Genentech – Capacity Planning Assignment

Submitted by: Pranita Kengar (PGP/25/393)

Question 1
What is your evaluation of Genentech’s production capacity requirements given expected
demand in 2010 and 2015 for Avastin and Genentech’s other products as per EXHIBIT 3?
Does your evaluation change if Genentech wants to cover the 85th-percentile level of
demand?
➔
2015 Front Line Others Number of GMs Kgs
Patients
Lung 22500 5250 27750 249750 249.75
Breast 42000 12000 54000 486000 486
Kidney 5400 2700 8100 72900 72.9
Pancreas 4800 2400 7200 64800 64.8
Other 7500 3750 11250 101250 101.25
Total 974700 974.7

2010 Front Line Others Number of GMs Kgs

Patients
Lung 22500 5250 27750 249750 249.75
Breast 42000 12000 54000 486000 486
Kidney 5400 2700 8100 72900 72.9
Pancreas 4800 2400 7200 64800 64.8
Other 3750 2000 5750 51750 51.75
Total 925200 925.2

As it is mentioned in the case that there are 50% chances of success during the trials

Demand for Avastin (2015)

Colorectal treatment 974.7 / 2 = 487.35
Other cancer indication 383
Total Demand 870.35

Demand for Avastin (2010)

Colorectal treatment 952.2 / 2 = 426.6
Other cancer indication 322
Total Demand 784.6

Capacity Calculation
2010 2015

This study source was downloaded by 100000849992473 from CourseHero.com on 08-03-2022 09:56:20 GMT -05:00

https://www.coursehero.com/file/158049846/393-Pranita-Genentech-Assignmentdocx/
 Avastin 207814 236147
Non-Avastin current
proteins 320513 400769
Non-Avastin new proteins 64103 102564
Total 592429 739481

As a result, based on demand forecasts for Avastin and other medicines,

manufacturing capacity is sufficient for the year 2010, but demand surpasses current
capacity for the year 2015.
Yes, my evaluation would alter if Genentech wanted to meet demand at the 85th
percentile. In this instance, both in 2010 and 2015, demand exceeds present capacity.
As a result, I advise Genentech to build a new factory with 25,000-liter manufacturing
tanks.

Question 2
Assuming Genentech decides to proceed with CCP3, what size of production lines (tank
sizes) would you recommend? Why? What criteria should Ebersman use in selecting a
location? Why? Should Ebersman move forward with CCP3 now? (If not, when?)
➔ Assuming Genentech decides to proceed with CCP3 then the batch numbers would be
15 every year, and the number of tanks required would be the same as for CCP1.
However, in order to make the plant design ideal, the most cost-effective option
would be to build the plants with 25,000 litre cell lines. The rationale for this is
obvious that a lot of efforts and time can be saved as building a new plant would take
about 5 years and an investment of about $600mn. Significant advantages associated
with 25,000 litre cell lines, such as doubling the capacity and supporting new cost
structures with higher profit margins and appealing cost structures. It will also boost
investor's confidence having a positive impact on stocks.
It is advised that the company's management develop the production plant in the
Porrino, Spain being the most preferred option. Because the company's management
does not want to create a third production capacity in Vacaville by putting all of the
eggs in one basket. The decision to locate the plant in Vacaville will significantly
increase management and operational issues because there will be a significant
increase in the number of labour force and scientists, which may cause them to lose
their sense of ownership and belonging at Genentech, reducing their efficiency. The
plant has a ready supply of scientific and skilled workers to carry out its activities.
Proximity to potential purchasers and consumers. Access to supply chain, distribution,
and retail facilities. As a result, after considering all of the factors, I believe the
optimal location for the new facility would be Porrino, Spain
It is advised that Genentech Company should not proceed with CCP3 now because
the risk of loss and excess capacity is reduced. At the very least, the company's
management must wait another year to observe the outcome of the product's testing
on certain cancer types. If the rate of success is projected and the product's demand
grows, additional study may be done and the choice can be made. If the corporation
proceeds with CCP3 now and the trials fail, resulting in lesser demand for the
company, the company would wind up retaining massive amounts of inventory, which

This study source was downloaded by 100000849992473 from CourseHero.com on 08-03-2022 09:56:20 GMT -05:00

https://www.coursehero.com/file/158049846/393-Pranita-Genentech-Assignmentdocx/
 will raise the company's holding expenses and administrative costs. The trials of lung
and cancer patients would have the greatest influence on overall Avastin demand, and
if they failed in phase III, the excess capacity would damage the company's revenues
and eat up its resources.

Question 3
What recommendations do you make to Ebersman regarding the process he and his team
should use in deciding how best to meet the demands for Avastin?
➔ Avastin, a new miracle drug manufactured by Genentech, has effectively prolonged
the lives of colorectal cancer patients. Avastin's effectiveness in treating various forms
of cancer has yet to be determined, and significant study is now underway.
• Because the present demand for Avastin and existing product can be met
utilising plant capacity, the team should not rush into any further capacity
growth. Awaiting around 2-3 years will provide insight on the specific
requirements of Avastin following the clinical study.
• Because the ultimate output of the recovery procedure is substantially smaller,
the team may focus on technological advancement. This will enable an
increase in total plant capacity without requiring a large investment.
• The team can use the time gap to choose the correct site for CCP3 because
picking the same place has numerous advantages and downsides. As a result,
the trade-off may be evaluated throughout time.
• The team has adequate time for CCP3 expansion so that the output of the
25000 capacity vessels may be checked. This will aid in the finalisation of
vessel capacity in CCP3.
• The team should also consider the trade-offs involved with contract
manufacturing. Though it may be less expensive in the near term, transferring
some skills and technologies might be time-consuming and inconvenient.
These are the factors that can be considered by Ebersman and his team in order to
meet the best demands for Avastin.

Question 4
A contract manufacturing firm has had an unexpected reduction in demand for a drug it
produces. It is now offering to devote four 10,000-liter lines to the production of Avastin at a
price similar to Genentech’s existing contract manufacturing agreements. How should
Ebersman respond?
➔ Avastin has already demonstrated early effectiveness in the treatment of colorectal
cancer. However, it is still in the trial phase for other forms of cancer. If all goes
according to Genentech's plans and it receives FDI permission for all other predicted
sectors, it will be one of the organization's significant income producers in the
foreseeable future. As a result, contract production of such a well-known medicine is
not advised since it will result in the transfer of ability and technology. Contract
manufacturing at such an early stage of the drug's development might be detrimental
to the organisation in the long term. Keeping skills and technology within the business
should be a the top priority for the corporation.

This study source was downloaded by 100000849992473 from CourseHero.com on 08-03-2022 09:56:20 GMT -05:00

https://www.coursehero.com/file/158049846/393-Pranita-Genentech-Assignmentdocx/