# Presentation: 931637

## Contrasting Technical Issues Facing the Pharmaceutical Industry with 

**Changes in the Domestic Automotive Industry from 1980 to the Present**
**Lessons to be Learned **
**and Techniques to be Adopted**

**Allan Wilson**
**Li Peckan**
**The 2080 Group**

**June 12, 2002**

## WHY is this comparison important to the FDA and the Pharmaceutical Industry?

**The automotive industry has already gone through a transition in response to external forces**
**We perceive that the Pharmaceutical industry is currently experiencing analogous forces**
**There are significant “lessons learned” which could result in savings of time, effort and resources**
**It is important to look at different manufacturing industries as a source of innovation and learning**

## A Number of Events / Trends Occurred in the Period Between 1975 and 1985 Which Were The Impetus For Change in the Automotive Industry:

**Pricing Pressures:  An Increase in Oil Prices and the OPEC Embargos**
**Domestic Quality Problems**
**Growing Foreign Competition **

## Factor 1: OPEC Oil Embargo

**Factor 1: OPEC Oil Embargo**

**Notes:**
Factor 1:  The OPEC Oil Embargo of the Late 1970s

A series of political actions taken by OPEC and the Western governments of the time resulted in a  three - fold increase in the cost of crude oil.  This triggered a shocking increase in gasoline prices at the pump.

These events put in place a new trend in the industry:  a desire for more fuel efficient vehicles.

Recall that the domestic vehicles at the time were like the one on the following page:

## Factor 2: Increasing Pressure Around 

**A 1973 Plymouth Duster**

**Factor 2: Increasing Pressure Around **
**Product Quality Issues**

**Notes:**
This was the end of the “muscle car” era.  Some of you may remember conversations like:  “Yeah, and then we put on a four barrel carburetor.”  

As the eighties progressed, these conversations gave way to statements like:  “Yeah, the speedometer broke, but we can just watch the fuel gage dropping to tell how fast we are going”.

The photograph of the Duster serves two purposes:  the first is as an example of a “gas guzzler”, the second is to remind us of typical product quality at the time.  The Plymouth Duster (and many of its Chrysler,  GM and Ford competitors) had serious surface rust problems.

However, surface rust paled in comparison with .....

## Unsafe at Any Speed!

**1964 Corvair  **
- source:  corvaircorsa.com

***Unsafe at Any Speed!***

**Notes:**
During this period, the industry was coming under increasing product quality pressure.  This came on two fronts.  First, product reliability and durability.  Second, product safety.

Increasingly, people like Ralph Nader, the author of the 1972 book, Unsafe at Any Speed, were telling us that not only were these cars gas guzzling dinosaurs which, incidentally, would probably poison us all (remember Rachael Carson’s Silent Spring), but, they were also likely to kill people in quick, nasty ways.

Then, to add insult to injury, along came the third Factor ....

## 1982 Toyota Celica  

**1982 Toyota Celica**
- Source:  classic-celica.com

**Factor 3: Foreign Competition**

**Increased quality and reliability and competitive cost resulted in:**
**   *****increased perceived value***

**Notes:**
OK, so everyone had a hippy uncle who had one of those VW Beetles - the cute little cars that came with one optional accessory:  a gas gage.  Not a very serious threat to the North American auto industry.

But then along came the Japanese, and they had gotten better, much better!!

Now, by modern standards the old Toyotas were no prize:  they were noisy at highway speeds, you wouldn’t be able to walk upright for days if you rode somewhere in the cramped back seat, and they defined the term:  “gutless”.  However, the Japanese automobiles:

used half as much gas as their North American rivals
were cheap to maintain
had the smoothest clutch on the planet

Which resulted in:
Increased quality
Decreased cost
Increased perceived value for North American consumers

## A Typical Automotive Assembly Plant:  

**1980 vs. Today**

**Notes:**
The automotive industry was able to significantly improve its performance in terms of:

Time to Market:  Concept to Start of Production
Product Quality
Cost
Supply Chain Efficiency

## Lessons Learned from the Automotive Industry:

- It is important to:
**Understand what your customer values**
-  what they need, want, and are willing to pay for
**Be mindful of your competition**
-  what they are doing to gain competitive advantage
**Develop a strong focus on product quality**
- This has not been a moving target but a rising bar

**Notes:**
Become Mindful of the Customer:  
Know who your customers are
Know what the consumer needs, wants and is willing to pay for. 
In the postwar era, whatever you could make, people would buy.  This gave way to the “consumer culture”.

