The Future is in Site.
Aidan Walker PiramalWhen Piramal acquired the Morpeth, Northumberland site from Pfizer in 2006, Aidan Walker became site head. With the title came the responsibility of leading the operation through the transition from an internal supply site within large pharma to a stand-alone profit and loss (P&L) business within Piramal’s contract manufacturing division. Now President of Formulations Services, Aidan talks about the challenges encountered in making – and keeping – the site successful under recent testing cultural and economic times.
Piramal sells itself as one of the few Contract Manufacturing Organisations (CMO) that can provide end-to-end support for bringing a drug to market, or managing the lifecycle of a launched drug. When it bought the Morpeth plant from Pfizer five years ago, it significantly expanded the Mumbai company’s global footprint, particularly in the finished active pharmaceutical ingredient space, contained finished dosage, packaging and supply chain areas. Since then, the site has established itself as the most profitable and thriving part of the group and is now one of the most successful contract manufacturing sites in Europe. Indeed, after laying out significant initial restructuring capital, it has returned to the black with a pre-tax profit of over £5m in 2010, compared to a £3.5m loss in 2009.
But change never comes easy, and there is often a cost involved, financial or otherwise. ‘There were a number of key challenges when Piramal bought the plant,’ Aidan admits, ‘one of the main ones being adapting to an Indian parent company’ (the site had always been owned by US companies previously). ‘Adapting’ involved changing some of the people who were holding them back. ‘This was painful but essential. We always communicated openly and honestly with our staff, sharing good and bad news as often as possible. We constantly set out new 18-24 month plans so our people knew where we were heading and why. We had to be tough when it was needed but we always kept a link to the history and heritage of the site, talking frequently about the changes the site had undergone previously and majoring on creating a sense of ownership amongst the current staff that would prevent “the ship going down” on their watch,’ explains Aidan.
There were other huge “culture” shifts, this time on a business front, including moving from being an internal supply site with no real competition to a stand-alone P&L operation with responsibility for managing their own cash flow; and most significantly, finding a way to develop a compelling value proposition such that Pfizer – who represented more than 95% of the customer base post the site sale – would renew the supply contracts once the initial term lapsed. “Everyone on site knew this was the immediate imperative. Failure to develop a sustainable value proposition for Pfizer would almost certainly have led to either a complete closure of the site or a major downsizing,” says Aidan. “As it turned out, we were so successful Pfizer approached us before the contract negotiations were due and suggested a renegotiation that provided not just a significant extension to the term of the contract, but also some significant additional business.”
But there was no quick fix to overcoming the myriad of issues the site faced, and they are still trying to overcome some of them today. ‘It’s very difficult to summarise what has been five years’ work and what is still “work in progress,” says Aidan. Maybe the lines are blurred on that definition, but there is no doubt that the refinements instigated have worked. Take the major re-engineering of the cost base for the business, for example. This looked at every opportunity possible, from raw materials and people costs to external contracts and energy usage. Initially a two year programme to save £10 million, such was the focus that it was completed in 15 months. Simultaneously, underlying levels of quality and service delivery on all products to Pfizer were improved. And in parallel, two new business areas were started and business development efforts commenced in the areas they already had. ‘We started to think not as a business that could have this OR that, but as a business that had to find a way to do this AND that,’ says Aidan.
Post the initial £10 million challenge, which was largely delivered by a small number of substantial projects that had been driven by senior management, Aidan and his team wanted to find a mechanism that would unlock the potential they felt existed in the broader team for identifying and implementing beneficial change. The site had already had many attempts at this and all had largely failed, mainly because they had looked to reward intent, not impact.
‘change is not something always to be afraid of’
To energise the staff they decided to create an “extraordinary” reward scheme. Every month, each department could enter a project that had delivered an improvement (be it cost saving, safety, productivity, etc.) into a monthly review that was chaired by the site senior team. Each entry had to meet some baseline criteria, but once in the final review every entry was given a “golden ticket”. The winning entry each month received five tickets, and any project that saved more than £25,000 received 10 tickets.
At the end of six months, provided the site had saved more than £50,000, all the tickets would be placed in a lottery and the winning team or individual would receive £10,000 worth of holiday vouchers. The only condition was winners must bring back some photos of their holiday!
The first six months should have brought in £50,000 – the actual saving was £600,000. To date, the scheme has generated savings of nearly £2 million. The scheme has been amended slightly over the last couple of years, with the monthly winners now also receiving £1,000 to donate to a charity of their choice.
The Golden Ticket scheme has been a huge success. Not only has it resulted in a substantial amount of cost savings, it’s also provided a platform for staff to champion and instigate their own improvement ideas, learn new skills and substantially increase their overall contribution to the business. And, of course, a few of them have seen their efforts rewarded with holidays of a lifetime,” says Aidan.
But he is acutely aware that the site cannot sit back and bask in the glow of its current success. It has won a lot of business in recent years and expanding in an efficient manner that maintains and improves on existing service levels is the latest key challenge. To meet this head on they have set up a dedicated project team for each product, and are actively recruiting into those areas where it is essential. For the fixed support parts of the business they are maintaining a rigid control on costs to maximise the leverage on the fixed investments. ‘At every opportunity the message of “efficient growth” is being explained as the way forward for the site,’ stresses Aidan.
The site has successfully navigated its way through the initial transition period, and is now positioned well for the next three to five years, and beyond. The markets in which it operates are undergoing lots of change, with mounting pressure on healthcare budgets in developed economies and the emergence of credible competition in low cost economies. There is no room for complacency, and the amount of change the business has undergone in recent years will likely need to be maintained as the norm. However, the site has demonstrated that it can change and that change is not something always to be afraid of. Provided it can maintain that desire to keep moving forward, its future should be a very bright one.
Aidan Walker Biography
President Formulations Services, Pharma Solutions, Piramal Healthcare
Aidan Walker is President of Formulations Services, Pharma Solutions at Piramal Healthcare, with responsibility for all of Piramal’s Formulations business covering operations in both the UK and India.
Aidan has worked at the Morpeth, UK site (initially for GD Searle pharmaceutical manufacturing operations) for over 18 years in a wide variety of engineering and manufacturing roles. In 2000 he joined the site leadership team, and in 2003 he became the operations director. During this time he was heavily involved in site transitions and integration activities as the parent company ownership changed, first to Pharmacia and then to Pfizer.
Aidan has a BSc BEng in Chemical Engineering and worked in petrochemical and fine chemical manufacturing before entering the pharmaceutical manufacturing industry.