goods approach - which is about efficiency and cutting out waste. This, says Sunley, contrasts with traditional pharma companies that are used to expending high resources to produce their products.

"I would say that the big pharma companies have not been efficient [in their factories]. Historically you could walk into one of their factories and there's five or six operatives on a line, whereas the same line in this factory has one or two people. If that's their strategy and they can afford to do that, that's fine.

"We've taken the approach that you minimise your costs because it makes good business sense to do so. This means making sure you maximise your performance and get the most out of your people - which means investing in them."

The operation's overall targets centre on quality, cost and service. High quality in production, packaging and distribution is essential for healthcare and medicinal products. And the customers, which include other RB units as well as all the major retailers and some Big Pharma groups, are highly demanding.

For one thing, they want the product to be available to meet fluctuating demand. Increasing efficiency is a key part of this, as it means that output can be increased to meet market growth without driving up costs.

The Hull factory has raised efficiency since the RB merger. Sunley, who joined as CI manager in 2006, believes that the company's approach to CI has helped to underpin its success, resulting in an increase in overall equipment effectiveness (OEE) to 67 per cent, up from 55 per cent in 2002.

This has been achieved through a mix of investment and improvement of existing processes, and this performance has led to the factory actively recruiting a further 25 people as part of the increased volume from two key brands, E45 and Nurofen For Children, coming into the plant.

As well as being deemed Britain's best factory, Hull won two other awards: for being the Best Process Plant and the People Management award. This, for Sunley, goes to the heart of what makes the factory tick: empowering staff and giving them the tools to drive efficiency underpin the factory's success.

Empowerment is also crucial because all staff at the factory are employed on performance-related pay - to the extent that any annual pay rise they get is linked entirely to measured performance.

Sunley says: "My focus has been to ensure that CI is a responsibility of every individual in the factory. New staff get CI training even before their factory training. The job description stipulates that a worker is responsible for the performance of their line. So they must have the tools to make sure they can maximise their performance. These tools will complement the skills a worker brings to the job and the knowledge they acquire on the line.

"People can have the skills and the knowledge, but sometimes it's the approach to problem-solving and to performance improvement that is lacking. And to create sustainable CI you've got to ensure that the right training is applied, so that everyone in the organisation has these skills, so that they can deal with a problem by being able to measure and analyse it as the way to resolving it."

For Sunley and the Hull management team, the use of 'root cause' analysis in CI - the process of searching for underlying causes of a problem rather than just dealing with its symptoms - is not enough. "We said that there are two steps that need to be taken prior to undertaking root cause analysis. One is: correct the obvious.

"For example, when there's a problem on a line, the operator should just stand back and look at the equipment to see if everything is as it should be. If you've corrected the obvious and you've still got a problem, then check if the equipment is adequately maintained. When you have gone through these steps, if you've still got the problem, then look to the root cause.

"This means that, if your set-up is correct, and it's maintained and operated properly, then you're a significant way towards solving any problem and maximising your performance."

The Hull factory uses a range of CI and lean tools but, emphasises Sunley, these are cherry-picked according to need and are built into the day-to-day processes; there is no wholesale application of a single major methodology such as lean.

However, the RB group as a whole has been rolling out one holistic improvement tool, six sigma, at its European factories. Six sigma will be arriving in Hull later this year.

Sunley insists that it will be a useful addition to the CI processes developed on site and will dovetail well with existing techniques while furthering the site's knowledge and skill in understanding process variation. The six sigma initiative will also be an opportunity for Hull to share its practices more widely with its European sister operations.

A renewed drive for higher efficiency at the plant a few years ago was a direct result of the creation of the merged group in 1999. Reckitt Benckiser's corporate body emphasised a set of four core values - teamwork, commitment, achievement, entrepreneurship - and introduced key performance indicators (KPIs) for each part of the business.

The Hull factory has a KPI scoreboard for every function including human resources. Sunley has as many as 20 such scoreboards stuck to his office wall. The overall aim of these, he says, is to drive out non-value-added tasks.
The focus is on driving out waste as well as reducing line changeover times, cutting stock write-offs and developing the factory's manufacturing execution system that integrates the production IT processes.

One result of KP's post-merger drive was a reduction in headcount at Hull as the factory became heavily automated and efficiency measures were stepped up. But Sunley insists that the staff are now much more effective and motivated. They receive detailed individual training, self-development plans and regular coaching. They are taught to 'own' their operations and seek improvement themselves.

Another key part of the factory's road map for cutting waste is process activity mapping (PAM) , a lean tool that is being rolled out this year. Sunley says the factory has systems for improving all the tangible measures, such as OEE and maintenance.

But there are less tangible processes that require measuring, he says, which is where PAM comes in. It will tackle activities such as the tasks of Area Team Leaders, inventory accuracy, liquid batch manufacture, and so on.

Winning the Best Factory Award, says Sunley, won't mean the factory resting on its laurels. "The award for us was fantastic, and was a very good benchmark. But we want to further develop what we do and get better. We need to carry on embedding CI and exploring opportunities for improvement."

In a global marketplace where UK factories continue to face pressures of closures and outsourcing overseas, Reckitt Benckiser's healthcare operation looks set to buck the trend and remain in its historic Hull location.

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