2. Become Mindful of the Competition:  
the automotive industry benchmarks and compares frantically.  
Tools like J.D. Powers surveys are used to close gaps in vehicle attributes, quality, cost and delivery on an ongoing basis.

3. A Strong Focus on Product Quality:  
there has been an evolution in thought from a focus on specifications, to a focus on scrap and rework reduction, to a focus on process capability then to a focus on design capability.  

## Lessons Learned from the Automotive Industry:

- It is _***also***_ important to:
**Adopt a culture of continuous improvement**
-  continuous improvement in quality, cost and timing are essential to survival – the tools are necessary, but not sufficient to drive the shift in thinking that is required
**Focus on the integration of effort**
-  between product design, engineering, operations and quality functions
**Redefine “mass production”**
-  by insuring quality at the source vs. inspecting quality into the finished product

**Notes:**
4. A Culture of Continuous Improvement:  
It has become a common understanding in the automotive industry that continuous improvement in product features, quality, cost and delivery are essential for survival.

5. A Focus on Integration of Effort:  
the need to improve product designs, reduce costs and improve design cycle times has led to greater integration of effort between the design, engineering, operations and quality functions of automotive organizations.  
This trend is continuing upstream into the supply base and downstream into the dealer networks

6. A Redefinition of Mass Production:  
with an anchor point in process capability, there has been a drive to increase flexibility, reduce floor space, reduce inventory, simplify work places and reduce the chance of errors occurring in automotive manufacturing plants.  
This has been accompanied by a move away from finished product inspection, towards insuring quality at the source.

## Similar Trends That Are Arising in the Pharmaceutical Industry:

**Pricing Pressures**
**Regulatory Pressures**
**Patent Protection Pressures**
**Foreign Factors**

**Notes:**
Pricing Pressures:
Political and Social Pressure:
ageing population
perception of high prices
State-led Cost Cutting
HMO / PPO Cost Cutting

Regulatory Pressure
Strengthening compliance requirements in the pharmaceutical manufacturing environment

Patent Protection Pressure
Ongoing / Intensifying Competition: 
Innovator Brands vs Generics
Fewer patents being licensed

Foreign Factors
Falling Trade Barriers:  especially in Europe, driving towards a flat, global price structure

## Our Current Thinking Around the

**Applicability of Automotive “Lessons Learned” to the PAT Movement:**

**Learning to Manage Volumes of Data **
**Measurement Systems are Critical**
**Developing an Understanding of the Process**
**Simplicity and Parsimony in all Things**

**Notes:**
Learning to Manage Volumes of Data:
A movement towards real time monitoring, coupled with available technology, yields a flood of data.
Resist the temptation to “paper the walls” with SPC charts

Measurement Systems are Critical
In the automotive world, a gage consists of the equipment, personnel, environment and procedures used to measure a product or process
An understanding of gage accuracy, repeatability, bias, stability and maintainability are key elements to success

Developing an Understanding of the Process
Learning the relationship between process and product variables is very important, from a manufacturing set-up and control perspective.
This relationship can lead to an understanding of “natural tolerances”  of process parameters using techniques such as Taguchi Parameter Design, which in turn drives appropriate, cost effective control strategy

Simplicity and Parsimony
A focus on key process parameters with an eye towards simple, reliable, production control techniques generally yields the greatest value

## Our Current Thinking Around the

**Applicability of Automotive “Lessons Learned” to the PAT Movement:**

**Learn from other manufacturing industries that have made similar transformations as a way of accelerating your progress along the continuous improvement curve**
**PAT is a step in the product quality journey, but you must also consider the other elements of that journey such as:**
**An emphasis on process stability and capability**
**Quality assurance at the source**
**In-Process Error reduction strategies**
**Workforce dynamics that can help or hinder your change management initiatives**